Higher FMV Creates Activity
Posted on 4/1/2006
The coin industry is entering new territory. Granted, we recall the 1979-80 coin market, but it was fueled by inflation causing the metals to rise which created the wild pricing structure forced by investors seeing a rising market and quick profits. However, when this market cooled and the metals crashed there was no support for the high prices so-called rare coins had attained. The dealer market could not repurchase all the rare coins that came back into the market. Also, when prices began to fall, grading tightened and many of the coins did not qualify for the grade at which they were previously sold. This was a few years previous to the establishment of the grading services which solidified consistent grading. Today, the coin market is fueled by a throng of collectors taking the control out of the hands of the dealers and placing it strictly on supply and demand. Today’s collectors are focused on rarity, quality, availability, and lastly, price. The majority of collectors leave the cost of a specific coin as the last hurdle when buying coins in today’s vigorous and most efficient market. In addition, today’s advanced numismatists are more savvy than in previous years due to widespread use of the Internet.
We have all seen what happens when forces outside the United States begin to participate in the stock market and the art market. Years ago when Japanese investors started buying land, stocks, art, etc. the prices began to jump as quickly as one could raise their hand. Today the Chinese, among other foreign interests, have entered competitive markets within the U.S. and are becoming a major influence. There are bound to be conglomerate acquisitions of truly rare coins if there have not been already. The FMV continues to sky-rocket for a myriad of coins, mostly those with low availability. However, it is not just the true rarities that are advancing; it is anything that looks better than having money in the bank.
At the recent Santa Clara Expo, we saw more numismatists with cash to spend than at any time in the last few years. It seems as if collectors (investors) do not want money wilting in bank accounts. These collectors are looking for investments with a track record that can be followed on a regular basis and have the ability to rise due to supply and demand. And we are seeing just that. Demand is forcing thousands of FMV prices to higher levels as the competition for coins is fierce. We think it will become even more competitive in the future. We are already seeing specific issues jump 25% or more just from one auction to the next. The first auction establishes a new price and with multiples of potential buyers for a rarity, when the next one becomes available, there is even more competition.
Since the beginning of the year, we have seen numerous coins advance beyond what can be considered reasonable. The list is endless but we will mention some here. The $5 Indian in MS 63 and higher is a very popular coin; and they are not easily located. The only date you will find at reasonable levels is the 1909 D. This coin had an FMV of $2,750 in MS 63 in January of this year and in MS64 it was $4,500. It is currently at $3,560 and $5,340, respectively. Any of the other dates will command levels higher than these when you can locate them. When they do come along dealers don’t even have to advertise them because they know right where to go for a quick and profitable sale. Another strong series is $3 Gold, which has moved up drastically in all grades. Availability in this series is very sparse; yes there are coins available but most of them are well above current FMV levels. Even at that there are still trades occurring. The common Type Coin had an FMV of $2,970 in MS 60 (January, 2006) and now shows $3,220; the MS 62 was $6,840 versus a current $8,810. The MS 63 and 64 grades have jumped a little over $2,000 each since January. And, there are sill strong buyers for all of these coins at today’s FMV levels.
What if the metals start to take off? Oh, that’s right, they already have. Analysts continue to expound the virtues of Gold, Silver, and Platinum and even Palladium and Rhodium are becoming more active. Even as we have seen Gold advance there are still areas of Gold coins that have not moved in tandem yet. The MS 60 $5 Liberty was $240 in January and is currently at $245. This is a coin that is not all that popular in the lower grades and is readily available. However, if Gold continues to move at its current rate this is a coin that could show future advances. There are several other Gold issues that have a low premium above the Gold content. You can be assured that there are many dealers and collectors looking into these series and will quietly be putting them away. The same scenario holds for the $10 Gold Liberty, although it does seem to be more popular than the $5 Liberty. The $10 Liberty had an FMV of $362 in January and is now at $376 in MS 60. It is double the weight of the $5 Gold and would cost a lot less than two of them.
Many collectors would agree that the $5 and $10 Liberties in MS 60 are not very attractive. However, if you take the same grade for an 1800 $10 Heraldic Eagle, the buyers for this coin might say that it is really nice for the grade. Again, this is a dramatic description of supply and demand whereas the early $10 is extremely rare and there are many buyers for a very small supply. The more common $5 and $10 in MS 60 would require hundreds if not thousands of buyers to create the same kind of demand. Of course, this is all relative to the amount of money there is to spend on certain coins. As Gold advances as the analysts feel that it will, these common coins will tend to dry up and force the FMV to higher premiums in the future.
One more area to look at is the $1 Gold Type III in MS 65 and 66. Many collectors view the spread from one grade to the next to see if there is potential for the gap to widen. Currently the MS65 has an FMV of $3,160 and the MS 66 is $3,500. This is an unusually tight spread between grades. It is obvious that there are enough MS 66 coins available that creates this anomaly. What would it take for this spread to change? The census reports would be a good way to examine this area to see the potential of all MS 66 coins available. Further, determine which are the most common issues and then look for the ones that are priced relatively the same but are not easily acquired. The future looks good for numismatics. It is just a matter of how you get involved.
NumisMedia is the Official Price Guide of NGC.