Dealers weigh in on the current condition of the coin market and collectors.
A guest article from NumisMedia
For most people, the New Year begins at midnight on January 1. For many Americans, the year will truly begin when our new president is sworn in on January 20 in Washington D.C. But for our numismatic community, the year typically begins in the early part of January in Florida.
Dealers are quickly getting ready for their trip to Orlando for the FUN Convention, which begins on January 8. This show typically reveals the nature of things to come for the coin business and this year's FUN will be more important than ever. With the lack of confidence in the financial markets, many investors and collectors are looking to position their portfolios with a good balance of rare coins and numismatic metals. The fluctuating metals market will also play an important role, but the results of this show should give us a sense of market direction for the rest of the year.
We recently conducted a survey among many of the nations most active and respected coin dealers. Their answers (some slightly disturbing) were insightful and varied to some degree. Dealers were asked the following six questions and we have summed up their answers below.
Q: In your opinion, what is the current condition of the coin market?
A: The coin market is very good, but a lot depends on location. Some dealers are selling coins hand over fist. Whenever nice coins come in, they have the clientele to sell them immediately. The high premium for bullion coins (Gold, Silver, and Platinum) helps strengthen demand for collector coins because they seem to be at less of a premium. If collectors can buy coins they want at current levels versus bullion coins at premiums, most are going to purchase the collector coins that are closer to current market. In addition, many collectors and investors do not want their money dwindling away in banks or the stock market so they are purchasing hard assets that they can physically hold in their hands. This benefits the coin business rather well. Some dealers feel the coin market is healthy but guarded because the small hobby shopper has virtually disappeared from many coin shops around the country. Some areas of the country depend on these hobby shoppers for their very survival. High unemployment in some states could denote a down market; any good buys in the store may need to be wholesaled at coin shows to dealers living and doing business within a healthier market.
Q: Are you selling more or less rare or collector coins than you were a year ago?
A: Many dealers are selling more rare coins, while some feel their market is down just slightly. A few dealers stated that their sales over the last year are dramatically higher; but it is getting harder to find nice coins. There are no bargains for rare, high grade coins. Further, some dealers are not getting as high a premium as they were previously. This cuts down on their profit margin. However, most dealers feel the smaller premiums are a result of sales for more common coins. If inventories are high for coins with high populations, it is only natural for values to drop as demand softens.
Q: Compared to current prices are you getting more or less of a premium?
A: Many dealers are selling for about the same over their cost; in other words, the same profit margin. A few dealers reported higher premiums, but only because they have to pay the higher premiums for the more desirable collector coins. This is also the case for bullion coins because there is a lack of supplies coming in over the counter. For those dealers able to buy bullion coins over the counter, they are now able to make a higher profit margin because of premiums being higher than normal. If more dealers were able to balance their buying and selling over the counter, the competitive nature of our business would probably force premiums back to normal levels.
Q: Are you selling more or less bullion related coins today than at the beginning of 2008?
A: One of the more interesting statements made by several dealers is that they are not buying much in the way of bullion over the counter. This is one of the reasons that premiums are unusually high. There is little balance where the dealer can offset buys and sells from his clients. Most dealers reported that sales of bullion are 90% selling to 10% buying over the counter. If this continues, the premiums will remain high, as dealers need to acquire supplies from wholesalers. Most feel they could be selling more bullion if the premiums were not so high. Dealers are receiving many more inquiries to purchase bullion now than they have in the last couple of years. A few think that conservative buyers are still waiting for the first official reported signs of inflation.
Q: What does the market look like for the next couple of months and where do you think it will be at the end of 2009?
A: Several dealers think the coin market will be strong at the FUN Show and will remain so over the next few months. They believe this because there does not appear to be any viable alternative for disposable income. In addition, many of the coins with the strongest demand are not easily obtained. Predictions for the stock market continue to point downward in the short run. The second quarter of the year could be defined by what takes place in the White House and what fiscal accomplishments are generated. Inflation is looming on the horizon and will start to have a major influence on what collectors and investors buy. A couple of dealers feel we are in the beginning stages of a depression. Fear of more bank failures could exacerbate this situation. A bleak economy should do wonders for the metals and the coin business overall. Other dealers may try to jumpstart the year by offering large package deals at big discounts just so they can raise cash. However, much of these deals will likely include just average coins; the main attraction here is the cost is cheap compared to the overall market.
Q: Will overall prices be higher or lower in December 2009?
A: Many dealers do not want to predict what prices will be by the end of next year mainly because there are too many factors that will determine the outcome. Those that will venture an opinion feel that inflation will be the theme of the second half of 2009. Increased printing of cash will help create the best coin market ever. Nice collector coins are always in demand. There are always buyers for these coins even if the cash market is tight. Baron Rothschild is credited with the expression that states, “When there is blood in the streets, an aggressive buyer can make tremendous profits.” That is, when some sellers have to raise cash, astute collectors with cash will be there to take advantage of the situation. However, this does not answer the question of whether prices will be higher or lower in December 2009. It will really depend on the quantity of buyers in the market chasing available supplies. If dealers have excessive amounts of inventory at the end of the year, prices will probably be lower overall. Yet, the chances of acquiring true rarities may be one of the last great opportunities in the coin market for decades.
Today, many dealers have a very healthy inventory and cash reserves. The asking price for their A coins (those that are the most desirable by grade or rarity) is a substantial premium above the current market. However, other 'not so well financed' dealers could offer the same coins at the current market. This could be as much as 20% less; a substantial discount for those seeking these A coins. Several dealers made the same statement, “If we keep losing collectors to the economy, overall demand will force prices to lower levels by the end of the year.” Gold will range from $675 to $1,250; Silver $9 to $26; Platinum from $775 to $1,500. One of the more astute dealers in the country pointed out that the main reason we are losing many of the everyday collector/hobbyist (who spends $500 to $1,500 at a clip) is because the financial institutions have cut back on credit card limits. This effectually takes many collectors out of the buying market. More extreme financial restrictions could force collectors to become sellers into a slightly weaker market. Financial institutions have cut credit lines by at least $500 billion. This has created a drastic change in the spending habits of the average collector.
This article is a guest article written by:
The thoughts and opinions in the piece are those of their author and are not necessarily the thoughts of the Certified Collectibles Group.