Rarities Fuel Entire Market
Posted by NumisMedia on 6/1/2006
A sure telltale sign of the condition of the overall coin market can be simply described using the following example. Pan Pac $50 Gold Commemoratives are hot. Every one of them seen of late in major auctions has been commanding well in excess of our reported FMV at the time they sell. The reported FMV rises and they sell at premiums again. The nation’s top market makers continue to raise their buy prices in an effort to corral some of these coins; they have modest success but they generally just get another one or two buyers for these rarities rather than actually locating sellers.
Now these coins are genuinely rare, exceptionally attractive, have always commanded great respect for their size and eye appeal, but are usually available if you really want them. Because of their high entry level value, you would not expect to find them in many dealer inventories as they tie up too much money. Yet, they are still out there. Further, they have continually gone up in value over the last couple of years. Since they are so expensive to own, not everyone can afford one in their collection. However (pay attention now because this is the most important point of this article), they continue to be in strong demand at higher levels by those who can afford them and put them away for the future.
This is extremely good news to the coin market for various reasons. First, it tells us that there is still a lot of money out there to spend on rare coins. Next, collectors are willing to spend big bucks for a single coin because they feel there is still room for major price increases. Also, the more we see expensive coins sell to collectors, the more numismatics will continue to attract lower value coin sales. We have spoken of this trickle-down effect in the past and it continues to influence the whole market.
Coin shows and auctions are receiving lots of attention even when the attendance may seem to indicate otherwise. There is so much business consummated over the Internet rather than face-to-face. Dealers come to coin shows with massive want lists and find coins for their customers, whether they are dealers back home or retail collectors. Major auctions have buyers on the telephone during the actual sale, aside from the fact that they may already have a strong book due to Internet bidding. The upward cycle continues to raise the overall value of most coin collections; it seems as simple as waking up in the morning to see how much your collection has increased in value. Many numismatists are spoiled because they have only been involved for the last few years and all they know is a rising market. Keep in mind it does not always work so well. Just look at the turnaround the metals have made since the recent highs. The good news is that this downturn has not really hurt the true numismatic market.
Let’s get back to our Pan Pac $50 commentary. This is not the only area that shows massive increases; it is not the only area where expensive rare coins are in great demand. Much of the Early Gold and Type coins that enjoy FMV of $100,000 and more will attract sales when they are actually available. This is one of the reasons that many of these rarities are offered in major auctions as they will entice many buyers to take part. The more buyers, the higher prices soar. In the last year, we have seen the FMV skyrocket for the $50 Pan Pac in virtually all grades; no matter what condition the coin is in, there is a buyer for it. The MS63 Round has jumped from $64,380 to $81,250 since June of last year. The Octagonal has moved from $59,380 to $80,630. The chart below shows how the MS64 to MS67 grades have done since June, 2005.
|$50 Round||$50 Octagonal|
|MS 64||$78,130 – $104,380||$73,130 – $95,630|
|MS 65||$123,130 – $154,380||$118,130 – $145,000|
|MS 66||$162,500 – $206,250||$187,500 – $243,750|
|MS 67||$325,000 – $300,000||$357,500 – $321,880|
You may notice that the MS 67s are lower than reported last year; this is due to the limited information in this grade at the time since few traded in this grade. Today’s FMV for all these grades are much more representative of a very strong two-way trading market.
As we mentioned, it is not just a single series that is carrying the coin market, there is a well-defined, widespread interest and it continues to blossom. It is like a regenerating life form that is on a feeding frenzy and keeps adding new areas for sources of nourishment. Collectors cannot get enough and they want more and more. We even noticed at a recent coin show how a husband and wife team was arguing over their next purchase. The simple truth is that you have to make a list of what you want. However, you need to be flexible because many of the coins you want are in demand by others as well. Those buyers with most flexibility will find more coins to their liking than those sticking to specifics in an exact order. Some coins just don’t come on the market when you are ready to buy them.
Many of our readers are painfully aware of how the metals have reacted over the last month. After achieving new highs in the last 25 years, they have drifted downward for the last few weeks. This causes some concern over how it could influence the rare coin market. From our perspective, the only negative is that the bullion-related coins have retreated based on current prices. Yet, one of the more interesting things we have noticed at coin shows is that many buyers are taking advantage of these lower prices to add bullion coins to their collections as a way of storing value. Many collectors and analysts feel the long term move is still to higher levels and it is just a matter of time before they turn back toward the upside. Further encouraging is the fact that we have not seen any slowdown as we approach the summer; this can be the time of the year when coins are moved to the backburner as family and vacations take precedence. No worry, the market maintains its overall strength.