Posted on 5/1/2005
At a recent major coin show some of us serious old-time collectors sat down and reminisced about the changes in the coin market over the last 20 years. These collectors have been involved in numismatics for 40 years and longer; they are also very successful business people, so they had and still have the ability to buy coins they really want. Their common ground is unmistakable. They all mentioned that they commonly purchased coins in the $100 to $500 range depending on the quality and the value in relation to other coins within the series. While they collected coins in a practical manner, trying to complete various sets of interest, they were not against buying multiples of certain issues they felt were under priced at the time. They also ventured out to buy coins that were key dates and typically cost well above their usual budgets. Most of these collectors acquired some rarities that cost as much as $5,000. However, these particular collectors tended to shy away from U.S. Gold coins because the entry into this area was greater than their expectations and too expensive in relation to other series which are unrelated to the whims of the bullion market.
We all concluded that times have changed and their budgets have increased dramatically. Coins they thought would cost too much suddenly seemed well within their price ranges. These collectors realized they had moved their average purchase prices to much higher levels without even noticing the dramatic differences. U.S. Gold began to look reasonable compared to the rest of the coin market. Gold coins they followed over the years, and thought to be too expensive at the time, appeared to be priced close to the same levels as they were several years earlier. It was time to jump in.
This is the kind of thinking that has expanded the U.S. Gold market over the last three years. With prices moving to higher levels in nearly all series and the average purchase prices for many collectors expanding to much newer highs, U.S. Gold seemed well within reach of many new collectors. While collectors used to buy coins under the $500 level, many have now added a zero to this number and thousands of U.S. Gold coins suddenly appear within their budgets. They may not be able to complete the Liberty series in Gold, but possibly the Indian series could be within their financial reach. Now we have collectors looking for those issues that are least likely to be found in even the most extensive inventories. They want a coin that not only is Gold, but has collector value, a nice look for the grade, and some rarity as well. This sounds like any other series and is why U.S. Gold has become so popular in recent years.
What we have seen lately is that the big money collectors have inspired collectors with lesser budgets to fulfill some of their numismatic dreams by pursuing better date coins in nearly every series prior to 1960. The additional money spent on expensive rarities will tend to have a trickle down effect on lower valued coins and additional dealer to dealer activity. Several major dealers have intensified their buying efforts as they increased the dollar amounts they are willing to spend on high priced rarities. They are trying to attract potential sellers of low population true rarities because they have customers more than willing to add these historical rarities to their portfolios. Early Type Coins and Early Gold in AU 50 and higher grades are extremely strong at this time. Dealers are competing with each other to try to fill the needs of their best clients. A seemingly endless supply of money is just waiting for the right coins to come along. The demand is there, the coins are not yet available.
One area we have seen FMV levels advance briskly in the last few months is in Three Dollar Gold. In all grades these coins have come under pressure and supplies are thin at this time. The AU grades have moved at least 10%-15% since the first of the year, but the Mint State grades have seen even more dramatic increases. In December the MS 61 Type showed an FMV of $2,720 against the current level of $3,690; in MS 62 it has risen from $3,380 to $4,720; in MS 63 they were not an easy coin to sell at $5,840 in December, but now they are not readily available at $7,720. The number of ready buyers has increased immensely and the shortage of coins is quite significant. This is more remarkable in the higher grades.
Another series showing brisk demand are the Early $10 Gold issues. The Capped Bust variety, 1795-97, have increased at least 10% in all the AU grades and few are to be found. As a result of auction activity and dealer buy prices moving dramatically higher in the past four months, we have seen the FMV jump from $156,000 in MS 63 to $188,500. In MS 64, the FMV has more than doubled from $181,250 to $375,000. As long as interest rates remain low and the stock market creates uncertainty, collectors are more than willing to diversify their holdings into what they feel is an up and coming market. It is difficult to argue with the proponents of numismatics mainly because of all the newly created interest and hundreds of thousands of serious collectors now demanding more specialized products.
Last month we wrote about specific $20 Liberty Gold and the fact is that we have seen interest increasing over the last three years without much real acknowledgement. Prices for the common issues in low grades were subject to bullion prices and the premiums would adjust accordingly. However, what we find interesting are the dates that many numismatists thought were easy to acquire, yet are not found in quantities today. Further, some dates are common up to a specific grade level and then they become nearly extinct. This occurs in many of the AU grades and creates the idea that the specific date is not rare. Yet, when a knowledgeable collector begins his or her quest for the higher quality coin, the search becomes much more difficult. This strategic dilemma is not unique to $20 Liberties. It occurs in many series in the 1800s. It is just a matter of time and study before more so-called common issues become recognized as today's rarities.
Another important point is worth mentioning. Sometimes you may not see some areas or specific coins rising in FMV, yet sellers can easily get 20%-50% over the reported NumisMedia prices. The reason this occurs is that there may be a dramatic difference in what dealers are generally offering for some coins and what the coins are actually worth. A specific example will illustrate this point. An 1880 Morgan Dollar in MS 63 graded by NGC wholesales at $40-$45; however, this is not a date that you can go out and find in large supply. So when it is offered to a retail buyer it may well bring $70-$80, as long as it is nice for the grade, well above the current FMV of $55. This is a simple illustration of daily transactions. The more you learn about specific series and dates, the more you realize the coins that attract premiums. We are in a very interesting market; one that may well become the centerpiece of financial asset strengthening.
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