Gold Propels Coin Market to Higher Levels

Posted on 11/14/2007

Gold is rocketing up to a high not seen since 1980. But today’s coin market has changed a lot since that year, and as the number of serious collectors increase, Numismedia takes a look at which coins stand to benefit the most.

A guest article from NumisMedia

In January of 1980, gold hit the high-water mark of $850. The coin market was as hot as it had ever been. Dealers could not get enough bullion to satisfy their customers and rare coins were selling as if they would run out. Toward the end of January, these buyers witnessed the beginning of a downhill slide that went on for the next several years.

As we approach the $800 mark at the end of October 2007, it is interesting to note that we have not seen the same buying frenzy for bullion that we witnessed in 1980. Many buyers are reluctant to put all their assets into bullion because they feel that the market can turn quickly and losses seem to be more of a concern than missing actual profits. On the other hand, many buyers have already jumped in at significantly lower levels and have substantial profits in hand. These buyers are of the opinion that there is no better place to put your money at this time. They believe, ultimately, gold will go much higher.

Today’s coin market is much different than 1980, chiefly because of the certification services. In 1980, everyone was a grading expert, but most numismatists had differing grading standards for buying versus selling. The coin market was so active that many coins sold for prices at least two grades higher than the actual quality of the coin. In fact, in those days, if it had eye appeal and was priced at $2,500 to $3,000, it was usually an easy sale. It seemed like $3,000 was the typical wholesale top because dealers all had customers who would pay $3,500 or more for nice-looking coins. The problem was that many of those nice-looking coins eventually became MS63 or less even though they had eye appeal. Bag marks were acceptable for a high-grade coin back then. Today, the grade is the grade, even though some rare coins will sell for prices that are commensurate with grades one or two points higher. That is characteristic of a seller’s market. Buyers have to be aggressive in order to get the best offerings and even more so for the rarest of coins which will command premiums of Fair Market Value.

With gold moving dramatically higher, we find that generics can move rather quickly. Many better date coins within the same series actually become premier buying opportunities because the market is moving so fast that some sellers do not conform to appropriate premiums for better dates. Astute buyers who pay attention to these anomalies can certainly find better dates at minor premiums which have a good chance to advance to levels exceeding the norm for regular generic issues. Many of the TII San Francisco $20 Liberties fall into this category. These coins typically run hot and cold in the market. When they are out of favor, they can be purchased near the generic prices, especially in AU55 and lower grades. When they get hot and dealers are buying them for customers, the premiums jump 20% to 30%. In the higher grades, they can move even quicker. In 2000, the 1872 S $20 Gold had an FMV of $2,730; in 2002, it was $4,440. Today, it is just $3,580. There are many other examples that have potential to move far beyond the common dates. Serious collectors need to consider the original mintages of these coins along with the number of coins certified by NGC and PCGS. It also helps to study the number of coins graded higher than the specific coin you may be considering. The smaller number of coins in the higher grades can spell greater potential.

The number of serious collectors continues to expand. Every major auction seems to bring out new advanced collectors willing to spend six figures and more for rarities that do not come along very often. One example is the 1796 No Stars $2 ½ Gold. All grades are sought after of late and the FMV continues to increase almost on a weekly basis. In 1999, the AU58 had an FMV of $132,000 and there were not many collectors with interest in acquiring one. Dealers could have had any of these graded coins in inventory without so much as an inquiry for several major shows. However, at today’s FMV of $190,630 we doubt that you could even find one for a customer, let alone several customers. It is a coin with tremendous desirability and the competition is quite vigorous. Just about all Early Gold is in the same boat as searching market makers and collectors can attest.

Although rare coins remain as hot as ever, not everyone can afford the luxury of owning many of the higher-quality rarities. However, there are thousands of collectors who can afford coins that range from $1,000 to $20,000. With Gold moving higher and the prospects of it going beyond the $800 level, the generic issues are a way of participating in numismatics, learning its intricacies, while still following the movements of the metal. Just a few weeks ago, common date $20 Saints had an FMV of $950 in MS60. Now they are at $1,000; for most buyers, this is the difference in the premiums of buying and selling. With the insecure economy, this is an excellent opportunity for novice and advanced collectors to build equity while enjoying the pursuit of the history and art of numismatics.

This month marks the largest number of FMV advances that we can recall for several years. While the increases emphasize a rising market, you should not assume that those issues without advances are necessarily weak. The only real weakness in the market appears to be for non-bullion-related modern issues grading 69 or lower. Nearly all earlier classic coinage prior to 1930 is marketable at current FMV levels. Of course, they have to be properly graded and cannot have detracting marks or they will require discounts.

Two of the strongest collector series remain Indian and Lincoln Cents. For many, this is the basis of all numismatics. In addition, there is a certain refinement that has developed over the years that separates these series into distinct categories. Color is a very important characteristic that helps a collector define his particular pursuit. As we all know, Red Early Copper Cents are very difficult to acquire across the entire series. Most advanced collectors realize that some dates are not available in both high grade and Red. When these coins are found, usually in a major auction, there are enough serious collectors who will pay “crazy” money that it relegates the average collector to pursue Red and Brown or Brown coins. These are the coins that most collectors feel will fall into the bargain category because they are well under the FMV for Red coins. When you look at an 1867 Indian Cent in MS66 and see the FMV of $2,280 for a Red and Brown and $32,500 for a Red coin, it is not difficult to understand why more collectors see the value of the seemingly reasonable Red and Brown coin.

This article is a guest article written by:

NumisMedia

The thoughts and opinions in the piece are those of their author and are not necessarily the thoughts of the Certified Collectibles Group.