Aging Baby Boomers and Rare Gold Coin Prices

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.

Characteristics of An Ideal Coin Collector

After attending the recent Heritage sale of Dr. Steve Duckor’s Indian Head eagles, I was invited to have dinner with Steve and a group of elite-level collectors. The sale was a smashing success with the final prices realized at least thirty to forty percent higher than I imagined they would be. As we sat at dinner and celebrated Dr. Duckor’s success, one of the individuals at the table made a great comment: “Steve Duckor is the poster child for coin collectors.” I thought long and hard about this comment and suddenly realized that it was, in fact, completely true. Steve Duckor, in addition to being a great guy, is a great collector. There are, in my opinion, five factors that make him a truly special numismatist.

He specializes in one or two areas and doesn’t wander outside his comfort zone. Steve Duckor specializes in Barber coinage (dimes and halves) and 20th century gold (Indian Head eagles and Saints). By keeping his focus on these areas, he has been able to build great sets and become far more knowledgeable than most dealers. Collectors with a clearly defined focus are unquestionably more successful (and probably happier) than those with a scattered approach.

He found a “look” and built his collection(s) around it. I had the chance to view Steve’s collections last year and was stunned at how standardized the appearance of many of his coins was. As an example, many of his Barber coins had dazzling peripheral coloration framing frosty centers. His Saint Gaudens double eagle set contains many of the most attractively toned gold coins I have ever seen. When these sets hit the market they will bring record prices because the coins have fantastic overall eye appeal that improves as you see all the coins together.

He established a strong relationship with a great dealer. Steve was lucky to find David Akers early in his career and this enabled him to not only have access to some great coins but to have access to a great mind. Dave Akers loves Barber halves, Indian Head eagles and St. Gaudens double eagles and his enthusiasm for these series rubbed off on Steve Duckor.

He was patient and held his coins for the long-term. Many of today’s collectors sell their collections literally as soon as they are finished. This mindset has been fueled by two forces: a strong market (which allows many collectors to realize big profits in a short period) and aggressive marketing by auction firms (which pushes many collectors to sell even if they aren’t necessarily ready to do so). Steve Duckor owned many of his Indian Head eagles for two decades and he realized enormous profits on many of these long-term purchases.

He is a nice guy and he slowly built a cult following among other collectors and dealers. Steve Duckor is not only one of the nicest guys I’ve ever met, he’s one of the canniest. His coins have a mystique surrounding them not only because they are superb but because they are owned by Steve Duckor. This is a case where a pedigree adds a considerable amount of value.

Will you be the next Steve Duckor? Perhaps not, but I would suggest that by following these five rules (and buying great coins) you have a chance to be.