I recently received an email from a collector who asked what I thought were an extremely intelligent group of questions. In a nutshell, he asked the following. As boomers age, are we nearing a bubble in coin prices? At some point will the number of collectors with the financial means to collect rare gold decrease and will prices suffer accordingly? Go to any coin show and you will see a disturbing trend. The buyers of most “serious” coins (i.e., coins priced at $1,000 and above) are in their 50’s or 60’s and the dealers selling them these coins tend to be at least the same age, if not older. There are not many young collectors at shows and the number of “A” level dealers in their 20’s and 30’s can be counted on one hand. This spells trouble for the coin market, right?
I contend that the answer is not as obvious or as clear-cut as it would seem to be. I am a keen student of the history of the numismatic marketplace and, as far as I can tell, ever since coin collecting became popular in the United States (in the late 1850’s/early 1860’s) it’s been a hobby that mainly attracts older people. Think about it: coins are expensive and people in their 20’s and 30’s have never had enough discretionary income to be making impulsive non-essential purchase. When you are 27 years old, you are thinking about buying a house and saving money for your child’s education; not deciding what series of 19th century gold coin to specialize in.
But the world has changed in the last generation or two and wealth is no longer the exclusive province of the middle-aged and the mature. For the first time that I can remember I have a few good clients who are younger than I am and these collectors tend to be self-made entrepreneurs.
In the 1950’s, many collectors grew old at around the same time and the hobby was in a precarious spot. Lots of great collections were coming on the market at the same time and it seemed unlikely that these coins would be absorbed. For a while, prices were depressed and the short-term outlook of the market was gloomy. But along came the roll craze of the early to mid-1960’s and the market was suddenly reinvigorated by young collectors; some of who became famous dealers who are active to this day.
In the mid to late-1970’s the same trend was occurring. Collectors were graying and lots of coins were coming on the market. All of a sudden, precious metals prices began to boom and lots of new blood came into the market. Two decades later it was the State Quarter program that jumpstarted a moribund market. Again and again, we have seen cycles of demand in the coin market and when things appeared gloomy, something would happen that infused youth into the hobby.
The X factor in today’s market—and the future coin market(s)--is, of course, the Internet. Unlike in 1960 or 1980 or in 1990, it will be easier to replace this generation of graying numismatists with younger buyers due to the accessibility of information and the ease of purchasing rare coins on-line. And there is another factor that I believe will come into play as well: foreign buyers.
As is well-known, huge middle-class and upper-class populations are being created in China and India. These are countries with an interest in American culture and cultures that greatly prize gold. It is possible (not likely, but possible) that new markets for American gold coins could develop in these countries and this, of course, would greatly change the dynamic of the future coin market.
My guess is that some time in the next decade or so, we will see a significant change in the demographics of the coin market. Many of today’s “super-collectors” are going to be net sellers in a decade or so and it is certainly possible that prices at some point could drop in the short-term. But if this scenario occurs, I think it is highly possible that this dip will be short-lived and that a new generation of eager collectors will fill the void.