Top End Soars
Posted by Jeff Garrett on 10/24/2013
Earlier this month a rare coin auction was held on the West Coast that featured just 27 United States gold coins. The Tacasyl Collection of Magnificent United States Proof Gold Coins was an interesting and fabulous Type set of NGC graded Proof gold coins. As many would say, Proof gold coins are the “caviar of numismatics.” In most cases, the gold coins in this offering were the highest grades known. The sale of these 27 lots realized $10,778,040, ranking it the highest auction ever in terms of value per lot ($399,186). Many of the coins sold for twice what many experts considered possible. The star of the sale was the complete set of four 1879-1880 Stellas. My presale estimate of the set was around $2,750,000. The coins sold for nearly $5,000,000! Wow!
The top end of the rare coin market has never been higher. Whenever something truly special is offered for sale, a new price record is set. This is particularly interesting, as much of the rare coin market is somewhat quiet at the moment. Generic gold coins are near all time lows (in relation to gold prices) and run of the mill or unattractive coins only sell when offered at discounts. Gold and silver prices have also fallen from recent highs and seem stuck in a trading range. Many coin shops have seen their volumes drop sharply in recent months. As a result, fewer fresh coins are entering the general marketplace. Anyone who has been to a coin show recently can tell you the bourse floor is rather dull.
There are several factors that explain this flight to quality. The simplest explanation is that the rich have gotten much richer in the last few years. The recent list by Forbes Magazine of the richest 400 Americans now starts at around $1.3 billion dollars. For the first time being a simple billionaire is not enough to make the list! The combined net worth of these 400 super rich individuals now tops $2 trillion dollars. The stock market has rebounded to record levels and real estate has staged a remarkable recovery as well. There is simply more money than ever in the hands of America’s most affluent. Rare coins are not the only market that has seen prices rise at the high end. The prices for race horses, rare cars, fine art and other collectibles have soared to new heights as well.
The wealthiest collectors seem very attracted to rare coins for several reasons. Although many of these collectors have benefited greatly from the rise of the stock market, some remember the crash of 2008 and the extreme market volatility. Rare coins have performed extremely well in recent years and most see this trend continuing. The idea of having some money in alternative investments is quite attractive. Some hard money enthusiasts also like the portable wealth of high rare coins. A $1,000,000 rare coin can fit into your pocket and not many other investments offer this feature. This factor alone could explain the interest in rare coins by many foreign buyers. Another factor that explains these super high prices are the changes in collecting habits of many new coin collectors. For decades most coin collectors would pick a series and start the process of assembling a set. Ambitious collectors would collect several series and occasionally a super wealthy individual might take on the entire US series. The biggest difference in most sets would be the quality of coins purchased based on budget. In recent years there has been a huge change in this trend. Now many collectors would rather buy a few great coins. This so-called “numismatic trophy hunting” has put a huge amount of buying pressure on a relatively small pool of coins. It does not take many collectors wanting a Coiled Hair Stella for prices to rise sharply!
As mentioned several times before in my articles, the Registry Set concept has also created a huge demand for coins at the top end of the market. Monetary concerns seem to be secondary for many of the individuals wanting to assemble the #1 set of a particular series. The status and prestige of being attached to a top registry set is very tempting for many collectors. The demand for some of these coins has pushed prices for top end coins to almost irrational levels. Who would have ever thought that a Roosevelt Dime could be worth $5,000!
Many may wonder if these prices are sustainable over the long haul. I believe that they are. I am sure that twenty years ago collectors of fine art were astounded by the prices great paintings were achieving at auction. Some probably thought the art market was in a bubble and susceptible to a huge drop. What actually occurred was that more and more money started chasing these trophy paintings. Prices continued to rise and now those $20 million paintings sell for $100 million! Great objects are always in demand and there will continue to be more and more money chasing those assets. Unless the creation of great wealth in this world is disrupted, those with resources will want to buy the best they can afford. I see no reason for this to change.
Chasing coins at the top end of the market is not for everyone, but in recent years this has been the most successful strategy for making money in rare coins. As usual, I recommend extensive research before committing money to your coin collection. With prices at these levels this advice is more valuable than ever before!
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