With the year nearly over, we are heading towards a slow few weeks in the coin business followed by what is certain to be an interesting FUN Show in January 2010. As we close the year out, I thought it would be interesting to look at a few points and ask where we are and where we’re headed. I have been through some odd coin markets (1982-84 and 1992-1994 come to mind) but what we are currently experiencing is pretty much unique. We are seeing a market where coins that were considered unfavorable a few months ago (bullion and semi-numismatic) are now what everyone wants and “real” coins are as hard to find as at any time I can remember.
The demand for generic U.S. gold, especially double eagles, remains as strong as I have ever seen. The premiums are as high as I can remember. As I write this, gold spot is at $1,140 per ounce (after having broken the seemingly unreachable $1,200 barrier last week) and an average quality MS60 to MS62 Saint is trading for $1,600-1,700. This 40%+ premium over melt for a low-end Saint is easily the highest I can recall and I think it’s pretty remarkable considering that you had to beg people to buy the exact sort of coins a few months ago at a 10% premium.
I am beginning to see some profit taking in the generic market and I think this will continue for a short period, possibly evaporating the premiums. That said, with the current sad state of the American dollar and the worldwide demand for gold, I wouldn’t be stunned to see gold break $1,500 in the next few months and a lower quality Saint to be worth close to $2,000 (!)
What about the rare coin market? It is, in its own way, experiencing topsy-turvy conditions not dissimilar to generics. The big difference is that there is good supply in the generic market but very limited supply in the rare coin market.
As I stated above, it is hard to buy interesting coins right now. Let me explain what I mean before this comment is misconstrued. If you collect Very Fine to Extremely Fine type coins or common date Walkers or Indian quarter eagles, locating coins is probably not a big challenge. But if you collect New Orleans gold or early quarter eagles or superb gem gold dollars you are probably finding it very, very hard right now to buy much. Sure, there are a few pieces around that are either terrifically overpriced or ridiculously overgraded (or a combination of both) but I’m guessing most serious collectors haven’t had an easy time adding to their collections in the last year.
The reasons for this appear pretty simple. There was a good deal of profit taking in 2005 and 2006, which brought quite a bit of material on the market but at very high price levels. The people who then bought in at the high levels either had to sell quickly (and at a significant loss) in late 2007/early 2008 or they have just decided to hold what they have and not sell their good coins at a loss. Another thing to consider is that many of the faux-collectors of the mid-decade have come and gone and most of the buyers for coins these days are serious collectors. They like the coins they own and they just aren’t interested in selling the cream of their holdings.
When I am able to buy interesting coins, they are selling well. I have noticed an uptick in demand for virtually all collector-oriented gold issues in the $1,000-5,000 range. Bigger coins seem to be selling better than smaller coins and nothing appears to be selling better than nice $2,000-5,000 Liberty Head double eagles. Yes, I am nostalgic for the days when I was regularly selling a $25,000+ rarities but I am happy to see many new collectors coming into the market and most of them heading towards the gold aisle in the numismatic mall.
Another issue we are seeing right now in the gold coin market is a real problem with price reporting. With bullion prices rising rapidly, price reporting is naturally lagging. This is compounded by the fact that certain rare date gold prices were unceremoniously devalued after one or two low-end examples sold cheaply at auction. Until we see some accuracy in this area, it will keep down the supply of interesting coins re-entering the market.
Speaking of auctions, it is interesting to note that the upcoming pre-FUN, FUN and post-FUN sales appear to be having a harder time attracting consignments than in years past. A few years ago, specialist dealers like me could use the excuse that auction companies were offering very strong competition when we moaned that we were having a hard time buying coins from collectors. Today, even the most formidable auction firms are extending their consignment deadlines in an attempt to gather more high-powered collections and individual coins.
I’ve heard fewer complaints from collectors and dealers about third-party grading in the last few months. Part of this probably has to do with the fact that most dealers are sending in Saints, Saints and more Saints to PCGS and NGC and the services tend to grade these pretty favorably. But I also think that the creation of CAC has helped to check some of the grading issues that existed in the past and I think the services are, frankly, being more careful with what they grade.
So what’s coming in the near future? As I mentioned above, I think the 2010 FUN will be strong but I am anticipating that I will come home with fewer coins than I’d like to. The name of the game in the early part of 2010 is clearly going to be gold and I wouldn’t be surprised if there is some spillover from the generics market into some slightly more exotic areas.