Where Do We Go from Here?
Posted on 10/9/2008
The current economy continues to be the main focus for most Americans. Bank failures and bailouts, an underachieving stock market with growing fears of total crash, talks of recession and a political race in the foreground has most of us struggling to maintain a balance in this current financial atmosphere. Yet, this all may be playing right into the hands of the coin market; the potential for future growth in numismatics could be unparalleled.
This past week has seen a major increase in the amount of coins sold by dealers across the country. Many Americans have lost much of their trust in banks and the stock market, so many are buying the only thing they believe will retain value — gold and silver. Whether they are buying rare coins or bullion, there is a tremendous amount of money coming into our industry. Premiums have increased on gold and silver bullion because of this current demand. The quantity of coins coming into most coin shops has dwindled to but a small percentage of what dealers need for their customers, forcing many to venture into the open market to fill these needs. With demand, these strong premiums may continue to rise.
Collectors were out in force at the just-completed Long Beach Expo, and whether they were buying bullion coins or nice collector coins, they were spending money. Dealers were satisfied with the amount of show activity; however, like most concerned Americans, they are not sure what will happen next. Coin dealers may be in the enviable position of “being in the right place at the right time.” Dealers must realize that large inventories will attract collectors and investors as they scramble to numismatics.
Besides bullion coins, demand remains very solid for Early Bust coins. Collectors are focusing on quality for the grade and the number of coins within a specific grade. It boils down to how many coins are available and what the future holds for increased demand and potential growth. When you take a coin like a 1796 Draped Bust Half Dollar with 15 Stars, which has a mintage of only 3,918 coins, it does not take a lot of demand to spur a price increase. There have been approximately 72 coins certified by NGC and PCGS in all grades. Since the beginning of 2008, this coin has increased from $59,380 FMV to $84,380 in Very Fine 20. In Extra Fine, it has jumped from $91,880 to $118,130. The grading services have only certified four coins in Very Fine and five in Extra Fine. There are only 20 coins graded higher and most numismatists assume there is some overlap because of resubmissions. The worst-case scenario is that there are only 29 coins graded in Very Fine and higher. This is truly a rare coin and the potential for growth is outstanding. Add to this the fact that many of these coins are in strong collector hands and are not available.
Not all coins can have this kind of potential. Yet, this is the typical strategy that many astute numismatists use in today’s market. Seated coins are on the radar and you might be surprised by how many coins have high original mintages, yet there are very low populations of certified coins. The 1857-O Seated Quarter has an original mintage of 1,180,000, yet only 110 coins have been certified in all grades. Twelve have been graded MS 63 and there are only six coins in higher grades. The FMV was $3,690 in MS 63 in January of this year and it is now $4,470; the MS 64 had an FMV of $7,060 in January and now enjoys an FMV of $7,410. Not much of an increase for a coin with fewer than six certified. We would seriously doubt that more than one or two coins have traded hands since the first of this year in MS 63 and higher. What do you think would happen if someone wanted to purchase all 18 coins in MS 63 and higher grades? What do you think the FMV will be a year from now if someone aggressively pursued these coins? This is the type of strategy that has been used by dealers for many years. Only in the last five years or so have collectors and investors adopted this strategy.
The Heritage Galleries Auction was a tremendous success; with more than $35 million in prices realized from all of its sessions, it was their best Long Beach ever. There were so many important highlights that it was difficult to choose a few select examples. There was a pair of 1915-S Panama Pacific $50 Gold coins graded by NGC; both were MS 64. The Round brought $103,500 and the Octagonal realized $92,000. A 1796 Draped Bust Half Dollar 15 Stars sold for $86,250 in PCGS VF 25, while an extremely rare 1839 O Bust Half Dollar in NGC PR 63 realized $149,500. The following highlights are significant results showing how aggressive buyers are in today’s market. For complete prices realized, please visit the Heritage Web site.
|1849 Seated Half Dollar||NGC PR 66||$86,250|
|1879 $4 Flowing Hair||NGC PR65 Cam||$204,125|
|1796 $10 Gold||NGC AU 55||$80,500|
|1907 $10 Gold Wire Rim||PCGS MS 65||$80,500|
|1871 CC $20 Gold||NGC AU 58||$65,600|
|1875 CC $20 Gold||NGC MS 62||$10,350|
|1877 CC $20 Gold||NGC AU 58||$11,500|
|1927-S $20 Saint||PCGS MS 65||$161,000|
|1929 $20 Saint||PCGS MS 66||$184,000|
Over the past several years, one of the strongest segments of the coin market has been Twenty Dollar Liberty Gold coins. Although, this is truer for the TI and TII issues than the TIII coins. With gold making such an impact on the coin market, collectors have the opportunity to gain profits not only from the collector side of the coin but also from the value of the bullion. Five years ago, an 1852 $20 Gold had an FMV of $840 in AU 50; today that same coin lists FMV at $1,310. This is a fairly common date in the AU grades but begins to get expensive in MS 62 and higher. Many of the TI and TII coins fall into the same category. That is, they are somewhat common up to a specific grade and then the populations in the next higher grades fall off precipitously. Again, these higher-grade, low-population coins are the types that astute collectors have been putting away for several years. That is also why many of these coins have enjoyed such an increase in values over this five-year period. Demand is strong and supplies have dwindled.
The past year has seen a further rise in demand for Carson City coins, especially $20 Gold. They are large coins and the Carson City Mint mark has a certain mystic about it that attracts collectors of Western memorabilia along with the typical coin collector. The rise in demand has brought some dynamic FMV increases for many dates in nearly all grades. The 1870 CC is the rarest with a mintage of only 3,789; there are only 56 coins certified by NGC and PCGS. The highest grade is an NGC AU 55 that currently has an FMV of $546,000. Five years ago, we only reported an FMV for the XF grade at $115,690. Today the XF is $306,250 and there are just 12 coins reported. Not everyone can afford this coin; however, many collectors are sure pursuing all the other CCs. The 1872 CC was listed at $43,690 in MS 61 five years ago; today it is $60,080 and this is the highest reported grade by NGC. The difference between today and five years ago is that many collectors are now willing to pay multiples of the reported FMV when one of these highest-graded coins comes onto the market.
Quality has always been the name of the numismatic game; however, today, there are thousands of numismatists willing to place large amounts of money on the finest known coins along with other low-population coins because they believe in the future of numismatics. Add to that the many investor types entering our market because of their lack of trust in the other markets, which leads them to choose gold and silver over other investment opportunities, and there is an abundance of money available for purchasing coins. The spending and attendance at the Long Beach Expo and other recent shows is also a strong indicator of the strength of our current and future market. This could make for a very prosperous last quarter of 2008.
The thoughts and opinions in the piece are those of their author and are not necessarily the thoughts of the Certified Collectibles Group.