NumisMedia Market Report: The Time to Buy Is Now or Never

Posted on 12/10/2009

The US Mint has suspended sales of the American Eagle Gold coins, due to a depleted inventory of Gold bullion blanks. This month, NumisMedia explores what could happen if the price of Gold continues to advance.

The US Mint recently announced the suspension of sales of the American Eagle Gold coins. A depleted inventory of Gold bullion blanks is the reason given for the temporary suspension. They will resume sales once they have additional inventories to supply the market. However, dealers have noticed in the past that the Mint usually does not buy competitively into the Gold market when the price of the bullion appears to be unreasonably high. They typically will wait until there is a downturn to replenish inventories. If Gold continues to advance to higher levels, will the Mint actually participate in the market? There has been a noticeable increase in demand for Gold Eagles over the past year. According to the Mint, they sold 568,000 ounces last year and so far this year 1.07 million ounces through October. With the lack of supplies and the tremendous demand for Gold, many collectors and investors are turning to US Gold coins prior to the 1930s.

A few months ago, overall coin market capitalization had shrunk about 25% over the past year. Of course, Gold was only $940 an ounce near the end of July. Since then, rare coins appear to have stabilized (at least the severe discounting has ceased) and bullion coins have taken off with a hearty advance in the price of Gold — now at $1,175. Rare coins and bullion are the most active areas of the money markets for positioning discretionary income. Add to this the fact that investors have emphatically infiltrated the Gold market and you have an abundance of activity in the coin market.

Along with the strength in Modern Bullion coins, Gold Eagles, Buffalo Gold, Commemoratives, Platinum coins and Silver Eagles, the earlier US Gold coins are also rising fast. Over the past year and a half, we have noted some tremendous increases in the FMV of many of the most popular US Gold coins. The value of Gold on March 28, 2008, was $934.25. Today, it is $1,175; this is an increase of 26%. However, if you were buying these coins at competitive prices in March of 2008, you would be showing a much larger increase in your investment. In March 2008, the coin market was still strong. It would remain so until about August of last year. If you were lucky enough to purchase these coins after prices began to fall, your profits would be even higher than what we see in the following charts.

$20 Liberty Gold TIII

Grade    FMV April 2008    FMV Dec. 2009    % Increase   
MS 60  $1,180  $1,810  53% 
MS 61 $1,220 $1,950 60%
MS 62 $1,280 $2,020 58%
MS 63 $1,880 $3,220 71%
MS 64 $2,310 $4,280 85%
MS 65 $6,410 $7,090 10%

$20 Saint Gaudens

Grade    FMV April 2008    FMV Dec. 2009    % Increase   
MS 60  $1,180  $1,860  57% 
MS 61 $1,220 $1,950 60%
MS 62 $1,250 $2,020 62%
MS 63 $1,290 $2,190 69%
MS 64 $1,370 $2,400 75%
MS 65 $1,980 $3,120 58%

The MS 60 through MS 62 Twenties are consistently close in FMV. These are the most common Mint State grades and closely follow the direction of Gold bullion. It is readily apparent that today’s demand is much stronger for these US Gold coins because they have both intrinsic and esoteric value. Studying these gains, collectors and investors will find themselves in a quandary over the idea of taking profits or maintaining their current positions. To further complicate any decision making, let us look at Ten Dollar Gold.

$10 Liberty with Motto

Grade    FMV April 2008    FMV Dec. 2009    % Increase   
MS 60  $613  $940  54% 
MS 61 $650 $1,000 54%
MS 62 $710 $1,060 50%
MS 63 $1,410 $1,970 40%
MS 64 $2,840 $3,130 10%
MS 65 $8,410 $6,000 -29%

$10 Indian

Grade    FMV April 2008    FMV Dec. 2009    % Increase   
MS 60  $760  $940  24% 
MS 61 $860 $970 12%
MS 62 $970 $1,150 19%
MS 63 $1,580 $1,920 21%
MS 64 $2,670 $3,000 12%
MS 65 $8,250 $6,000 -27%

It is interesting to note that the MS 65 grades have both dropped about the same percentage. The fact that they have fallen over this period is an indication that today’s buyers are looking for values that are closer to Gold; this is why the larger $20 coins have had a consistently higher percentage increase.

Heritage Galleries, in Dallas, recently completed a study of wholesale prices for smaller Gold. They compared US Gold $1 through $10 in MS 63 to MS 65. They used the Gold price of $720 on May 11, 2006, against their current study price of $1,148 on November 18. They found that many of these coins are down 10% to 20%, with some as low as 45% off wholesale prices in May 2006. Gold has improved nearly 60%, and if it continues to rise, many of the smaller US Gold coins could start showing some major increases. History has shown that in previous cycles there is a trickle-down effect. When prices increase for all the grades of $10 and $20 Gold, then the smaller Gold could start to receive attention as well.

This may be the right time to purchase coins, whether they are collector-related or bullion-related or both. If the metals continue to increase at the rate they have been over the past three months, the overflow of fresh money coming into our industry could wipe out today’s inventories as we see them.

Happy holidays to all and to all good collecting!

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.

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