Eight Tips on Buying United States Gold Coins

As a specialist in the area of United States gold coins, I often find myself giving "tips" to buyers. Some of these seem pretty obvious to me while others are kind of clever and maybe not so obvious. Here are some of these tips along with a bot of pertinent commentary. 1. If you are a gold coin specialist who is worried about potential hoard coins hurting the value of pieces in your collection, there are a few things you can do as a safeguard. First, stick with coins struck prior to 1890. Most of the gold coins expatriated from overseas appear to be dated from 1890 onwards. Coins struck earlier, especially those before 1878, seem a lot "safer." Second, limit your exposure by not buying very high grade coins. The collectors who owned high grade 1857-S double eagles before the S.S. Central America was discovered got killed afterwards. But if you owned a nice AU example, your downside was limited. Third, you could stick with lower denomination coins. Hoards of gold dollars, quarter eagles and half eagles seem less frequent and dramatic than those with eagles and double eagles. But to those collectors who live in fear of hoards, I'd tell them to get over this and just buy what appeals to you.

2. By the grade before the big price jump. What I mean by this, if you have a choice between an MS64 double eagle priced at $3,500 and an MS65 priced at $25,000 I would always buy the lower priced example, especially if the population is high in the lower grades. As an example, if there are seventy five examples of the $3,500 MS64 with just five better doesn't it seem like that at least a few of the high end 64's could gradeflate to MS65?

3. Nearly every collector who works on a series builds it the wrong way. It seems to me that all collections should have the keys be the best coins in the series while the common dates should be nice but not overblown. Instead, most collections skimp on the keys but overdo it on the commons. Let me give you an example. If you are working on a set of Dahlonega quarter eagles the coins you should "overdo" are the legitimate rarities like the 1854-D, 1855-D and 1856-D. I would stretch on all three and buy the nicest ones I could find. On the other hand, I would be content to purchase nice, original AU55 or AU58 examples of the common dates like the 1843-D, 1844-D and 1847-D and sink maybe $5,000 per coin into these three issues.

4. Always use a 5x glass when you are making a buying decision. Just recently, I bought a Charlotte half eagle at a coin show. It was in an old green label PCGS holder and it looked great to the naked eye. I made an accepted offer and never used a glass to look at it. When I got home and was ready to break the coin out to regrade it I put a glass on the obverse and noticed a deep, detracting scratch that had naturally blended into the surfaces. Yes, you may have great vision and you may be a really macho guy but use a glass whenever possible.

5. Buy coins with good eye appeal. Unless we are talking about an amazingly rare issue like an 1854-S quarter eagle, there is no reason to buy an ugly coin. And I would include damaged coins when I am talking about coins that lack eye appeal. As time goes by, I am noticing that fewer and fewer 18th and 19th century United States gold coins have good eye appeal. By "eye appeal" I mean a coin that is pretty; one that makes you stop in your tracks, look at it carefully and maybe even take a deep sigh. I can pretty much assure you that when you go to sell your coins, the ones with good to great eye appeal are going to be the ones that cause the greatest commotion.

6. First impressions are usually correct. If you get a coin shipped to you by a dealer and your first reaction is "yuck" or "um...I don't really like that" you should pass. Nearly every major mistake that I have ever made as a buyer has been convincing myself that I "liked" a coin when, in fact, I really did not.

7. Price buyers wind up with mediocre collections. Really nice coins with good eye appeal are really hard to buy right now for a number of reasons. If you are a buyer whose is driven by price alone I'm guessing you either buy modern coins or you haven't had much luck lately buying. And if you are a cheap buyer who puts in low bids at auction, I'm guessing the only coins you are buying are the dark, ugly, low-end pieces that those of us who like nice coins wouldn't buy no matter how cheap they are. You aren't going to have fun when you go to sell your coins. But don't take it from me; as an experiment post a few of your "good deals" on a message board to try to sell them to the local dealer....

8. If you are buying coins as an investment and expect to turn them over quickly to make a profit, there are a few things you should know. Rare coins have a fairly sizable entry/exit fee. If you are buying from a typical retailer, you are probably paying at least a 15-20% markup. And when you go to sell your coins, whether it be to a dealer or through auction, you are probably paying in the area of 10-20%. So even if you are buying and selling through good sources, you are talking about values having to go up 25-40% just to break even. That's why I don't personally tout coins as an investment and when someone does ask me about coins in this regard, I stress that they really need to be held at least a full market cycle (or five to eight+ years).

Like these buying tips? Want to read another blog with more tips? Leave a comment at the end of this blog or drop me an email at dwn@ont.com

Coin Buying "Tricks"

As a dealer who has spent over $100 million on rare coins, what are some of the “tricks” that I have learned that can help you when you are buying coins? Read on to see some of the ones that I think you will benefit most from. When I buy a coin I am looking to sell it immediately for a profit. This makes my needs as a buyer slightly different than yours as a collector. But your ultimate goal, I would hope, is to sell your coins for a profit. What are a few of the most obvious but most important parameters to consider each and every time you buy a coin?

1. Buy Coins That Are Pretty

Numismatics has always been a highly visual hobby. But the advent of the Internet has made the visual aspects of numismatics more significant than ever before. When I look at coins now one of the first questions I ask myself is: will it image well on my website? Coins that are pretty are very easy to sell.

The term “pretty” is somewhat semantic. I tend to like gold coins that are dark and dirty and find these to be aesthetically appealing. Not everyone agrees me. Some people like gold coins that have bright, dazzling luster while others prefer coins that two-tone contrast between the devices and the fields. But I think most people can agree that a certain percentage of coins are, for lack of a better term, “special.” This does not necessarily mean “expensive.” I have seen circulated $100 Bust dimes that I thought were really pretty. The bottom line is that you should try and have as many pretty coins as possible in your collection.

2. Buy Coins That Are Popular

There are many coins that no matter how many examples I have purchased over the years, I have never lost money on them. As an example, I have probably owned twenty 1838-D half eagles in the past decade, ranging in grade from VF25 to MS62. Every time I’ve owned one, it has sold quickly to a happy collector and I’ve made a decent amount of money on each transaction. It’s obvious to me why this date sells quickly: it’s a first-year-of-issue, it’s a one-year type, it has a neat design, it’s a Dahlonega coin and it is relatively affordable.

In the last few years, key date coins in virtually every series have shown dramatic increases in value. There is a good reason for this: they are very popular and this creates a constant level of demand for these issues. In some cases (like 1901-S quarters or 1907 High Reliefs) prices are now probably too high and these key issues are currently overvalued. But I would personally rather have a collection (or inventory) that was full of popular coins than ones that were too esoteric and hard to sell.

3. Buy Coins That Are Problem-Free

I’m pretty staggered at how unappealing most coins are that I see these days. As I look through other dealer’s inventories at coin shows or at auction lots, nearly every coin I pull out has some sort of problem. It has been dipped. It has funky color. It has hairlines from an old cleaning. That’s why when I see something that I really like, I try and aggressively pursue it.

In certain 18th and 19th century series, it is likely that 90-95% of all the coins currently on the market have some sort of problem. If you can patiently and carefully assemble a collection that focuses on the remaining 5-10% of the coins that are what I would call high end and choice, you will have a truly significant coin collection.

4. Buy Coins That Pre-Sell Themselves Every time I’ve made a big mistake purchasing a coin for inventory, it’s been a coin that I had to give myself a hard sell on. I’ve found that my first impression regarding a coin is inevitably correct. If I see a coin and it makes me gasp because it’s so pretty or it’s so above-average an issue that usually comes with bad eye appeal, I’m inevitably going to buy this coin no matter what. If my first reaction is “I don’t really like this” or “It’s OK except that spot in the right obverse field sort of bothers me” that doesn’t strike me as the sort of coin that is going to go flying out of my inventory when it is imaged and described on my website. As a rule, if you don’t like a coin the first time you see it, don’t buy it.

5. Buy Coins That Have Been Pre-Screened

Never, never, never buy expensive coins sight-unseen or based solely on a mediocre quality image with no return privilege. It’s one thing if someone is trying to sell you a generic MS63 St. Gaudens double eagle sight-unseen; even if the coin is low-end it is essentially a commodity and what it looks like is not especially important. But I can’t tell you how many times I’ve had clients send me expensive coins that they have purchased sight-unseen out of an auction and how many times I’ve had to politely tell them that it is very low-end. If your dealer insists you buy coins sight-unseen, find another dealer. If you think you can buy nice coins sight-unseen out of auctions, swallow your pride and hire a trusted representative to view the coins in person for you.

Rare Coin Purchasing Strategies

In 1996, two collectors decided to assemble a million dollar collection of high grade United States coinage. Seven years later, both decided to sell. One now has a collection that is worth upwards of $2 million while the other individual's coins are worth $600,000. What did collector #1 do that was so much smarter than the other? I'd like to say that the answer was as simple as collector #1 carefully listening to me while collector #2 took his advice from other people. And while this is ultimately true, there were a number of important purchase strategies employed by the first collector that were ignored by the other.

Collector #1 did the following: he was patient, he chose his coins carefully, he was loyal, he was not a slave to published bid levels, he reached for the best available coins and he assembled a true collection as opposed to an accumulation. Collector #2 made rash, impulsive purchases, bought coins from a wide variety of sources (some reputable, some not), would never purchase a coin unless it was priced at a "bargain" level and wound-up with a strange, disconnected assemblage of coins rather than a true collection.

It is a good idea to look at some of these points more carefully to understand why one collector did so well while the other did not.

1. For the collector, patience is a virtue: One of the key reasons for the success of collector #1 was his patience. Instead of wildly charging out into the market and buying whatever looked interesting, he was highly selective. In fact, he typically purchased just a few coins each year. Collector #2 was extremely impulsive and purchased some coins that, in retrospect, made no sense. As an example, he bought at least three five-figure coins that he didn't really like and which he knew, even at the time they were bought, that they would have to be upgraded. And he purchased some other coins that had absolutely no thematic tie-in to what he was collecting. These were quickly jettisoned at a significant loss.

2. Always buy the best coins you can afford: If you care about the financial returns provided by your coins (and if you are buying coins that are more than $1,000 each you should) then it is important to buy the best you can afford. A collection should be centered around quality instead of quantity. This means that you will have to tailor your collection around your budget.

Both collector #1 and collector #2 had the same budget but collector #2 wound-up buying dozens of coins while his counterpart only purchased a few. The result was that the first collector had a small collection of superb pieces with enough of a synergistic tie-in that it was more valuable as a whole than as a sum of its parts. The second collector had an assemblage of expensive coins that, because of the presence of a number of "dogs", would have to be broken-up and sold piece-by-piece.

3. If you find one or two dealers you like, stay loyal to them: Yes, this is a self-serving comment. But in the non-numismatic areas that I personally collect, I have followed this advice and it works. If you establish a good relationship with a knowledgeable expert, you are more likely to get good deals from this person. He will be genuinely concerned about the coins he sells you, especially if he knows that he will have a chance to resell them in the future. Because I knew that collector #1 was loyal (and because we became good friends as a result of the time we spent together pursuing his coins) he purchased great coins at fair prices. I immediately figured out that collector #2, while a very good person as well, would never be a faithful customer and that as hard as I tried to earn his loyalty, it just wasn't going to happen. As a result, this made me less enthusiastic to sell him my very best coins.

Collector #2 made another mistake that I think ultimately cost him alot of money. He gave out his want list to a number of dealers. I know of at least two instances when many dealers were competing against each other for a specific rare coin, all thinking that it was for their "own" customer. In reality, everyone was working for the same collector and this allowed the original owner of the coin to hold out for a higher price. When it comes to rare or expensive coins, it is highly advisable to keep your want list as private as possible.

4. Truly rare and choice coins are seldom offered at "bargain" prices: Truly good items, whether they be houses, paintings or coins, are not cheap. You don't get a "deal" on a museum quality Van Gogh just like you don't get to "rip" a problem-free high grade 1793 Chain Cent. Collector #1 understood this and was willing to pay well over Greysheet, Bluesheet or Trends prices when it came to rare, important coins.

Collector #2 was always looking for a deal and would never pay above published price levels, even for rare, early United States issues. He was told again and again that they were impossible to buy at these levels but never took this advise to heart. As a result, when he did buy a significant early type coin, it tended to be a problem piece that was priced cheaply or which savvy buyers had rejected due to quality considerations.

Novice collectors typically do not understand what these published prices represent. The Bluesheet lists low sight-unseen wholesale bids. In other words, if a dealer I didn't know called me up and offered me a 1795 silver dollar in a PCGS AU-50 holder and explained that it was dark, poorly struck and enthusiastically graded, what would my offer be? While it is not impossible to buy nice coins at bluesheet bid levels, it should be understood that most attractive, desirable coins are generally priced at levels above "sheet."

5. Collections are better than assemblages: Many dealers believe that a collection of coins is worth more collectively than the sum of its parts. I generally agree with this but would offer the following caution. In the case of an expensive, high-powered collection it is likely that it will have to be broken-up when it is sold. But if the coins in the collection are properly connected than they can add value to each other. As an example, collector #1 had a small but outstanding group of early coins that were not only very choice but they were first year of issue pieces. It was a true collection that was worth more as a whole than as the sum of its parts, even if it were not realistic to think that it would sell intact.

Collector #2 also specialized in early coins but his grades ranged widely (from Extremely Fine to Mint State-65) and he typically chose "bargain dates" to represent a specific type (as an example he chose a 1795 half dollar instead of a 1794 because it was "cheaper.") When it became time to sell, his coins seemed to be more of a random accumulation than a true collection.