Some Interesting Results From the Recent Heritage Spring ANA Auction

The recently concluded Heritage sale was not really a stellar offering from this firm. Falling after the outstanding array of coins sold at the 2011 FUN auction and occurring before what is likely to be a solid group at the Central States sale in late April/early May, the Sacramento auction did, however, contain a few really interesting coins. While I don't pretend to make comprehensive market assessments based on four pieces, I'd like to focus on these and present some thoughts. The first coin of interest was an 1850-D quarter eagle graded MS62 by PCGS. Sold as lot 4637, this piece brought $27,600 which is a record-setting price for this date. This exact coin was last offered as lot 1113 in the ANR 9/05 sale where it brought $21,850.

While I personally liked this coin quite a bit, its appearance was a bit on the "too crusty" side. Its color was real in my opinion but it was a tad splotchy and I could see some knowledgeable specialists thinking it might not have been attractive. The coin didn't have a CAC sticker and I have to assume that given the fact that Heritage sends many of the high end coins in their sales to CAC for approval that it flunked its test in Far Hills.

What I find interesting about this price realized is that the coin is not necessarily the finest known (there is a PCGS population of three in this grade but I think there are just two specimens graded as such) and it is in a series (Liberty Head quarter eagles) that isn't exactly "hot" right now.

My pre-sale estimate for the coin was in the $17,500-20,000 range. I was assuming it would bring around the middle of this range and that it would be resold at around the figure it sold for in 2005.

The next coin was an 1879 quarter eagle graded MS66+ by PCGS. This was an exceptional coin; probably the best of this date that I have seen. But the 1879 is a pretty common issue in MS63 and MS64 and not even that big a deal in MS65. In other words, this was a semi-common date in a (very) uncommon state of preservation.

As I researched the valuation of this coin, I thought about a few things. The population for this date in PCGS MS66 is just four and, as far as I can tell, this example was the only piece to have received a "plus" designation for PCGS. A "normal" MS66 1879 seemed like it was a $5,000-7,000 coin so I guessed that this one might sell for as much as $8,000-9,000.

Wrong, Mr. Rare Date Gold "Expert!" The coin brought a stunning $17,250 which I find to be a pretty perplexing number. The previous auction record for this date was set back in January 1990 when an MS65 (probably now a 66 or even a 66+ by today's standards) sold for $6,875 in a Superior auction. In the Heritage 9/03 sale, a PCGS MS66 (without a plus designation but a pretty nice coin from my recollection) sold for just $4,600.

I have to assume that either two people saw this coin as a "lock" to upgrade to MS67 (and I'm not sure that as a population 1/none better coin in MS67 that its worth much more than what it sold for in the current 66+ holder) or two serious collectors got involved in a titanic ego battle.

The third coin is one that I doubt if more than a small handful of people thought was special. The coin in question was an 1844 eagle graded AU53 by PCGS. It was offered as lot 4805 and it sold for $8,625.

Compared to the last two coins I discussed, the price of this coin wasn't shocking. I was the under-bidder and I kind of regret not going a bit higher in an attempt to purchase this coin.

The Heritage cataloger didn't realize that this coin was from the Bass collection (ex Bass III: 588 where it brought $5,290). The PCGS holder didn't note this either but the coin was obviously ex Bass and it was unchanged since its last appearance in 2000.

The 1844 eagle is an under-appreciated rarity. Only 40 or so are known from an original mintage of 6,361. I doubt if more than six or seven real AU coins are known and the Heritage coin was unusual from the standpoint that it hadn't been cleaned or processed as most 1844 eagles are. It wasn't a really attractive coin (it had numerous deep abrasions on the obverse and reverse) but this date never comes nice and I though it was actually pretty solid for the grade.

One quick, interesting side note. Heritage 1/11: 7017 was graded AU58 by NGC and it was really, really ugly. It went cheaply at $7,475. The coin in the Heritage March sale was graded five points lower (even though it was nicer) yet it sold for nearly 20% more. This was clearly a case of someone buying a "real" AU53 coin versus someone buying a coin that wasn't an "AU58" despite what the holder said.

The fourth and final coin was an 1862-S double eagle graded MS63 by NGC. This piece had been approved by CAC and it was extremely attractive for both the date and grade.

The Heritage catalog hinted at the fact that this coin may have had a shipwreck provenance. I'm almost certain it was one of the best coins from the S.S. Brother Jonathan that had, after its original sale in a PCGS holder, been broken out, sent to NGC and upgraded. The coin had luster that, for lack of a better term, just seemed a little too "shipwrecky" to have not been from this source. Instead of being frosty like the typical high grade 1862-S double eagle, this one was a bit satiny with a semi-grainy texture and pronounced rose-gold color.

The coin sold for $57,500. The previous auction record for this date was $29,555 which was set by another NGC MS63 that was sold by Bowers and Merena in their May 2004 auction.

I was surprised but not shocked by the price that this coin brought. It is tied with one coin at PCGS and two at NGC as the highest graded and I have only seen one other MS63 (the coin that sold in the May 2004 sale that I referenced above). It was beautiful, its a condition rarity and its a Type One double eagle. With these three factors in play you had to assume it was going to smash the previous auction record to smithereens.

One final note. Heritage's market penetration as a result of their internet presence never ceases to amaze me. Even at a small, "minor" sale like the Spring ANA, no great coins fall through the cracks as they did even as recently as a few years ago. Heritage could sell a high quality U.S. gold coin at the Tripoli Airport coin show in May and still get a strong price.

Are Auction Prices Wholesale or Retail?

Until a few years ago, the vast majority of coins that sold at auction were purchased by dealers. It was a safe bet to say that the prices realized at auctions were wholesale and collectors could assume that they would typically pay 10-20% more than what coins were selling for at auction. But this has all changed. One of the key elements to Heritage's rousing success in the coin auction business has been to make sales more collector-friendly. Today, a sizable amount of the coins that sell at auction are going directly to collectors. So, are auction prices now representative of the wholesale or retail markets? The answer is not as easy as you might think...

The answer is actually, as you might have, guessed, "answers." Nothing in the coin market is cut and dry anymore and the new auction market and the prices that coins fetch in an auction conducted in 2010 can have a broad range.

The first thing that has to be analyzed is what coin is being sold. If it's something that's extremely collector-friendly (like a rare date Type One Liberty Head double eagle) the price realized is likely to represent a retail level as it is likely to have been sold to a collector. If it's a widget or a low-end coin that sells cheaply we can assume that a bottom-feeder dealer bought it and the price it brought is clearly at the wholesale level.

The next thing that has to be gauged is the quality of the sale itself. One of the most amazing things about the Bass sales, in my opinion, was the fact that virtually all the coins were bought by dealers. If the Bass sales were to be held today (and conducted by a technologically savvy firm like Heritage) I would venture to guess that over 50% of the coins would be sold for retail as opposed to wholesale prices.

Is the coin in an auction a grading play? (In other words, is it an AU58 in an older holder that would upgrade to MS61 to MS62?) In this case it is a virtual certainty that the coin sold to a dealer. But there is an immediate asterisk that must be applied to the sales price. If the coin is worth $5,000 in AU58 and $13,000 in MS62, it is highly possible that at least two ramblin' gamblin' dealers would pay $10,000-11,000 for the coin. In such an instance, the collector needs to be careful not to assume that just because one AU58 coin sold at auction for $10,000-11,000, the next one(s) will as well.

Auction records are most useful when they occur with some degree of frequency (two or three examples per year) and when any anomalies can be discarded.

Let's say, for example, that a certain Charlotte quarter eagle in AU55 has sold at auction five times since 2007. The prices realized have been $3,500, $3,750, $2,650, $8,000 and $4,000. We can pretty much immediately boot the $8,000 auction record as we can assume that this was a severely under-graded coin with a large spread to the next highest grade(s). We can also boot the $2,650 record as this may have been for an extremely low end coin or it may have been in a "bloodbath" auction that, for a host of reasons, saw very low overall prices in specific areas of the market. This leaves us with three prices: $3,500, $3,750 and $4,000. A quick assumption can now be made that this AU55 Charlotte quarter eagle has a value in the range of $3,500 to $4,000. Another way of looking at this is that the wholesale value might be $3,500 while the retail value might be $4,000.

I have a theory that auction firms give collectors just enough information to do damage to themselves. They provide an archive of auction prices which show what coins have sold for and with a little bit of digging, the collector can determine if the coin sold on the floor, over the phone or to an Internet bidder. But unless someone really follows the market carefully, all of this "information" can do little more than serve as an easy way for the neophyte to make major mistakes. I have long said that hiring an auction representative for 5% is far and away the best value in all of numismatics. This fee (which amount to a whopping $250 on a $5,000 coin) is a small price to pay to have a specialist explain to you why a certain auction record is valid or not valid.

So 700+ words later, I'm back to my basic question: are auction prices wholesale or retail? As you can plainly see, there is no quick answer to this and I urge collectors, new or experienced, not to be lulled into a false sense of security based on what seems like unquestionable information.