Weak Economy Reinforces Coin Market Strength

Posted on 4/17/2008

Although the economy is hitting the skids right now, conditions could not be better for the coin market.

A guest article from NumisMedia

The condition of the economy continues to make the coin business more appealing to divested stock market players with uninvested cash. And with the sensational amount of media attention numismatics has received over the past few years, many investment-minded collectors are entering our market. Several million-dollar coins have changed hands and the extreme increase in profits of true rarities indicates strength in this market that was unknown until recent years. Since the beginning of 2007, a 1907 Ultra High Relief $20 Lettered Edge in PR68 sold for $1,840,000; a 1796 $2½ Gold No Stars in MS65 brought $1,725,000; a 1920 S $10 Indian in MS67 was purchased for $1,725,000; and an 1839/8 $10 Gold Type of 1838 in Ultra Cameo PR67 sold for $1,610,000. These high-profile coins have attracted more attention than the market can handle. This is the chief reason many early rarities continue to climb in value with such ferocity.

Granted, many of the coins that sell for more than one million dollars are quite rare, if not unique, in these high grades. However, many other early issues are no longer hiding beneath the radar of most advanced collectors. What many numismatists, dealers, and collectors have known for a long time is that these coins have always been rare; now they are receiving the depth of demand to drive them to the new reported levels. One example is the 1804 Heraldic Eagle Quarter. With a total mintage of just 6,738, the 1804 falls into the category of a true rarity. In addition, when you compare the number of coins certified by NGC and PCGS, you find the total to be less than 300 coins in all grades. There are only 11 coins certified that grade higher than MS61 and just four coins above MS63. There are several dealers in the market trying to shake loose any of these Mint State coins for their customers.

In September of last year, the MS63 1804 Quarter had an FMV of $113,750; today it is $190,630, an increase of more than 65 percent in less than one year. The AU50 was $39,380, compared to today’s FMV of $56,880. All grades listed show the same type of advances. Further, there is probably less than a handful that has actually been sold in this period. This issue is even rarer than its original mintage would indicate.

There are hundreds of other such rarities in various series that can perform in nearly the same manner when market makers identify these types of issues. Once identified, dealers develop a market and create charts for their savvy buyers with proficiency in a stock market type of analysis. This is why so many dealers are gaining new clients who were formerly heavy investors in the stock market.

Early Gold is an area we have mentioned over the past few months. As a result of recent auctions, the 1796 $2½ Gold, both the Stars and No Stars variety, have increased in the MS65 grade. The No Stars has but two coins certified in MS65 with none higher; the Stars has just a single coin certified by NGC in MS65 and none higher. Both of these million-dollar coins are so rare that they could be sold a few times over at the same price levels. There is that much depth in today’s market; and there is that much money available to handle these types of coins. If you are grasping the notion that the census of certified rarities has a profound influence on the prices that these coins realize, then you understand a basic tenet of numismatics that has taken the marketplace many years to figure out. That, and the fact that current demand is so overpowering that dealers cannot control market momentum like they could 20 to 30 years ago. We are in a brand-new era of collecting and investing.

Early $5 Gold from 1795 to 1834 is also quite popular, although the advances are not nearly as dramatic as $2½ Gold. Original mintages tend to be higher with the $5 Gold and census numbers indicate more certified coins are available in the market. However, there is still widespread demand among advanced collectors who are looking for coins with solid potential and little downside risk. Again, the higher grades have advanced the most because collectors want the best they can afford. The 1795 Small Eagle in MS64 was listed at $300,000 FMV in September and now it is $381,250. In MS65, it was $500,000 and currently the FMV is $556,250. It is quite clear that advanced collectors have the money and desire to own the very best. When these coins come onto the market, the buyers become very aggressive and prices usually surpass previous records.

Obviously, not everyone can afford $100,000+ coins. However, there are still thousands of advanced collectors looking for the best coin their money can purchase. Early Bust and Seated Silver coins fall into the category where buyers compare the FMV from one coin in the series to the next and then analyze the census for a specific grade. Once they find a list of coins that meet their specific criteria, the search begins. The next step is locating the coins and then making sure they visually meet the actual grading criteria of the collector.

A very popular series where sight becomes extremely important is Bust Halves. Not so long ago, dealers had a most difficult time selling these coins. In the last year, they have become very active with thousands of collectors. However, not all coins will visually make the grade. As with any series, some coins are just plain ugly for the grade. However, this is even more so for Bust Halves. Dark or ugly toning will downgrade the value one or two points. Anything from Extra Fine through the Mint State grades need to have better-than-average eye appeal or they will not trade at current FMV levels. This is a series that has taken a long time to develop a strong market, but specialists in this series are doing a lot of business.

Dealers maintaining an active client base are having great success in this market. Their long-time customers are able to sell their rarities at tremendous profits and dealers are profiting by selling these same coins to new aggressive buyers. With the weakening economy and strengthening of metals, the number of high-funded investors entering our market is on the rise. We may be witnessing the greatest coin market ever; it’s a good time to be a coin dealer.

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.