Gold Coin Market's Strength

Part of me wants to think that the gold coin market’s currently high values represent a peak and that a correction is due. But the more I look at the market, the more I think that it truly has legs and that prices are not going to go down any time soon. Here are a few reasons why I think the gold coin market is not going to drop any time soon:

There are a lot more people looking to buy coins than there are people selling. As long as demand outstrips supply, prices are not going to go down. In some areas, like early gold, prices have doubled or even tripled in the past three to five years, yet the current supply of early gold is the smallest I can ever remember. When you see auction sales with a large number of interesting early gold coins for sale, this might be a sign that this area is correcting. But as long as people are more interested in buying than selling, look for prices to continue to rise.

With gold (and silver) at twenty-five year highs, coin prices aren’t going down any time soon. If both of these markets show a major short-term correction, it is likely that certain areas of the market will weaken. But I don’t think that gold dropping from $600 to $500 is going to affect the value of a rare date St. Gaudens double eagle or a rare Liberty Head eagle.

There is a lot of money in the world right now. I recently went shopping for a new house in Portland, Oregon and was pretty shocked to see how little $1 million bought you in this once-sleepy market. Not that long ago, one million dollars was a staggering amount of money to pay for a house. Today, it’s what many people pay for their second—or even third—residence. Gone on vacation lately? Taken the wife or significant other out for a fancy meal? Filled up the car? It’s an expensive world we live in these days, and the gold coin market merely reflects this fact.

The most interesting thing about this market is that it is still mostly self-generated. People really want gold coins; unlike in 1979-80 and 1989-90 when they were told they really wanted them. If you remember those two markets, you can remember insane price manipulations and wacky hype that, viewed today, seems like…well, insane hype.

One has to wonder, what will happen to gold coin prices if the Chinese decide they want to play. Or if someone really clever decides to corner the market in MS65 Indian Head gold (it’s SO easy to do!) and then expertly market the coins. Then today’s seemingly “insane” gold coin prices could actually look cheap.