Why is Proof Gold Suddenly a Hot Commodity?

Without a lot of fanfare, Proof gold coins have become a strong area of the market. In this blog, I'd like to postulate as to why Proof gold coins have become so avidly desired, which Proof coins are currently in greatest demand and what the short-term outlook is for Proof gold. To understand the current Proof gold market, it is important to understand the market over the past decade. The years from 1995 to 2000 represented the greatest period of availability for rare Proof gold in modern numismatic history. The sale of the Childs, Bass, Pittman and other collections made very rare issues seem almost common. I can remember there being multiple examples of issues from the 1860's and 1870's available simultaneously. This availability was coupled with a lack of demand for expensive coins once the Bass sale(s) were finished in 2001.

I think dealers who were around for this period (including myself) got a little spooked by expensive Proof gold coins. We remembered owning great, great pieces in 2000-2003 and not being able to sell them. Even when the coin market started getting very strong around 2004 and expensive coins were suddenly in vogue, I can remember that Proof gold seemed to lag the market. Everyone suddenly wanted great business strikes but formerly in-demand Proof gold just seemed harder to sell.

(Side note: Proof gold had been actively marketed in the 1980's and early 1990's. During the go-go investment years of the late 1980's I can remember Coin World ads touting Proof gold as "real coins for real men." But the coin market goes through cycles of demand and it seemed that many of the biggest dealer advocates of Proof gold in 1988 were no longer buyers of such coins in 1998).

This seems to have changed.

What are the major reasons for the sudden surge in demand (and increased prices) in Proof gold? The first answer has to do with supply. In the last year or so, there have been some really interesting Proof gold coins available. The Miller collection, which was featured in the Heritage 2011 FUN Platinum night sale in January, contained many coins that I think will be looked at in the future as truly significant. The quality of these coins was amazing and it was one of the few "time capsule" groups of Proof gold that still exist(ed). By this, I mean the coins hadn't for the most part been conserved. Proof gold with original surfaces is exceedingly hard to find in 2011, and the Miller sale had coins that were not only rare, they were magnificent.

The second reason has to do, obviously, with demand. There was a low level of demand for Proof gold as recently as a few years ago. Oh sure; there were a few people collecting Proof gold by date and when something really rare and really cool appeared at auction it would sell for a strong price. But since late 2007/early 2008 there has been a new breed of collector-investor that has suddenly made a beeline towards Proof gold.

These individuals are wealthy, sophisticated, and generally operate well under-the-radar. They tend to like U.S. gold coins that are very rare, very beautiful and historically significant. For a number of reasons, Proof gold is especially well-suited to them.

But not all Proof gold.

In the coin run-up of 2004-2007, super-grade Proof gold coins were in demand. Investors liked coins like PR68 Liberty Head quarter eagles and PR67 Type Three gold dollars. Now don't get me wrong; these are great coins and they are certainly rare in the grand scheme of things. But their value is derived more from grade than absolute rarity.

Case in point: a perfectly wonderful common date PR65 Deep Cameo quarter eagle from the early 1900's is worth around $17,500. The same coin in PR69 Deep Cameo is worth around $90,000. The quarter eagles from the turn of the 20th century are comparatively available (by the standards of Proof gold) and these sophisticated collectors, many of who have made a lot of money in the stock market by value investing, just don't see the need to own a $90,000 common date Proof 69 Liberty Head quarter eagle.

What does appeal them are Proofs that are very old (in this case, pre-1880) or very rare. And if the coin is large-size (ten dollar or twenty dollar) so much the better.

There are a few other parameters that seem to be important with this new breed of collectors. Off-quality coins won't fly so the baseline for grade seems to be at least PR64. Coins with great eye appeal are in demand and this means that Ultra Cameo or Deep Cameo pieces are commanding more significant premiums than in the past.

With the exception of the Miller coins, originality doesn't appear to be as much of a factor as I would have thought. My unscientific reasoning for this is that there are so few original Proof gold coins left that a premium is hard to place on them. And, most of these collectors really don't like the deep, cloudy natural toning that might be found on an unmessed-with proof double eagle. Big and bright is better and this is the market reality, for better or worse.

The quality of the coins in the Miller sale were an anomaly and you can't necessarily use them as a barometer of the market. There were a number of very rare Proof gold coins in the recent Heritage that sold for very strong prices and were apt metaphors for the entire thesis of this blog. Let's peek at a few.

Lot 5435 was a PCGS PR64 DCAM example of the 1860 eagle. Despite a seemingly high mintage of 50, this is a very rare coin with an estimated ten or so known. The example in the Heritage sale was decent for the grade with a nice naked-eye appearance. It sold for $161,000. The exact same coin sold for $69,000 back in June 2004; its last appearance at auction. More tellingly, a similarly graded but different coin brought $83,375 in January 2009.

An even more interesting coin was Lot 5492; an 1860 double eagle graded PR64 Cameo by NGC. This exact coin had last sold for $94,875 (as a PCGS PR63) back in September 2004. It brought $230,000; exactly the same amount as a similarly graded example (but much nicer, in my opinion) just sold for in the Miller auction.

I was certain that the next lot (5493) was going to be a big-ticket item as it had all the Big Bright and Rare factors going for it. The 1870 double eagle, one of around ten or so known from an original mintage of 35. Another factor was that the coin was actually nice; it was stickered by CAC and I thought it was solid for the grade. In the Miller sale, graded PR64 DCAM, this exact coin brought $189,000. Despite being freshly upgraded (kudos to Heritage for pedigreeing it...) this coin brought a solid $345,000.

Just to let you know that not everything that was big, bright and rare sold for a ton in the Heritage sale, Lot 5496 was an interesting study. Graded PR64 Cameo by NGC, the 1878 double eagle sold for $69,000. This is a very rare coin with no more than ten known from the original mintage of only twenty. Why did it sell for "just" $69,000? Probably because it really wasn't very nice. Also, this is an overlooked date that doesn't have great auction records despite its great rarity. Heritage 1/09: 4135, graded PR64 DCAM by PCGS and nicer than the coin referenced above brought $74,750 in a weaker market.

My guess is that we'll see some more big-ticket Proof gold coins on the market this summer during the ANA sales. Anyone who bought very rare Proof double eagles around 2004 to 2006 has seen them double or even triple in price and this will motivate some collectors to sell. I'm not certain that the market can sustain this price movement but a coin like an 1870 double eagle in Gem Proof at $500,000 or even $600,000 might not seem as impossible as it sounds as you are reading this right now.

Proof Gold Coins

We are now on raregoldcoins.com Blog #50 for the year and I’ve just realized that I’ve yet to write anything on Proof gold coinage. It seems to me that a quick overview and a few passing thoughts on the subject are well overdue. Let me begin by saying that I personally love Proof gold, especially Liberty Head issues struck prior to 1900. I love the fact that most of these coins have original mintage figures below 100, I love the dazzling appearance that nicer pieces possess and I love the excellent value that many of these coins represent in today’s market.

The Proof gold market changed radically in the late 1990’s. After the Bass, Pittman and Childs holdings were sold at auction between 1995 and 2000, there was an exceptional amount of Proof gold on the market. I can remember certain dates in the quarter eagle and half eagle series that were really rare (i.e., with surviving populations of fewer than 20 pieces) having multiple examples available simultaneously. This gave the market a somewhat warped perspective. At the end of 2000, I owned three very nice Proof 1886 quarter eagles at the same time. In the ensuing years I haven’t owned a single example and don’t think I’ve seen more than one or two.

A few very major buyers of Proof gold coinage emerged around 2001-2002 and they have quietly put away large amounts of these coins. I can think of at least two buyers that have each taken over 100 pieces of Proof gold off the market and it is likely that these coins will not reappear for quite some time.

Something that has changed considerably in this market since the late 1990’s is the market premium factor. I can remember that during the Childs and Bass sales, it was possible to buy some incredibly rare Proof issues from the 1870’s and 1880’s for just a small premium over the much more available dates from the 1890’s and 1900’s. When a coin like an 1879 half eagle (original mintage: 30) was selling for just 20-30% more than a common date like a 1900 half eagle (original mintage: 230) it was hard not to absolutely love the value that the former represented. Today, a coin like the 1879 now sells for a much greater market premium factor—and deservedly so.

Grading standards for Proof gold coinage have unquestionably changed since the mid-1990’s to early 2000’s. I notice the biggest change in the PR63 to PR64 range. At one point in time, coins in this grade range were actually relatively attractive. They generally showed a few light hairlines in the obverse fields and had Gem quality reverse. Today, many Proof gold coins graded 63 and even 64 show clear signs of having been aggressively cleaned at one time and tend to have dense hairlines on both the obverse and reverse.

As far as finding truly original Proof gold coins…you can just about forget ever seeing these anymore unless “old time” out-of-the-woodwork collections surface at auction. If you go through the Childs and Bass catalogs, you’ll see photos of wonderful, deeply toned Proof gold coins. Today, essentially every Proof gold coin you see looks like it is fresh from the Gallery Mint’s coining press with ultra-bright surfaces.

I think the best value in proof gold right now is in the smaller denomination coins. As an example, I think many Proof gold dollars and quarter eagles are very well priced in relation to the larger denominations like eagles and double eagles. I especially like any Proof gold coin with an original mintage figure of 50 or less in PR63 or higher grades. In the smaller denominations like gold dollars and quarter eagles, it is sometimes possible to purchase truly rare and very attractive coins for below $20,000 and, in some cases, for less than $10,000.