Coin Shops Make A Comeback
Posted on 6/7/2012
I have fond memories from my childhood spending Saturday afternoon hanging out in the local coin shop. The store was a gathering place for anyone interested in coin collecting and was quite the social destination. I was able to learn an incredible amount about rare coins in a short period of time. The owner and many of the locals were eager to share knowledge and give me tips on how to make money hustling coins. The owner of Dunedin Coin Shop, Ed French, is still an active dealer in the Tampa Bay area. I owe much to him and others who fostered my early interest in numismatics. Small shops like his were a staple in most towns and cities in the United States during the 1970s and 1980s. Anyone interested in coins could drop by to see the latest offerings. This was well before the internet and the instant access to rare coins we now take for granted. Other than local coin shops, Coin World and Numismatic News were the prime sources of numismatic material and information.
During the precious metals boom of the early 1980s many coin shops became more bullion houses than rare coin dealerships. Precious metal dealing became a critical part of most coin shop operations. The profits from dealing gold and silver dwarfed that of selling rare coins. More than a few dealers proclaimed themselves investment advisers rather than coin dealers. As we now know, the precious metals boom of late 1979 and early 1980 was very short lived. Many of the fortunes created almost overnight quickly disappeared and the precious metals markets began a multi–decade period of stagnation. Relying on the sale of rare coins to make money became more and more difficult. Coin shops slowly disappeared from the landscape. By the year 2000, many major cities in the United States lacked a single coin shop. A few well established operations survived, but were far from the busy hubs of numismatics that they once were.
During the year 2001, gold sank to less than $300 per ounce and silver was very cheap at around $3 to 4 per ounce. Profits from precious metals dealings were small to say the least. It seemed that only “the world is coming to an end” fanatics were interested in hard assets such as gold and silver. This all began to change around 2007 and 2008 when the sovereign debt and financial crises exploded. Suddenly the safety of hard assets became center stage. Gold and silver prices exploded to near record levels. During this time rare coin prices for “trophy” coins also exploded. Million dollar transactions were common news stories and about record prices were realized whenever a prime rarity crossed the auction block. This is probably the result of the much-talked-about “1% of the population” seeking alternative investments. Regardless of the reasons, gold and silver prices were now in the headlines almost daily.
Suddenly, local coin shops began to come to life again. One of the most important lessons learned from the market crash and near global melt–down of the financial system was the importance of hard assets you could actually hold. Complicated paper assets and financial monkey business convinced many that the Wall Street game was rigged and not in their favor. Buying gold and silver made a lot of sense for those concerned about their investments. Also, everyone likes to get on a bandwagon and the demand for physical precious metals soared. As in the past, the local coin shop is the prime source for actually purchasing physical gold and silver. Sending a bank wire for $100,000 to someone with a website or fancy TV ad can be pretty scary. Walking into a coin shop and walking out with your gold or silver may seem a much safer proposition.
Local coin shops have also profited greatly from the public's need or desire to sell scrap gold. For years this was a minor part of most dealers' operations. With gold prices at or near record levels, even a small amount of scrap (used jewelry) adds up. The recent recession has left many with few liquid assets to cash in. Many local coin shops buy a tremendous amount of scrap gold from the public. Some cities have seen price wars break out with dealers fighting for this lucrative business. It is not unusual for dealers to run daily full page ads promising to pay the most for your gold and silver. Quite a few coin dealers or scrap gold buyers now have multiple locations and spend six figures per month advertising to buy precious metals. This trend will probably not continue forever. Those needing money have already sold most of their holdings and it would require gold to reach new highs to entice more sellers. The local coin shops will continue to thrive regardless of gold prices, but look for some contraction in the number of corner gold shacks in the near future.
If you are lucky enough to have a successful coin shop in your area, I strongly urge you to pay them a visit. Having a chance to actually see and hold rare coins is much more fulfilling than visiting a website. Many coin shop dealers have been in business for years or decades and are more than happy to share their considerable numismatic knowledge. I probably would not be a coin dealer today if a local coin dealer had not shown an interest in my excitement for the hobby 35 years ago!
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