Ups & Downs of the Coin Market
Posted by NumisMedia on 7/1/2006
What you are seeing in the coin market is typical of the summer months. Just like other industries, coin dealers go on vacations. It is a situation that began several decades ago when the coin market was not what it is today. As a nation, the summer is when most take vacations because the children are out of school. When you take a significant number of coin dealers out of the market because of vacations, it tends to exhibit a slowdown in the market. Yet today, the majority of dealers have laptops with them when they are out of town and are quite capable of running their business while basking in the sun somewhere far away. While it may appear that the volume of business is down during this time period, we are seeing significant sales and activity to indicate that the coin market is doing just fine.
Sure, there will be areas that do not attract as much attention as before; but that is always the case. Hot spots change and some coins fall from favor at current levels. Just offer these coins at discounts and see how fast they sell. Does that mean they are lower, or, are they a new opportunity? There is always a balance in numismatics. There has to be a buyer in order to give meaning to a seller's offering. When prices are too high sellers will tend to change their needs rather quickly. However, if the number of coins available in a grade and series is relatively low compared to the number of potential buyers, then we see prices move forward with little resistance.
One of the hot areas of the market during the first half of this year was $5 Gold Indians. Not that they are soft by any means, but they have retreated slightly in MS64 and lower grades. One of the more interesting beliefs in the coin business: if prices for specific rare coins increase significantly enough it will attract sellers into the marketplace. This is what appears to have happened to the $5 Indian. We monitored substantial increases to the FMV since the first of the year and we could not find very many $5 Indians for sale, especially in MS63 and MS64 that did not sell very quickly to aggressive buyers. In fact, the most common date, the 1909 D, was just about the only coin most sellers could locate to offer their customers. The majority of other so-called common dates were fetching markedly more than this date — and there were buyers waiting. In the last month, the FMV reached levels that actually attracted enough sellers that some of the dates in this series were being offered at the same price as the 1909 D. Buyers backed off slightly looking for bargains and the FMV fell slightly this past month. This is quite normal for strong markets as the balance of power shifts from buyers to sellers. The MS63 fell about 10% and the MS64 about 12%; the MS65 is down less than 1%.
When one market quiets you can almost bet that another one heats up. It is not always in a related series, but there is one this time. The $10 Gold Indian has been warming since the first of the year and has received lots of play in the last couple of months. The common dates have moved from $1,500 FMV in January to a current FMV of $2,280; in MS64 they have jumped from $2,430 to $3,300. On MS65 the FMV has increased from $5,750 to a current $8,720. Now, keep in mind that these are only for the most common dates; the other dates are not readily available and will typically increase in an advanced fashion. Also interesting is the fact that when a series is not extremely active, you will see coins sitting at then present FMV levels with relatively no interest. When the market changes, you cannot find a coin to save your life. Numismatics — always interesting.
We constantly receive phone calls and email from our subscribers with various questions about the coin market. Most of them have a common theme. They wonder about the overall potential of the coin market. They receive lots of sales pitches and hype from coin dealers as they try to sell coins. There are probably as many marketing techniques as there are coin companies around the nation. Many coin dealers try to sell coins based on the premise, "Buy now while prices are down and take advantage of this opportunity." If the market softens and the FMV drifts lower you might hear, "Buy more and you can average down." These may sound like quotes right from the stock market. Yet, they can be realistic statements and provide promise if we are talking about areas with potential and not common series.
With the coin market as hot as it has been over the last few years, most dealers do not even need a sales technique. Coins have been selling themselves. The demand is so strong overall that it creates exponentially more demand. This is what has made the coin market what it is today. There is a certain amount of adoration that dealers and collectors have for numismatics and we don't think anyone should be involved with it unless they have developed this ongoing love affair. The collectors we talk to seem to be very astute. They are aware that there are going to be cycles; some up, some down. History tells us this will occur in every marketable product. What we did not figure into the numismatic equation is the phenomenal rise in the number of collectors enamored in this wonderful hobby/business. It is not just for the rich; people from all walks of life can enter.
One of our recent conversations was with a collector concerning the Type market. Specifically, he questioned the potential of Liberty Seated coins. He believes that these coins have not made significant increases to the FMV over the years because there are so few examples available in the marketplace. Now he has touched on a series that we really like and he hit a home run with his analysis. Dealers need quantities of specific coins within a series in order to create an active buy/sell market. For example, Walking Liberty Halves are always available in MS63 through MS66; that is, most dates from 1936 to 1947. You can have an active two-way market because the numbers allow it. But with Liberty Seated Coinage in MS63 and higher, you will rarely have more than one coin of the same date in inventory at the same time. A dealer may have common MS63s, but they will all be different dates. This makes for a difficult two-way market. So what we will have to rely on is the natural increase in this area as all prices change. Liberty Seated material will have to undergo a natural transformation in FMV prices relative to other series. As we have mentioned in past articles, this is an area we like, yet, it does not seem to attract visible buyers at this time. Will its potential ever be realized?