ANA to Determine Market Direction

Posted on 8/5/2008

With a modest slowdown in business over the past several weeks, the ANA World’s Fair of Money will certainly impact and determine the general health of the market for the remainder of the year.

The ANA World’s Fair of Money is in Baltimore for its annual convention, and many dealers and collectors have been looking forward to this event for a whole year. With a modest slowdown in business over the past several weeks, this show will certainly impact and determine the general health of the market for the last four months of the year. There is quite a bit of excitement over the fantastic auction hosted by Heritage Galleries. The number of rare and near-unique coins available in this extravaganza is overwhelming. Early Type coins (1793 to 1850) should capture the heart of this sale, although Type is definitely a misnomer since many of these rarities are not representative of the most common issue of the specific series. Most of these coins are not only limited by their original mintage, but there is a limit to the supply of these coins by grade. The supply certainly dwindles as the grades improve, so the number of buyers willing to spend the kind of money it takes to own them will diminish as well. However, it seems like there has been an increase in these high-end buyers.

Highlights of the sale will certainly include many rare gold coins, especially some $20 Saint Gaudens, including the 1921, 1930 S and 1931 D, just to name a few. These examples are representative of nearly the highest graded available in the market. In addition, there are more superb gem rarities from the Phil Kaufman Collection that amaze even the most astute and selective buyers in the country. Most of the coins from this collection will command record prices; potential buyers will bid aggressively or go home empty-handed. Add to these rarities the collection of Deep Mirror Prooflike Morgan Dollars (there are some Prooflikes included) and the overall depth of this sale is practically unbeatable. We have monitored the pre-sale bids of many of these rarities and the prices for some are already beyond current FMV levels.

In today’s minting process, there is one feature that all coins have in common: they have the potential to be perfect or as near-perfect as possible. The number of near-perfect coins is only limited by the original mintage. This is not the case for coins minted pre-1950, and even less so in earlier dated coinage. As the original minting process improved over the years from 1793 to today, each improvement brought a greater percentage of potential high-quality coins. Yet, quality was not the main concern back in the early 1900s or even in 1950. While quality was important to some advanced collectors in the early years, it wasn’t until the 1970s that we began to see the transformation of a hobby into the industry we know it to be today.

Today, quality and rarity are at the forefront and are the foundation for many advanced collections. The last 5 to 10 years have seen so much money come into numismatics that it has changed the face of our industry. There are two types of rarity that intrigue today’s collectors. The 1804 Dollar and the 1913 Liberty Nickel are two top performers because of the limited mintage. It almost does not matter the quality of the coin being offered in an auction because they will undoubtedly bring in millions of dollars. The other type of rarity that attracts astute buyers today is the one that shows a low availability by grade and census. For example, the 1795 Small Eagle $5 Gold in MS 60 had an FMV of $39,600 in January of 2000; today it has a FMV of $85,630. NGC and PCGS indicate that there are 120 coins graded higher than MS 60; yet, we are certain that there is some overlap of this number because coins are resubmitted or sent to multiple grading services in hopes of receiving a higher grade. Thus, the actual number of coins that could be available at any one time is somewhat less than this number of 120. In MS 63, there are a total of 20 coins in the combined census with only 16 coins certified higher. In January of 2000, the FMV for the MS 63 was $104,220, against a value of $212,500 today. Yet, and here is the kicker, current availability makes this coin even rarer than the census shows. Most collectors who hold these types of coins have the ability to maintain and grow their collections to even higher levels.

What really creates the depth in the market, however, is the number of potential buyers for this limited number of coins. It is a moot point to be able to offer a quantity of a rarity if there are few buyers in the market. Fortunately, we have thousands of potential buyers for this limited number of rarities. The millions of dollars of demand chasing few coins create the advances we see each week in the FMV. Further, the aggressiveness of potential buyers fuels further advances. A previous potential buyer who lost out to a higher buyer serves to reinforce the willingness of current buyers to spend more money for low census rarities when they do come onto the market.

Judging by the number of advances in this month’s FMV, you would never think that the summer brought with it a slowdown in the coin market. Yet, in the last six weeks, the market has looked as if it took a vacation. However, the coin market is still better off than the economy as a whole. While a tough economy can impact the coin business substantially, we are still much healthier than other segments of the financial market. With the fact that all individual economic growth has been shocked by higher oil prices, a disenchanted stock market, a slump in housing and rising inflation, the coin business has fared quite well under the pressure. In fact, despite a slow summer, the overall market looks very appealing to those among us who still have excess cash reserves and want the best return on our money. As bad as the economy is for some, there are still a lot of people out there with millions of dollars and buying good solid coins that have tremendous potential in the long run.

While these negative economic factors affect overall expenditures, the impact on the coin business has been less invasive. The coin business remains very good, just not as good for as many numismatists as in the past. Like all segments of society, the weak economy has forced some collectors to sell into this market, causing some areas to have more supplies than current demand can handle. The areas most affected are the more common issues where quantities of coins were already available in dealer inventories. If you go to a coin show and find a hundred coins of a specific grade, you can be sure that dealers are going to get very competitive if a collector shows any interest in one of these coins. However, and this is the key, when you go to the ANA and you find five coins or less of the same graded coin, and there are 50 buyers for this coin, dealers know the buyers will have to be very aggressive or they will be left behind in this market.

This 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.

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