How To Handle A Soft Market

This year’s ANA convention in Chicago was vibrant and active. Tens of millions of dollars’ worth of rare coins traded hands that week. The auctions were well attended, and bourse activity was brisk. Attendance for the show was about average or above average for the summer World’s Fair of Money. The US Mint's offering of the Proof Gold Kennedy coins may have swelled the numbers somewhat, but in general, the show was a rousing success. I have often said that when you become concerned about the rare coin market, attend a busy show and you will feel better!

Well, now there are a number of people that have become concerned about the rare coin market. Maladies are to be found in quite a few areas of the market. The above-mentioned Kennedy Gold coins dropped sharply after the show. Some blame the bad mood of the current market as beginning with the release of this issue. To be sure, the US Mint's large offering of interesting products have taken a lot of cash from buyers’ pockets. In my opinion, the vintage and modern markets are quite separate and have little impact on each other. Buyers of Morgan Silver Dollars probably do not care what the US Mint is currently selling. Modern coin collectors probably do experience buyer fatigue when a lot of new issues are released, and this is reflected in the resale value of many issues.

Current market weakness for rare coins can be attributed to several issues. Oversupply is probably the biggest problem for the rare coin market at the moment. Anyone who reads Coin World or Numismatic News has seen the headlines about the fantastic collections that have been sold in the last year. The Eric Newman and Eugene Gardner collections lead the way, but there have been many others. It will take a little bit of time before all of this material is absorbed.

Unfortunately, the supply-glut is expected to persist for a while longer. Two or three gigantic collections are also slated to be sold in the next two years. The Pogue collection is said to be worth over $250 million dollars and will be sold over the next three years. Most of these coins are amazing and should do extremely well. Psychologically, however, this much material overhanging the market causes concerns which creates a temporary drag on the market.

Another big drag on the rare coin market has been the depressed prices for gold and silver bullion. Prices have fallen to near three year lows and seem stuck in the mud. You would not think this would have much impact on rare coin prices. Unfortunately, it does. Large numbers of rare coin collectors are introduced to collecting as bullion investors. Coin shops around the county are very quiet. This reduced foot traffic has an impact on the number of new rare coin collectors being created. Fluctuating metal prices are a part of the rare coin market, and when they drop, they cause a lull. This will change either when dealers and collectors find comfort trading coins at new levels or when the price of gold and silver changes course.

Regardless of the reason, the rare coin market has softened in recent months. For many collectors, because of its uncertain duration, this logically causes concern and discomfort. For some astute collectors, this time will be great buying opportunity. The following are a few tips on how to handle a down market for rare coins.

• DO NOT PANIC - Probably the worst decision would be to dump your rare coin holdings. Anyone who has spent years building a great collection knows the effort required. Long term collectors almost always do well, and I see no reason for this to change. If you have a nice collection of rare coins, the same fundamental reasons for owning them still apply. Anyone who dumped their stock portfolio in 2008 can tell you that panic selling is usually the worst decision.

• LOOK FOR BARGAINS - If you follow the above advice, you will have some money to spend. Look for nice coins that have recently come down in price. Now may be a great time to buy that “key” issue you have always wanted. The upcoming FUN auction is huge, and chances are there will be some interesting coins that would complement your collection.

• DO YOUR HOMEWORK - I have given this advice many times before, but it is now more valuable than ever before. You need to fully understand the series you collect. I recommend that you carefully study auction records, dealer offerings and population reports for the latest information. Prices can be significantly impacted if just a few extra coins have been certified of some issues. This homework will pay off handsomely when it comes time for negotiations or making an auction decision.

• BE MORE SELECTIVE - There is no doubt that the rare coin market has become more quality oriented in the last few years. We all know, or should know, that most coins of the same grade are not identical. Coins can vary greatly in appearance for the same grade. Some have brilliant white surfaces, and others are completely toned. It’s usually a matter of taste, but prices vary depending on the eye-appeal of a coin. You owe it to yourself to understand the differences. The best way to accomplish this is to examine coins being sold in a major auction. You will see lots of coins in the same grade sell for different prices. I still do this myself to understand current market conditions.

• BUY A FEW GREAT COINS - Regardless of your interests, now may be a wonderful time to purchase a few great coins. These may be something you do not normally collect, but would love to own…if the price was right. The top end of the rare coin market is having trouble absorbing some of the material being offered. Great coins have been some of the best performers in recent decades, and once the supply has dried up, prices could rebound sharply. The 4th Edition of the 100 Greatest US Coins was just published. I recommend the purchase of any coin on that list that you can afford.

• NEGOTIATE - It’s a buyer’s market for most series. Many dealers have excess inventory and are willing to negotiate more than in past years. Shop around for the best possible deals. From an investment standpoint, paying too much for a rare coin can take years to recover. With so much material hitting the market, now is the time to find bargains.

Hopefully, the above advice will help you better understand the current market and the opportunities it may afford prudent collectors. Markets seldom go straight up, and fluctuations are to be expected. Donald Partrick purchased some of his greatest coins at the 1979 Garrett sales. If he had sold during the market crash of the mid-1980s, he would have left millions on the table. Instead, he continued to buy when great coins became available. This strategy worked then and will probably work in the future!

Questions about the rare coin market? Send them to wmr@ngccoin.com.