Are Early Gold Coins Overpriced?

A good client of mine recently asked me the question “are early gold coins overpriced?” As with most intelligent questions, I don’t think that this one has a pat answer. My feeling is that some early gold coins are poor value at current levels while others are good to very good values. Read on for my take on the current early gold market and my suggestions of where the best values are. Appearance and eye appeal are, obviously, critical factors in determining the desirability of any coin. In the area of early gold, I think these factors are especially important. The reasons are fairly obvious: these are hand-made coins that vary in quality literally from year to year, many survivors have been cleaned, abused or damaged and the third-party services tend to be inconsistent (to say the least) when it comes to grading early gold.

A fairly general statement that I think can be made about the early gold market is that only a small handful of the coins that exist have good eye appeal and a pleasing overall appearance. I personally feel that virtually every early gold coin that is choice and original remains a good value while most every good early gold coin that is low end for the grade and unoriginal is poor value. But this observation is fairly simplistic and needs to be expanded.

As with most markets, early gold issues can generally be divided into three categories: common or “generic” dates, better dates and rarities. And in the case of early gold we might even be able to create a fourth category: the “super-rarity.” How are each of these categories doing?

Even if you know very little about early gold, you might guess that the area most prone to showing weakness in a downward market turn would be the common dates. An example of what I would term a “generic” early gold coin would be an 1806 Round 6 Half Eagle. There are as many as 1,000 examples known of this issue and it is fairly readily available in grades up to and including MS63 to MS64.

If you go to a major national coin show you are likely to see a decent number of 1806 Round 6 half eagles. These would generally be available in the AU55 to MS62 grade range. (Lower grade 1806 Round 6 half eagles are difficult to find because the nice, affordable examples tend to be closely held by collectors; the very high end MS63 to MS64 tend to either show up at auction or they are placed in tightly-held, high end collections and do not trade with frequency). The examples available for sale tend to be low end and unattractive. At current price levels, I think they are not especially good values. Why is this?

As recently as five to six years ago you could buy a nice, fresh AU 1806 Round 6 half eagle for $5,500-6,000. At this affordable level, this coin was a good value, despite the fact that it wasn’t really “rare” in the sense of most early gold. Today, a similarly graded coin will cost you at least twice this amount. The problem is that these coins now tend to not be nice for the grade and the new price range of $11,000-13,000 no longer qualifies as “affordable.” Are coins such as this overpriced? If they are typical low to middle quality coins, the answer is a fairly resounding yes. If they are accurately graded and solid, choice pieces I would say that they are really overpriced but that they are relatively marginal values at these levels.

An example of an early gold coin that I regard as a “better date” would be a 1799 half eagle. This issue is not truly rare but it is available with far less frequency that an 1806 Round 6 half eagle. I think the market for an issue like this has held up rather well; even if a 1799 half eagle in, say AU55 is currently valued at least twice as highly as it was five or so years ago. Collectors still expect an AU55 example of this date to have good eye appeal and ugly examples are harder to sell than they might have been a year ago but I think this area of the market is solid. Are coins like this overpriced? I would say, pretty resoundingly, in fact, that they are not; especially in the solid collector grades of EF40 to AU55.

A “rare date” early gold coin would be, as an example, an 1826 half eagle. This popular Fat Head issue has a surviving population of maybe three dozen and it tends to be offered for sale at the rate of one or two coins per year. This is another issue that has seen significant price increases in the last five years but the fact is that the supply of 1826 half eagles in virtually all grades is nowhere near the (current) demand. Yes, coins like the 1826 half eagle are currently expensive. But given their unquestionable rarity I would have to say that coins like this remain fairly priced.

And what about our fourth and final category—the so-called “super-rarity?” An example of this would be an 1815 half eagle; an issue that is extremely rare in all grades and which typically appears for sale at the rate of approximately once per three to five years. My gut feeling is that these major rarities, in all the various early gold series, are still reasonably priced. There is an 1815 half eagle coming up for sale in the 2009 FUN auction (graded MS64 by NGC and pedigreed to the Garrett collection) that is almost certain to shatter all price records for this date and which could be one of the highlights of the 2009 Numismatic Year.

What about issues like the 1796 No Stars quarter eagle or the 1808 quarter eagles; coins that aren’t “rarities” in the classic sense of the word but which are exceptionally popular and numismatically significant? I think, in theory, that these are overpriced given their big-picture rarity. Given their strong level of demand I would still buy them for inventory. However (and this is a BIG however) I think the market has become far more selective on coins like this. If they are not CAC-quality, they have become hard to sell unless discounted in price. And this scenario is likely to continue as long as decent 1796 quarter eagles command prices in excess of $125,000-150,000+.