Hunting For Value In Today's Rare Coin Market

As we roll towards the mid-way point of the numismatic year, this is a good time to step back for a second and reflect on value. The Numismatic Prognostications of late 2008/early 2009 have not proven as dire as first thought (at least not yet...) but there has still been quite a bit of shake-out in the coin market. For the collector who is a stickler for good value, does this represent a good time to jump into the market and pursue some of the bellwether items that are standards in any collection? Let’s take a look at a few of these and see if they are good values at current levels or if the collector should ride the market out and take a “wait and see” approach.

The first coin I’d like to look at is a 1795 half eagle graded AU55. The 1795 half eagle is a very popular issue due to its status as one of the two first gold coins struck by the United States mint. It is scarce but not unobtainable and it is priced at a level that many collectors can (still) afford. The current value of an average quality 1795 half eagle in AU55 is around $40,000. Last year, examples consistently traded in the $45,000-50,000 and at the peak of the market in 2007 they hit the $50,000-55,000 mark.

Now, let’s look back a few years. What were 1795 half eagles in AU55 worth five or six years ago? As I recall, it was possible to buy a nice, solidly graded example for around $25,000-30,000. My gut feeling tells me that it’s not likely that we’ll see these levels again for this coin but that a dip down to around $35,000 might be possible this year, especially for examples that are low-end and unoriginal.

In my opinion, at current levels (give or take 5-10% on the downside or upside), the 1795 half eagle is a pretty good value in AU55. But I’d be very picky right now. The last three or four examples that I have seen in AU55 holders have been fairly unattractive. A choice, lustrous piece with good eye appeal and nice color is hard to find at the new levels and I think it’s a solid value.

How about the Big Brother of the 1795 half eagle: the eagle from this year? I personally love 1795 eagles. It’s a beautifully designed coin, it’s historic, it’s scarce but not to the point of being esoteric (as are some of the rare date early eagles of this design) and it’s an issue that has been in demand since the early days of coin collecting.

Prices levels for this issue in AU55 have held up a little better than they have for the similarly dated half eagles. I haven’t handled an AU55 in a few months but I’m guessing that they are worth around $50,000-55,000 right now. Last year, examples traded in the $55,000-60,000 range and at the peak of the market in 2007, I traded at least three of them in the $65,000-70,000 range.

Looking back a few years, 1795 eagles in AU55 were trading for around $35,000-40,000. If I had to guess what the current “basal value” for this issue is, I’d say around $45,000. At this level, I have to think there are a lot of dealers who would jump in, even for coins that weren’t especially high end.

In my opinion, a nice, choice 1795 eagle at around $50,000 is very good value. Again, I’d be picky if I were buying one. I’d spend a few extra thousand dollars and wait for an example that was as original as possible.

What about High Reliefs? As you might know, I’m not a huge fan of High Relief double eagles from the standpoint of value. But I do love the design and if I were a collector I can’t imagine not owning a nice MS64 example at least once during my collecting career.

If you shop around, I think you should be able to buy a decent non-CAC quality MS64 for around $26,000-28,000. These were worth around $32,000-34,000 a year ago and at the peak of the market in 2007 I can recall seeing examples trade in the $36,000-38,000 range. Around five or six years ago, as the Great Bull Market in coins was beginning, MS64 High Reliefs were available in the $22,000-24,000 range.

These numbers are sort of surprising to me. Given the near-ubiquity of this coin in this grade (PCGS alone has graded over 1,200 in MS64) I would have personally expected it to have dropped more than it has so far. Many collectors are not aware of the fact that some of the dealers who were the biggest two-way market-makers in High Reliefs have cut back their buying due to cash-flow constraints. Given these factors, I’m impressed that MS64 High Reliefs have only dropped 15-20% since last year. My gut feeling is that they could drop another 10-20% but I don’t see them getting much cheaper than the low 20’s in MS64. At this level, I would have to think that they are a “safe” purchase.

Let’s look at one last item. How about something that straddles the line between “generic” and “rare coin?” I’m thinking Three Dollar Gold and, more specifically, I’m thinking an 1878 $3.00 in MS64.

If you follow the generic market, you probably are aware that Three Dollar Gold is not in demand right now. I would term this series as “cold” and it might even be approaching “glacial.” With a little price shopping and comparing various dealers’ inventories, you should be able to buy an MS64 in the $6,500-7,500 range. These were worth $8,500-9,500 a year ago. The peak of the market for common date MS64 Three Dollar gold was in late 2005/early 2006 when these were being promoted and they got as high as $12,000-14,000 in MS64. Going back to the beginning of the bull market, MS64 Threes were selling for $5,500-6,000.

I’d like to tell you that I thought MS64 Threes were a great value right now because I do think that they are cheap. But the problem with this series is ample supply and almost no current demand. Unless someone starts promoting Threes again, I could see MS64’s drop down to the $5,000-$5,500 range. So unless you really need one for a type set, I’d suggest waiting a while and letting them get cheaper.

ValueQuest 2009

I have the feeling that the Numismatic Buzzword for 2009 is going to be “value.” If you are like most collectors, your purchases in the coming year(s) are not going to be as extensive as they were in the past. If you are buying fewer coins, you’ll want to stretch your coin purchasing dollars and look for pieces that offer the biggest bang for the buck. I have a few suggestions, which are mainly conceptual in nature, to guide you along the Value Trail. Regardless of series, date or mint, coins that have a nice, original appearance are very rare. My definition of “original” is a coin that appears to not have been cleaned, dipped, processed or otherwise enhanced in recent generations. In many series, especially ones like early gold and southern branch mint gold, truly original coins probably represent less than 5% of the available population. If you don’t believe me, take a look sometime at a large auction that is held in conjunction with a major convention. Assuming that you know what you are looking for, my guess is that you’ll see coin after coin that is too bright or bleached out or bedecked with “unusual” coloration. In some sales there may be thirty or forty early gold coins and only a small handful that fit my criteria of originality.

It makes sense to me that if you are going to buy fewer coins in 2009 (or, who knows, maybe you won’t buy fewer coins, just less expensive ones...) you should be buying prettier, more aesthetically appealing ones. And one of the things that I am continually amazed about in the rare date gold market is that, when they are available, choice, original pieces tend to only bring a small percentage (10-20% at most) over the typical “schlock” that is usually offered.

Another important point to consider when purchasing coins with a newfound appreciation for value is current market price versus prices in 2002-2003. I use 2003 as the point in time that prices in many gold series began to rise significantly. As an example, many early gold coins that were worth $6,000-8,000 in 2002-2003 had been at that level for quite a few years. Today, these same coins may be worth $10,000-12,000 or even more in some cases.

If you own stocks, you are probably well aware of the fact that the drops in the market since early September have basically eroded all stock profits achieved in the last five years. While the coin market has, so far, held its value far better than I would have expected, it is certainly a possibility that today’s $10,000 coin could certainly drop to $6,000 in a fairly short period of time. By studying the past history of specific subsections of the market, the value- conscious collector should have a clearer idea of potential downside.

There are actually a number of rare date gold coins that are worth the same today as they were in 2002-2003. Examples include very high grade Charlotte and Dahlonega issues (in this case MS63 and above), many San Francisco issues from the 1850’s, 1860’s and 1870’s and even a number of New Orleans gold coins. The reasons for this range from the market being damaged by too many overgraded coins in holders (in the case of Charlotte and Dahlonega pieces) to collector indifference (in the case of the San Francisco coinage) to poor reporting of prices by Trends and CDN (in the case of New Orleans issues).

Just because a coin was worth $5,000 in 2003 and it is worth the same today does not mean that it offers the “best” value to a buyer in 2009. But, it is interesting to ponder if coins such as this might have less downside than areas of the market that have shot up considerably.

Which brings us to the third and final point to consider in our Valuequest 2009. Liquidity is likely to be a huge factor in the coin market in the coming year(s). This is probably no time to be “cute” when it comes to your coin purchases. My guess is that coins that had limited appeal and liquidity issues in the good market of 2003-2008 might have virtually no appeal and liquidity in the potentially-not-so-good market of 2009 and beyond. In other words, key dates may drop in price somewhat but they are still likely to have a lot of collector demand. And to use an analogy from the non-gold coin market, series such as Three Cent Nickels, Shield Nickels and Liberty Nickels have and will probably always be also-rans because they are just not especially interesting in the opinion of most collectors.

So, in summary, I believe that three of the key elements that will drive the market in 2009 are originality, current price levels versus pre-bull market prices and liquidity/popularity. These were obviously key elements in years past but with the market euphoria of the past not likely to be seen for awhile, I think they will be more important than ever.

Collecting Coins in Difficult Economic Times

If you are like most people, the last few months have been tough on your pocketbook let alone your psyche. We are, at least for the immediate future, in tough economic times. For some people, there are difficult decisions that have to be made: which bills get taken care of, can the mortgage be paid, do we eat dinner or fill the tank with gas. Fortunately most coin collectors are faced with decisions that are much less dramatic. When people are feeling wealthy, spending discretionary income on something like coins is a no-brainer. You see something you like and you buy it. In a Recession, such purchases become far less impulsive. But I don’t think the coin market is going to come to a screaming halt. Prices may come down (in some cases they may actually raise) but I sense that there will be activity. Simply put, there are just too many people who enjoy numismatics and there is just too much money (in the United States and world-wide) for established hobbies like numismatics to crash. And, if we enter an inflationary period as many experts believe, there could easily be a rush into tangible assets.

That said, I think people’s buying habits will change quite a bit in the next few years. The Irrational Exuberance we saw in the middle part of the decade could be over forever. As someone who has survived a number of lean Numismatic Cycles, I’d like to share some observations on how you can still add coins to your collection, even in tough times.


1. Buy Smart. I can’t begin to tell you the number of purchases I saw in the last few years that were just plain dumb. Collectors battling to the death at auction over coins that weren’t really that nice or rare. Dealers falling all over themselves to buy old holder coins in one grade and paying a price that assured them they would possibly break even if the coin upgraded three points...sheesh!

Being a smart coin buyer means being informed, confident and well-connected. In my opinion, this means taking the time to carefully research the coins that you are contemplating buying, fully understanding the buying and selling process(es) and having a good relationship with a small group of dealers.

I am a huge believer in first impressions being correct. In numismatics, this means having a good feeling about a coin’s appearance, a coin’s price and the person who is selling it. If you have to convince yourself that you like a coin, don’t buy it. If you have to make irrational justifications about a coin’s price, pass. If the person who is selling the coin makes your skin crawl, have a trusted dealer make the transaction for you—or shop somewhere else.

2. Look for Value. I think value is going to be a real buzzword in the coming coin market. You the collector are going to be bombarded with this word but do you really understand it? And, if so, how does it apply to what you collect?

Here’s an example of how I form opinions in regard to value. I have spent quite a bit of time in the last few days doing pricing for the 2010 edition of the Redbook. As I was going through the various sections, one thing that really grabbed my attention was the pricing structure of Extremely Fine Charlotte and Dahlonega half eagles. As an example, virtually every C+D half eagle in EF40 is priced at basically the same amount. Sure, there are a few exceptions but we are talking about issues with a wide range of rarity and availability being priced exactly the same. For instance, the 2010 Redbook prices for an 1854-C and an 1858-C half eagle in EF40 are both $2,500. That’s great except for the fact that the 1854-C is a considerably scarcer coin in this grade (and in all grades higher than EF as well). As a value conscious buyer, I’m going to be looking for the 1854-C half eagles of the numismatic world.

When money is tight and you don’t have as much to spend on your hobby as in the past, make your purchases as value-conscious as possible.

3. Think Long Term. There are many collectors who have never known a slow coin market and they’ve been spoiled. In the past few years, they’ve been able to bail themselves out of trouble when they’ve bought “bad” coins by throwing them into auctions and letting the next buyer come along. In some cases, they’ve been able to turn handsome profits on coins that they had no business buying, let alone selling, for a profit. In a slow market, these “unburials” are going to happen with less and less frequency.

There’s a pretty basic solution to this problem. Buy the “right” coins and buy for the long term. You don’t have to become a numismatic “black hole” who never sells any coins (in fact, I urge you to sell from time to time so that you better understand how this part of the market works). But buy every coin as if you were going to hold it for a reasonably long period of time.

4. Eye Appeal, Eye Appeal, Eye Appeal. If the coin market were to tank in the next few years, the coins that are going to maintain their value better than anything else are the ones that are aesthetically appealing. This is particularly true if you collect a series in which the coins aren’t really rare from the standpoint of total number known. Let’s say you collect Proof Seated Liberty Quarters. If you have a set of coins that are all bright white and which show average quality contrast, the chances are good that these coins will devolve into semi-widget status (unless they are in very high grades). The same set with all beautifully toned original coins or with a mix of toned coins and superb black and white cameo pieces is probably likely to retain more of its value and interest levels even in a poor market.

Coins do not have to be expensive to be pretty. And they don’t have to be in ultra high grades to be considered great eye appeal pieces either. Savvy, sophisticated buyers are often more content to purchase a nice EF45 example of a rare date than a marginal quality AU55. The only time you should allow yourself to buy a coin with marginal eye appeal is if essentially every known example of the type or issue is crudely made. But even in the case of an issue like this (an example would be the 1856-D quarter eagle) there are still pieces that despite a crude or “ungainly” appearance have a certain charm to them that make them clearly desirable.

5. Be Patient. I’m a strong believer of being patient even in a bull market. In a slower market, patience is, I believe, imperative. Back in the day, collectors looked at their collections as long-term endeavors. The collector who was assembling a set of Carson City gold looked at his challenge as something that would take many years, not just a few months. I blame the short attention spans of many new collectors on the internet mentality that says “I want it, I must have it NOW!!” Sure, it is possible to complete a set of Carson City gold in a few months. But the collector who rushes his way through a set is certain to make some potentially big mistakes and he is missing out on the fun of the big, long-term picture.

One thing I’ve learned over the years is that many so-called “rare” coins are not rare at all. Unless you collect a series that is replete with truly rare coins (Liberty Head eagles would be an example of a series that contains dates that ARE truly rare, in my opinion) don’t sweat it if you missed out on a certain coin on a dealer’s website or at auction. You’ll probably find another one in a few months.

6. Buy Special Coins. Whether you collect Roosevelt Dimes or Proof Liberty Head double eagles there are clearly coins which exist that are “special.” In other words, there is something about them that make the viewer stop and look twice. As an example, when I view lots at an auction, I tend to plow through the coins and after a while they literally all begin to look the same. But then some lot will pop up that make me stop, take a deep breath and exclaim, “man, is that cool/pretty/neat.”

For the Roosevelt Dime collector, this “special coin” might be a piece with monster toning or one that is fully prooflike and very unusual as such. For the Proof Liberty Head double eagle collector, his special coin might be a piece with a Bass, Eliasberg or Norweb pedigree or one with splendid natural hazy orange-gold color.

Special coins can also be pieces that have a great story to tell. I have always liked coins that are one-year types or first-year-of-issue pieces because they can be appreciated by someone who knows nothing about the specific series. Even if you could care less about Dahlonega gold or three dollar gold pieces, the chances are good that you’ll still think an 1854-D three dollar is a pretty interesting coin.

One last thought. In tough economic times, the natural instinct for many people is to panic. Your sense of fear may be played on by some of the numismatic newsletters or ads that you read. Don’t buy into this shameless marketing. If you like collecting coins and you can afford to keep buying them, do so. If you think the world’s economy is going to hell in a hand basket, putting 10% or so of your net worth into a nice coin collection probably isn’t the worst thing you can do. Coin collecting is a great hobby and I hope that you’ll call on me to help you with your purchases whether the Dow is 12,000 or 3,000.