Factors That Influence Coin Prices: The Not-So-Obvious

Coin prices are impacted by a number of factors. The most obvious of these are supply and demand. Simply put, if a coin has a greater degree of demand than available supply, the price is going to be strong. But what are some of the not-as-obvious factors that impact coin prices? Here are some observations. 1. Quality of Demand. There are different levels of demand for any rare coin. There's "I'm sort of kicking tires and I'm wondering if you might have the following D Mint quarter eagle," and there's "I've been looking for a nice 1840-D quarter eagle for five years, its the last coin I need to finish my set and I have to have it!" The latter is, obviously, a higher quality of demand and this buyer would be willing to pay a significantly higher price than the lukewarm, casual buyer.

While this example is deliberately extreme in its contrast, there are clearly different levels of demand that impact coin prices. Another factor is venue.

I am very interested in marketing and branding and one of the things that interests me is creating demand for new products. Brands now do "mash ups" where a hot young designer of furniture, as an example, designs a limited edition sneaker design for Adidas or Nike. Only 500 might be released and collectors will pay a significant premium for this because of its perceived scarcity. And, it might be offered only at a "pop up" venue where you have to wait for an hour to just see the sneakers and where's there is no time to sit and ponder if you will or won't make the purchase. You are pre-sold and you represent a high quality of demand.

I see this sort of collector behavior for coins at auction. The major firms do a great job of creating an environment that fosters competition and turns a coin purchase into blood sport. As an example, how many times have you, as a bidder, placed an on-line bid and received an outbid notice only to say "I know I shouldn't this but I'll be damned if I'm going to let myself get outbid on this D Mint quarter eagle?" At a live auction, it is even easier to lose control when bidding (which is why I suggest hiring an agent, but that's another story...) and I can recall numerous incidents when bidding has turned into a ego-fest between collectors or dealers.

2. Promotions. A decade ago, when large-scale telemarketers seemingly controlled the coin market, having information about the next coin or series that was going to be promoted could make or break a wholesale dealer. As an example, I can remember at least a few times that Commemorative Gold coins were about to be pushed, and quietly buying coins at pre-promotional levels so that I could sell into a potential rising market.

This isn't the case so much in the 2012 coin market due to the Democratization of Information as a result of widespread web access. But rare coins are still being promoted and this can be a subtle factor in price increases.

In December 2010 I wrote a blog entitled "Which Civil War Gold Coins Will Be Promoted in 2011," which represented my unbiased opinion(s) that the upcoming 150th anniversary of the beginning of the Civil War was a good opportunity for someone to promote Civil War gold coins. It seems that at least a few people read this blog, as I know of two marketers who, perhaps as a result of my suggestion, began promoting the exact coins I suggested in the article. Plus, said article inspired me to become a more active buyer of high end Civil War gold coinage and to write a major four part series in 2012 about collecting these coins:

Part I Part II Part III Part IV

3. Registry Set Collecting: In many series of coins, the passion of Registry Set collectors results in amazing prices for the right coin(s). This hasn't impacted 18th and 19th century gold coins all that much as there is little Registry Set collecting for early gold and Liberty Head issues (although I wouldn't be surprised if we begin to see serious registry collecting in popular areas like CC double eagles or Dahlonega half eagles in the very near future).

The areas in the better gold coin market that seem most likely to be impacted by Registry Set collecting in the immediate future are 20th century issues. I find it very surprising that dealers or marketers who specialize in series like $2.50 Indians haven't seriously promoted the Registry as a way to impact the demand on rarer dates in high grades. For a while, there were a small but dedicated number of Registry Sets in the St. Gaudens double eagle series that were highly competitive and which greatly influenced the prices of high grade better date PCGS encapsulated Saints. My guess is that this will happen again in the not-so-distant future.

4. Pushing Hot Buttons. Most collectors of high(er) dollar coins are Baby Boomers. And I believe that a major part of the strong, strong market in key date American coins in the past decade has been the ability of these coins to push the hot buttons of buyers. Let me explain:

Just the other day, I got back a coin from PCGS that hit my nostalgia button as hard as any has in some time. It was a perfect, even-brown VF30 1877 Cent. When I was a wee lad, I collected Indian Cents and the 1877 was a mythical rarity that I could only dream of owning. Today, this is a coin that I can easily afford and the $1,500-1,750 that this coin would cost me, as a collector, would exorcize some of the oh-why-can't -I-fill-that-1877-hole frisson that haunted me when I was eight or nine.

There are, of course, other hittable hot buttons for gold collectors as well. Cool design? That's an affirmative, High Relief double eagle. Great background story? Hello, Carson City double eagle! The "neatness" factor of owning an 18th century issue? That would be you, 1799 eagle.

5. Historical Significance. As numismatics becomes less about investors and more about collectors, I am finding the historic significance of certain issues are becoming more available because of their historic significance. This includes a number of factors, a few of which include the following:

-Background Story: I don't think its a coincidence that coins like 1861-D gold dollars and half eagles or 1861-O double eagles have become much more in demand due to their fantastic background stories. -Provenance: This may not be the case for all collectors but for some of us (and you know who you are...) the allure of an Eliasberg or Norweb pedigree is a definite factor that influences the price that we pay for a neat coin. -"The Look:" As the internet has (re)proven, numismatics is very visual. Coins that have a great appearance (such as wonderful deep coloration or lots of dirt clinging to the recessed areas) are pieces that a certain type of collector will pay a premium for.

There are other not-so-obvious factors that influence what collectors will pay for a coin. What are some of the ones that went undiscussed in this blog that impact you?

Which Civil War Gold Coins Will Be Promoted in 2011?

I don't consider myself to be a real pro when it comes to rare coin promotion but even I know a no-brainer when I see it. 2011 marks the 150th anniversary of the beginning of the Civil War. As sure as the sun will rise tomorrow, you can bet that rare coin promotion gurus who are far more clever than I have been preparing for this event for some time. So if you are Joe Coin Promoter and you are gearing up for the Civil War Sesquicentennial in 2011, what kind of gold coins can you get enough of to do a promotion? Let's go denomination by denomination and figure this out.

I. Gold Dollars

Only two mints made gold dollars in 1861: Philadelphia and Dahlonega. The 1861-P is common and cheap; the 1861-D is rare and expensive. The 1861-D is unpromotable; it is too rare to accumulate in quantity and is already too expensive. A clever dealer could probably stealthily buy 40-50 1861-P gold dollars in lower Mint State grades over the course of a year and have enough coins to promote. He could probably find as many 1862-P gold dollars and maybe have as many as 100 coins in total. I would have to wonder, though, if the intended audience for this promotion would get excited about gold dollars as they are small, common and not really "sexy." As a collector I'd probably avoid stockpiling any Civil War gold dollars to ride the coattails of a promotion.

II. Quarter Eagles

Two mints made quarter eagles in 1861: Philadelphia and San Francisco. The 1861-S is unheralded but scarce and I doubt if you could put together a group of more than three or four over the course of a year. The 1861-P is common in grades up to MS63 and it might be possible to accumulate enough to promote. I like the promotional possibilities of this issue and it might not be a bad idea for a collector to buy a few MS62 to MS63 pieces and see if prices increase in the next few years. None of the other Civil War Philadelphia issues can be found in enough quanity to promote. The San Francisco issues are all rare but it might be possible to put together a rag-tag group of circulated examples.

III. Three Dollar Gold Pieces You couldn't promote threes in Uncircirculated as all of the Civil War issues are rare enough and expensive enough to preclude this. But you might actually be able to acculate a few dozen nice circulated pieces. This promotion actually makes sense to me as the three dollar denomination is odd and interesting and it would appeal to non-collectors. It is also out of favor right now so the possibility of buying a fair quantity exists. The 1861-64 dates are all moderately scarce but available in the EF-AU range for less than $4,000 per coin. As a promotion bandwagon jumper, these three dollar gold pieces kind of make sense to me.

IV. Half Eagles

The two southern branch mint half eagles (1861-C and 1861-D) would be fantastic issues to promote but they can not be found in quantity. The San Francisco half eagles of this era are also very rare and while not as glamorous as the 1861-C or 1861-D, issues like the 1862-S and 1864-S half eagle are highly unlikely to be used in a promotion. This leaves the Philadelphia coins. The 1861 is the only one that is common although I wonder if a promoter could find, say, fifty to one hundred examples. I imagine that if you were willing to sell cheap pieces, like in EF40 or EF45, it might just be possible. Not "easy," but maybe "possible."

V. Eagles

Civil War era ten dollar gold pieces were made only at the Philadelphia and San Francisco mints. All of the west coast issues are rare in any grade and the possibility of finding more than a few in any grade is unlikely. The Philadelphia issues are even rarer with the exception of the 1861 which can be found in some quantity in circulated grades. But I just don't think you could come up with enough coins to make for a good promotion. Which is actually kind of shame as a group of 1861 eagles in EF and AU grades would make a great Civil War-themed promotion.

VI. Double Eagles

There isn't a better denomination to promote these days than the double eagle. The coin are big and with gold at $1,400 or so per ounce, they interest nearly every investor. Unfortunately, there is just a single Civil War double eagle that might be available in a quantity great enough to promote: the 1861 Philadelphia. This is probably the most common non-shipwreck Type One double eagle and it exists in significant quantity in circulated grades. But....there may be a fly in the proverbial ointment. Type One double eagles are currently as popular as any series of American coin and an issue like the 1861-P, which used to be fairly easy to buy in quantity, is now in demand by legitimate collectors. It still might be possible but its not going to be an easy task.

After thinking about Civil War era gold coins to promote for the Civil War Sesquicentennial in 2011, I've pretty much come to the conclusion that unless someone has been working on this project for at least a year already, it probably can't be done in time. Given the scarcity of these coins and the costs involved, maybe it would make more sense to work on buying 500 circulated 1861 Indian Cents or 750 circulated 1864 and 1865 Two Cent pieces.

Coin Price Perspectives

If you ask ten knowledgeable people if coins are too cheap or too expensive, you’ll probably get ten different answers. I think certain coins are clearly too expensive but I think others are dirt cheap. Read on for my explanation. Coin prices depend a lot on perspective. I’ve been involved with coins since the 1970’s and in the market as a professional since the early 1980’s. I’ve seen markets go up and go down and watched the cycle repeat itself. As 2007 begins, I think there are certain coins that seem very pricey; primarily due to the fact that they’ve been promoted and that these promotions appear to have run out of steam.

Let me give you an example. Everyone knows that Indian Head quarter eagles have been brilliantly promoted for the last four or five years. During this period of time, the key issue, the 1911-D rose dramatically in price -as it should have. After all, hundreds of new collectors starting working on Indian Head quarter eagle sets and everyone needed a 1911-D.

When the Indian Head quarter eagle market was at its frothiest (in late 2005 to early 2006), an MS63 1911-D would have cost you around $30,000. When the Indian Head quarter eagle series was first being promoted, back in 2001, you could have bought a 1911-D in MS63 for $9,000-10,000. This coin tripled in value in five years and actually became somewhat more available during this time period due to relaxed grading standards. In retrospect, $9,000 for an MS63 1911-D seems pretty cheap while $30,000 for the same coin in MS63 seems pretty pricey. Or is it? If the promotion had continued for another five years, could the 1911-D risen to $50,000 or even $75,000 in MS63? My guess is that, yes, it could have (although I certainly wouldn’t have wanted to buy an MS63 1911-D quarter eagle for $50,000…)

Coin market observers (including, alas, myself) tend to think small and don’t often look at the big picture. The fact is that there is a tremendous amount of wealth in the United States right now and not a lot of places that wealthy individuals feel safe putting some of their excess cash.

If you follow the art market at all, you might have noticed that auction prices for Contemporary Art in the past few years have truly gone through the roof. It is not uncommon for good but not great examples of paintings by relatively good but not great Contemporary painters to sell for well over $1 million. In fact, in the upper echelon of the art world today, $1 million does not buy you very much at all.

We know who is buying many of these paintings. Hedge Fund managers and other successful Wall Street types have targeted Contemporary Art as their “Place To Make A Splash.” And why not when many of these individuals got $5 million, $10 million or even $20 million dollar bonuses this year? When you already own a killer apartment in Manhattan and a great weekend house in The Hamptons, what’s a million dollars here or there on a nice piece of art for the walls?

So what would happen if a small number of these Hedge Fund Superstars got interested in coins? They already have the perfect personality to be coin collectors and many of them probably dabbled with Lincoln Cents and Mercury Dimes when they were kids.

If you are brand new to the coin market and you have this kind of discretionary income, coins seem dirt cheap. Just the other day, I was talking to a client of mine about purchasing a major rarity in an upcoming auction. This is a true museum quality coin and one of the two or three finest known examples of an issue with probably less than a dozen known. To buy this coin, he’ll probably have to spend $125,000 or so. To you and me, that’s a lot of money. But to someone who sees “unspecial” paintings selling at Sotheby’s auction for $2.5 million+ this seems very cheap.

Clearly, these Hedge Fund guys will see their salaries come down to earth someday, possibly soon. But what if, in the meantime, a few of these guys started buying coins? And what if I told you a small but meaningful number of them already are?

The result of this, I suppose, will be an even further bifurcation of the market. The meat and potatoes coins that most of us buy and sell on a routine basis will go up and go down but shouldn’t be affected by Harry Hedge Fund’s foray into coins. But what about coins that are extremely rare or those with great stories or those which are finest known? My guess is that coins like this could get really expensive. Because, if you really think about it, the truly great coins out there actually are dirt cheap when you compare them to other collectibles.

Indian Head Quarter Eagles

In the past few years, Indian Head quarter eagles have been very successfully promoted. A not-as-well-known but equally successful promotion has doubled the price of common date MS65 Indian Head half eagles in the past year. I have recently witnessed an interesting trend that I think might foretell the next price run-up in the 20th century gold coin market. A few dealers are starting to quietly accumulate better date Indian Head eagles, especially issues such as the 1908-D With Motto, 1909-D, 1909-S, 1912-S, 1914-S and 1915-S. The desired grade range for these coins is MS63 to MS65 with most of the activity seen in the MS64 range as this is a “sweet spot” from the standpoint of price (most MS65’s are expensive) and rarity (many of these dates are nearly impossible to find in Gem).

It makes sense to me for a lot of reasons that this series is due for a promotion. The coins are beautiful (I personally like the design even better than the St. Gaudens double eagle), the set is relatively short (only thirty-six coins including the 1907 Wire Edge and Rolled Edge varieties) and, unlike Saints, it can realistically be completed. Most importantly, this series is a sort of final frontier in 20th century gold as it is really the only denomination left that hasn’t been promoted and seen significant price run-ups.

This is a great set for a collector to assemble but it takes deep pockets, especially in MS64 and higher grades. How can the collector of more modest means take advantage of what could become an interesting market play in the coming years? I would suggest purchasing a few slightly better dates in MS64 or MS65. There are only two truly common issues in this series: the 1926 and the 1932. They are currently valued in the $2250-2500 range in MS64 and around $5000-5250 in MS65. I’d suggest the collector look for marginally scarcer dates such as a 1908 With Motto, 1912, 1913, 1914 or 1914-D. These currently sell for modest premiums in MS64 and MS65 despite the fact that they are many times rarer than the 1926 or 1932.

A few buying tips: avoid coins with heavily spotted surfaces as they are hard to sell (a few small, unobtrusive spots are OK), be careful for coins with deep, detracting marks (especially on the face of Liberty) and watch out for coins with funky color (yes, they are even in NGC and PCGS holders).