Compromising When Coin Buying: When You Should and When You Shouldn't

Collectors often ask me about my thought process(es) when I make coin purchases. Why do I buy certain coins and pass on others? Why do I stretch for some coins, and make others based solely on a favorable price? These are great questions and I think they are worthy of a blog.

Most coin purchases involve some sort of compromise. Very few coins are “perfect” from an appearance standpoint. A coin may have been cleaned at one time or it may have some weakness of strike or more marks in prominent locations than you would hope for. When should you compromise your standards, and when should you hold fast and true?

A lot of the answers that I would give to these questions depend on what sort of coins you are buying and whether you collect by type or by date. If you are a type collector, it is much easier to, as an example, wait for the perfect AU55 Capped Bust Right Heraldic Eagle ten dollar gold piece than it is to wait for an 1804 eagle in AU55 which is well struck and which has natural color.

Let’s look at some specifics for compromise vs. non-compromise, and use some real world examples.

1. Very Rare Coins Should Be Held to Lower Standards than Common Coins

Intuitively, you would think that the exact opposite should be true in numismatics, but it’s not.

The rarest Dahlonega half eagle is the 1842-D Large Date. It’s the only issue in the series which is genuinely hard to find in EF and higher grades with really good eye appeal. I haven’t handled a truly nice one in years, and I have numerous want lists for this date in nearly any grade. If someone offered me a marginal quality in a 45 holder tomorrow, I would invariably buy it unless it was grossly overpriced or it had some flaw that I just couldn’t get past.

The most common Dahlonega half eagle is the 1854-D. It’s kind of a blah issue, but I seldom buy this date unless it is outstanding for the date for one of the following reasons: it's 100% original, it has great color, or it is exceptional eye appeal. In other words, I’m not going to buy an 1854-D (or any other very common Dahlonega half eagle) unless there is something really exceptional about it.

If I hold the 1842-D Large Date to the same standards that I hold the 1854-D to, I’m never going to buy an example. And this is a trap that many collectors fall into.

There are a number of very rare coins that just don’t come nice. A classic example is the 1870-CC double eagle. I’ve seen or owned probably half of the surviving examples and I can’t recall more than two or three that I would regard as “choice.”  The typical example is not only well-worn but it lacks original color and has numerous abrasions. As a buyer who loves original color and tends not to like abrasions, the 1870-CC is problematical for me. Which is why I hold it to an entirely different set of standards than, say, an issue like the 1890-CC double eagle, which I can easily locate with good eye appeal.

2. If You Don't Lower Your Standards on Certain Coins, You'll Never Buy Any

Around a year ago, I began selling coins to a new collector who decided that he wanted to specialize in rare to very rare Liberty Head eagles. His collecting background was with more modern issues such as Walking Liberty half dollars and he was used to big, bright, shiny coins which were just about perfect. I warned him that he would have to use an entirely different set of standards with a coin like an 1860-S eagle; an issue which is not only extremely rare but is one with which rigorous buying standards have to be thrown out the window.

The first two transactions I had with this gentleman were disasters. He returned one very scarce coin (in a PCGS holder and with CAC approval) for having a tiny “scratch” hidden on the reverse, and another rarer one for not being as “dark and dirty” as he thought the photo and description on my website indicated. I don’t have many coins returned due to quality issues, and two have two returned by the same individual in the space of a few weeks…well, let’s just say this doesn’t happen much at DWN.

We spoke on the phone and this is what I learned: since these coins were expensive (high four figures in one case and low five figures in another) he expected them to be superb. I tried to explain to him that what constitutes “superb” in the realm of rare date eagles is entirely different than what constitutes “superb” when looking at MS66 and MS67 late date Walkers. He was using a set of standards that were totally inapplicable to rare date 19th century gold coins that were both conditionally rare and which had very low survival rates. I think we parted friends, but to this day I have never sold him another coin and don’t think he is likely to buy anything from me.

This blog is not meant to be an apology for compromising your standards. In the field of rare date gold collecting there are many coins that you can take a firm stand and not waver from it.

3. When You Want One of Something, You Can Be Fussy

More dated gold collectors are collecting by a type or by “best available neat coin” strategy and wandering from the previous standards of collecting series by date.

Let’s say you’ve decided that you like Charlotte quarter eagles but you want just two examples: a Classic Head and a Liberty Head. You are more limited with the former as there are just two Classic Head issues; the Liberty Head series offers much more flexibility with 18 different issues to choose from.

You’ve saved up and have $3,500 to spend on a really nice quarter eagle. You are someone who really values good strikes and you hate coins which are made on inferior planchets. This automatically eliminates around half to two-thirds of the possible Liberty Head issues from this mint (due to budget constraints, strike problems, or poor method of manufacture) and you can focus on the issues which make sense. The chances are good that the “right” $3,500 coin will show up in a few months; a coin with excellent striking detail, nice surfaces and the original color and surfaces that collectors now crave. It might be a “common” issue such as an 1847-Cl or it might be a scarcer issue such as an 1840-C.

Or you can just buy assorted neat coins in your price range. Let’s say you love dirty, original coins and your price point is $2,500-5,000. It doesn’t theoretically matter if you buy a PCGS AU58 1857-S gold dollar or an NGC AU50 1846-D/D half eaglel as long as the coin has character and its eye appeal “speaks” to you.

4. Be Picky on the Keys (if you collect by date)

I’ve discussed this more than once but most collectors overbuy the common dates in their chosen set(s) and underbuy the keys.

Let me give you an example of the right way to form a set. A very good client of mine has been working on a Dahlonega quarter eagle set for five or six years now. His motivation to begin this set was when I had just bought a great collection of D mint quarter eagles and was breaking them up. It just so happened that the key 1855-D and 1856-D in this collection were wonderful quality for the date: comparatively high grade, nice and original, and well-pedigreed. He realized that by purchasing both coins, he would be off to a great start and that he might not have a chance to purchase such nice examples again.

After buying these two key issues, this collector decided that the other rarities in the set (1840-D, 1841-D, 1842-D, and 1854-D) had to be special coins. And over the course of the next five years, I was able to purchase beautiful AU55 to AU58 examples of each.

As picky as he was on the keys, he was discriminating on the common dates in the set. He bought nice AU examples but resisted the temptation to spend $15,000 on a common 1843-D when he could own a perfectly presentable example for $4,000 and funnel the savings towards another key date, or two to three more nice commons.

5. Be Picky When You Have Options

Let’s say you are a collector for whom strike is a key factor in determining whether or not you buy a coin. On some issues, you are out of luck as all known examples are found with weakness of strike (an example of this would be the 1859-C and 1860-C half eagles). Other issues are found with varieties which are well struck or poorly struck, depending on the die state (examples of this include the 1844-D and 1848-C quarter eagles).

To be a good collector in the area of rare date gold, you have to learn about each issue’s appearance. This is why the books I have written explain factors such as typical strike in great detail.

You are surfing the web and you happen on a nice, crusty 1844-D quarter eagle in a PCGS AU55 holder. It has your “look” and is priced in your wheelhouse, but the strike is very poor. If you know the intricacies of this issue, you know that around 50% of all 1844-D quarter eagles show central weakness. This means that you still have a good chance to find a well-struck example and that you should probably pass on the coin, even if you need it for your date set.

Knowing when to be picky and when to compromise is an important part of the strategies used by sophisticated collectors of all coins; not just dated gold. Do you have any stories to share about being picky or not being picky when you bought a coin? Please share them in the comments section below.

Do you buy rare gold coins?

Do you have coins to sell?

Would you like to have the world’s leading expert help you assemble a set of coins?

Contact me, Doug Winter, directly at (214) 675-9897 or by email at dwn@ont.com.

The "Ten Favorite Coins in Ten Weeks" Series: A Look at Some Interesting US Gold Coins

If you are a sports fan, you are probably aware of the wonderful ESPN series 30 for 30. As I watched an episode a few nights ago about the sad demise of the Big East conference, I thought about doing a blog series which looked at 30 of my favorite coins over the course of 30 days. After realizing this was waaaaay over ambitious, I tempered my initial enthusiasm to ten coins in ten weeks.

So here’s the skinny.

Every week I’m going to choose a coin which, after my nearly three decades as a professional dealer, still gives me goosebumps to buy. You’ll be surprised by some of my choices. Some won’t be gold coins but will be nostalgia-based due to my early days in the coin market (hint: I’m still intimidated by those gaping holes for the 1856 and 1877 in my circa 1968-70 Flying Eagle and Indian Head Penny set). Others won’t be rare in the true sense of the word, but will have a design or an historical element which still appeals to me. And yet others won’t be specific dates but rather types (Fat Heads!) which get me hot and bothered to this day.

While this is probably a social media pipe dream, I’d love for this series to be interactive and for you to share with me (and the readers of this series) your thoughts on the coins I select and your own "10 in 10."

Look for this series to begin next week.

Some Recent Trends in the Rare Coin Market

If you are a reasonably long-term participant in the rare coin market, you may not have recognized the fact that the market has changed in a huge way in the last five to ten years. Walking around the  floor at a show, you may not notice this (many of the same dealers are buying and selling coins) but the collectors and dealers who are really "in the know" are aware that things are irrefutably different.

How so?

Let's take a look at a few of the ways the rare coin market is far, far different in 2013 than it was in 2008 or 2003.

1.  CAC becomes a force. Five or ten years ago, CAC didn't exist and the major services didn't have someone "checking their work." This led to some sloppy grading and clearly the existence of CAC has tightened standards. Does this mean the services (or CAC) are perfect? Most clearly not but I think grading is more consistent now than in the past and this is evidenced that fewer dealers are making a living solely as "breakout" specialists.

I see a big change in the market from another CAC-related perspective as well. In some series, if a coin doesn't have a CAC sticker, this can mean the kiss of death. I think this is an unfortunate circumstance and I'm guessing this wasn't something that John Albanese had in mind when he established CAC. But as of the middle of 2013, we can look at auction prices and dealer sales and gauge that a CAC sticker clearly increases liquidity and in some cases it increases prices by a significant amount.

2.  Interesting coins outperform all others.  In the rare date gold market, the coins which are clearly in the highest level of demand are those which are interesting to multiple groups of collectors. As an example, a coin like an 1855-O gold dollar has multiple levels of demand because it is a distinct one-year type coin while an 1850-O gold dollar (which is three times as rare in Uncirculated but priced at about one-third to one-half as much) is of interest mostly to a smaller group of specialists.

This isn't to say that people deliberately sought "boring" coins before. But in 2013 (and beyond) it seems clear to me that people want coins with an interesting story behind them.

Some examples of interesting branch mint gold coins include 1855-D gold dollars, 1861-D gold dollars and half eagles, 1839-O quarter eagles, 1854-D three dollars, 1838-C and 1838-D half eagles, 1838 eagles, 1861-S Paquet double eagles. Coins like this have at least a few things in common: they are either one-year types or first year of issues or they have very interesting back stories which appeal to a wide variety of collectors. I call these coins "multiple level of demand" issues and they are clearly in vogue right now.

3.  Pricing Becomes Complicated.  A decade ago, rare coin pricing was fairly simple. You had a coin--let's say an 1885-CC double eagle--and it was graded AU58 by PCGS. You looked at the Greysheet and saw that Bid was $10,000. The coin was pretty decent, it was a popular, low-mintage CC issue and, therefore, it was worth 10% over Bid. You priced it at $11,000 and if it didn't sell quickly, you lowered the price to $10,500. Simple.

But today, there are countless variations of 1885-CC double eagles. It could be a PCGS coin or an NGC coin. It could have a CAC sticker or not have a sticker. It could have a "+" designation or a "*" designation (or even both). It could be in an old green label holder. The possibilities are literally endless.

Suddenly, many significant coins have four, five, six or even more potential variations and just as many possibilities when it comes to pricing. The 1885-CC double eagle in AU58 could be worth $20,000 or it could be worth $25,000 or it could even be worth $30,000. And that's not taking into consideration the possibility that it's an upgradable coin and it is worth $35,000 or more.

Unfortunately, the Greysheet has not kept up with this widening range of prices. Today's collector has to be very nimble or very well-connected to know the price differences between a PCGS/CAC and an NGC/non-CAC coin in his series; especially if he specializes in something like St. Gaudens double eagleswhere the variation(s) in prices can be dramatic.

4.  Every Picture Tells a Story.  As I have written about before, the advent of the internet has made numismatics an increasingly visual hobby. With most collectors making their purchases solely based on images from dealer or auction websites, the visual appeal of a coin has become paramount. Unless a coin is very rare, in today's market it is visual appeal which sells a coin more than almost anything else.

This tends to be less true in the branch mint gold area than in silver coins where superb color can mean staggering premiums. But, as I have noted in the past, how a coin will look on my website once it has been imaged is a major consideration in the process I use to determine if I will or won't buy a coin.

Which brings us to the next point.

5.  In Crust We Trust.  After years and years of beating the "buy original coins" drum, it looks like many collectors of branch mint and early gold have begun to listen to me. This has been reinforced by the emergence of CAC (see above) who tends to appreciate originality and rewards coins which have not been dipped or processed.

The change of taste towards "dirty original gold" has no been without consequence(s). The first I've noticed is that both PCGS and NGC now sometimes over-reward originality. How ironic is this? For years, the services tacitly endorsed the dipping of coins to make them bright so that they would achieve the highest possible grade. By now, so many coins have been ruined by this that when a nice original AU50 is sent in, the chances are good that it will grade AU55 or even AU58 just because it has original skin.

Another consequence is that collectors who want original surfaced coins typically mistake so-so or ugly coins with some color for nice coins with really nice color. This is understandable. Let me give you example. At a recent show, a collector showed me a group of coins which he had purchased through auctions in the last three years. He wanted me to verify that they were all "crusty and original." The coins ranged from not even remotely original to reasonably original but were not attractive. I thought they were clearly nicer than the bright, dipped out junque which he might have bought a few years ago but he still didn't fully "get" the concept of crust. And I'm not sure many collectors--or dealers--do. And this is what, in my opinion, makes the whole 'dirty original gold" craze somewhat ironic.

6.  True Rarity Becomes Appreciated.  Because of the preponderance of numismatic information, collectors are a lot smarter in 2013 than they were in 2003. Many collectors have access to information which, a decade ago, was only accessible to real students of the hobby.

One consequence of this is that you don't have to "convince" collectors that a certain issue is rare. You can prove how rare a coin is by how often it does--or doesn't-- appear at auction and how high--or low--the populations are at PCGS and NGC.

This has made tastes change in recent years. As an example, I just sold a very, very cool San Francisco eagle which was one of the two or three finest known for the date. Ten years ago, I would have bought this coin and my reaction would have been "cool item but who the heck am I going to sell this to?" Cut forward to 2013 and not only did I pay a very strong price for the coin with no hesitation but my reaction was "cool item; I better not put it on my website because so many people will want this that I'm going to anger the collectors I don't call about it."

I see this trend intensifying in the coin market in the coming years. Whether you are spending $1,500 or $15,000 do you want to own a coin  which is hard to find or one which is rare? And what if rarity can now be quantified due to the number of coins which have been graded by PCGS and NGC and the auction archives which Heritage and PCGS make readily available?

What are some of the recent trends in the coin market which you find interesting? Feel free to leave your comments about this topic in the space below or email me at dwn@ont.com to continue this discussion.