Some Thoughts on Rare Coin Pricing

I have been working on a few coin-related projects lately and one component which has made me stop and collect my thoughts on many occasions involves pricing. And then it hits me: if issues about coin pricing confuse me, how confusing must they seem to new collectors? Here are a few random thoughts about coin pricing.

Try to see if you can answer this question without cheating: what do you think an 1893-S double eagle in PCGS MS65 is worth? Without knowing much about the series, I'm going to predict that your guess is in the mid-to-high four figures; maybe as high as $12,500-15,000. What if I told you this was a $44,063 coin and could prove it?

Which brings us to Thought #1 of this blog: can a market be made by one coin trade? Quick answer: "yes but..."

The 1893-S double eagle, it turns out, is the Poster Child for Numismatic Condition Rarity. It is common as dirt in the lower Uncirculated grades and only marginally scarce in MS63. It is very scarce in MS64 with an estimated value  of $9,000-10,000 (which in and of itself might prove surprising to you for a coin with a population of 40 pieces, just at PCGS...). But it turns out that in MS65, this date is a beast with a current population of just two at PCGS and none finer.

Which is all well and good but how do you price a coin like this when one has never sold? Well, you wait until one does sell which is exactly what happened in Heritage's 10/12 auction, when a PCGS MS65 example brought an impressive $44,063.

I'm not going to make a value judgement about this coin as it isn't my intention to state whether it was a "good deal" or a "bad deal." But  if another piece were to come up for sale, I would have to use the $44,063 figure as a baseline comparison. As long as the population figure (i.e. the supply)  stays low for this issue, we can assume that the demand will remain fairly consistent. For better or worse, this $44,063 is what we are left to work with, even if the underbidder at the Heritage 10/12 suddenly thinks the coin is now worth $20,000.

Here's the thing about coin pricing: in very thinly traded markets (like coins with populations of two and none better) the market price becomes whatever the last trade is. In the case of very rare coins, this makes sense. In the case of a condition rarity in a series which is not typically collected by date, especially in Gem (like our aforementioned 1893-S double eagle) it makes sense but it is harder to embrace.

What about what I call "outlier prices?" Can a pricing structure be based on pricing anomalies?

This is a harder question to answer. Let's use another 1893-S double eagle as an example; this time in MS64. While scarce, enough have appeared at auction over the last few years that we can make some good assumptions.

The last MS64 to sell at auction was a PCGS MS64 with CAC approval which brought $12,925 in Heritage's 1/13 auction. It was a nice coin and one of the few examples of this date in MS64 with CAC approval; even so, the price realized has to be considered an outlier given other comparable coins.

The two previous APR's for the 1893-S in MS64 are $9,975 for a PCGS/CAC coin in Heritage's 2/10 sale and $9,890 for a non-CAC PCGS example in Heritage's 2/09 sale. The non-CAC coin, interestingly, was nicer than the CAC (in my opinion).

Why did the one coin bring nearly $13,000 while the other two brought a shade under $10,000? It could be a number of factors. It is possible that two "crackout" dealers felt that it had a shot to upgrade to MS65 (not likely given its scratch on the face) and they bid the coin up. Or, Type Three double eagles may be a bit stronger now than they were a few years ago (possible but are they nearly 30% higher, in the case of this date?). We'll never know the answer for certain but I don't feel strongly enough about this price to make the bold statement that all other 1894-S double eagles in PCGS MS64 with CAC approval are now worth $13,000. To me, they are still $10,000 coins and this one "outlier" price realized doesn't necessarily mean a new price level has been established.

There are many other scenarios in which an outlier price can be attained.

Let's take a random example: an 1855-S  eagle in AU55. This is a coin which could have a potentially huge range in valuation. And there are many factors why this range could be so dramatic. If it was a "real" AU55 with original surfaces and good eye appeal it could be worth double the amount of a crappy processed example. If it was a nice AU55 with an SS Central America pedigree (in the original holder) it could be worth even more. My point is that we could see dramatic variations in prices if enough examples of this date were sold at auction.

I mentioned that the range on this date could be vast. While a junky, low end "buying it for the plastic" AU55 could be worth $7,000-9,000 in the current market, a choice PCGS AU55 with a CAC sticker could bring as much as $12,500-15,000. And a coin with all the bells and whistles (PCGS/CAC/pedigree/old holder) could bring close to $20,000.

Which brings me to another thought.

Some coins are easy to price. An Iowa half dollar in an MS65 holder is worth around $150. An 1882-S Morgan dollar is a $350 coin (unless it has spectacular multi-colored toning but that's another issue).  Other coins are hard to price and they require value ranges. As I pointed out above, the value range for an 1855-S eagle in AU55 could run from a low of $7,000 to a high of close to $20,000. Same date, same grade, same value, right? In the case of very rare, esoteric coins this is far from the case. There are a ton of factors which influence value and, unfortunately, this is often not reflected in pricing guides.

Would it be possible to create a pricing guide which reflected the fact that there are variations in value for many coins? In the case of 1793-1814 Large Cents such pricing already exists. This pricing assumes that there are at least three variations within each grade; let's call them "A" for nice coins, "B" for average coins and "C" for below average coins. These variations may not matter much for MS65 Iowa half dollars but they matter alot for coins like Chain Cents or 1855-S eagles or even common date Dahlonega half eagles in EF45. I would love to sell multi-tiered pricing for various series and believe that this could be done, albeit with a great deal of effort.

I've written this before but I believe that one thing that holds coins back from literally exploding as an asset class among sophisticated investors is a lack of high quality pricing. Someday, someone is going to realize this and they are going to create a proprietary pricing system (its not hard to do but it is extremely labor intensive and requires input from extremely knowledgable market players and specialists) which will revolutionize numismatics. Until then, many new collectors will have to gamble that the 1855-S eagle which they just paid $15,000 for is a $15,000 1855-S and not a $7,500 1855-S. CAC approval is a start, but dissemination of information is a necessary next step.

Buying the Jump Grade

A few recent  coin sales that were made by my firm have given me an idea for a blog that I think is interesting. I've written about this before so I'll try to approach what I think is an important concept from a new perspective. The concept of value is extremely important to me when I buy a coin for my inventory and I try and share this with clients of DWN. In a nutshell, my core belief in coin buying is that, with most coins, there is a point at which you can "overbuy" . There are obvious examples of this and not so obvious ones.

The basis of my concept is what I refer to as the "jump" grade for a coin. The jump grade is the point at which the value spread for a coin becomes out of whack and the higher grade(s) for a coin no longer make sense.

 Let's look at a hypothetical pricing structure for a coin in higher grades:

     MS63:  $2500

     MS64:  $5000

     MS65:  $90000

This seems far-fetched, right? In truth, this is the exact value spread chart for a 1920 St. Gaudens double eagle, an issue that I consider to be the poster child for buying the jump grade which is MS64.

In this case, an MS64 example at $5,000 seems to make alot more sense than an MS65 at $90,000, especially given the fact that the single PCGS MS65 1920 Saint that has ever been graded isn't all that much nicer than a number of the 64's that I've seen or sold. So why would anyone buy a $90,000 version of a coin that can be represented in a set by a nice $5,000 version?

The answer is more complicated than you think. Obviously, part of it is vanity. Very high end collectors demand the finest coins and if a finest known coin jumps nearly 20x in value over the next grade down, that's just the reality of the market. If you are putting together a set of Saints that is competing for the finest in the set registry, the opportunity to add a finest known population one/none better coin (and the huge number of "points" that come with such a coin) is far and few between.

But what about the rest of us; we coin buyers without unlimited funds?

I'd like to share a few of my personal philosophies about value in numismatics.

     1.  Most collectors overbuy common coins and underbuy key coins. This is especially true for gold collectors who focus on 20th century issues. Let me give you an example. If you are collecting high grade Indian Head half eagles by date, why spend $25,000-30,000 on a common date in MS66 when you can buy a perfectly acceptable MS65 for half that amount? I think I'd rather pocket the $12,500-15,000 difference and apply it to a truly rare coin like a 1911-D. Conversely, the same collector who is working on the killer set of Indian half eagles would be foolish to scrimp on a classic issue like a 1929 and buy a "details grade" cleaned example so he could save money.

     2.  Issues with large underlying populations are dangerous purchases. Let me give you an example, along with a chart:

     1879-S Double Eagle

     Grade          PCGS Population          Value Range

     MS61                        225                        4000-5000+

     MS62                         59                          11000-13000+

     MS63                           3                           40000++

This issue actually has not one but two jump grades. For many collectors, the choice will be clear: buy an MS61 because in MS62 the price of this issue jumps almost threefold. An important point to consider is how many of the 225 coins graded MS61 (the actual number factoring in resubmissions is probably still 125-150) could become MS62 someday? Even if the number is just 10-20% percent of the total, that's still potentially as many as 15-30 new MS62 coins. Is the market deep enough to handle that high an influx and still maintain current value levels?

But for collectors with deeper pockets, MS62 is the jump grade for this issue, especially given the fact that they are unlkely to have the chance to buy an MS63 ( considering that the PCGS population is just three  and none have traded at auction since 2006). My personal choice would be a nice MS61 but I would buy a high end MS62 at, say, $15,000 if it were an obvious "just miss" coin.

3.  "Boring" coins deserve "boring" grades in most sets.  To me, a coin like a Dahlonega quarter eagle is interesting. That's why I don't think you can really "overbuy" in this series. There are very, very few D mint quarter eagles graded MS65 (or even MS64) and just about any coin graded as such, unless its horribly overgraded, is worthy of consideration for an advanced Dahlonega specialist.

But a coin like an 1898-S half eagle is boring. There were nearly 1.4 million struck, thousands and thousands exist and most range from nice to very nice. I have a hard time getting excited about a nice 1898-S half eagle; even the direct-from-the-mint to-John Clapp piece, now graded MS68 by PCGS. This coin last sold for $81,600 and I can think of alot of U.S. gold coins at this price point that I'd rather own. The only real "function" that this MS68 example might properly serve is as a type representative in a knock-your-socks off set.

4.  Type collecting looks at jump grades differently than date collecting.  Type collectors just buy one example of a specific design unlike date collectors who buy numerous. So a type collector will look at a jump grade differently. Going back to our earlier example of the Indian Head half eagle, for type purposes an MS66 might make sense and this becomes the jump grade; given that the next grade up (MS67) is likely to cost $70,000 or more.

5. You can throw the book away when it comes to dual rarities.  There are coins that are rare because of their grade and there are coins that are rare because few are known. Then there is the "rarest of the rare." These are coins that I refer to as "dual rarities" because they check boxes on both sides. An example of a dual rarity is a coin like the Byron Reed 1864 quarter eagle, which is graded MS67 by NGC. This is a coin that is not only very rare in any grade, it is an amazing piece from a condition and appearance standpoint.

I'm going to write an article on dual rarities and it should appear in the next few days on my website www.raregoldcoins.com.

Whether you have a coin budget of $1,000 or $1,000,000, you want to get the best value you can every time you make a purchase. Understanding the concept of the jump grade can help you as you mull decisions for your collection.

Pricing "Difficult" Coins: A Real World Model

I have written a number of blogs in the past few years about how I price rare coins. Despite this, I still get many questions from new and experienced collectors about pricing. I'd like to share a specific coin that I recently handled and explain how I came up with buy/sell prices. As I have written, I find many of the published price guides to be of little or no use when it comes to complex, infrequently traded coins. When I make decisions at shows, in my office, or in the auction room on what to pay for a coin, I tend to put a lot more credence in auction records. So, if you'd like to play at home, I suggest that you follow along with the PCGS auction archives on pcgs.com as this is a major source of information for me when I make pricing decisions. Here is a "real world" model and the thought process(es) that went along with my pricing decision.

1863 Half Eagle, Graded MS60 by NGC and CAC approved

This is a coin I handled earlier this year and it is one of the first pieces in a while that, as soon as I saw it, I said "I have to own this." Before I discuss my thoughts about how to price it, let me discuss a little about the issue and about the coin itself.

Only 2,442 business strikes of this year were made and my experience is that the 1863 half eagle is rare in all grades, especially in AU50 or better. I jogged my memory and couldn't recall having seen an example I thought was better than AU53 to AU55 in more than a decade. And, I remembered that this was an issue that typically comes with zero in the way of eye appeal. A quick look online showed me that the PCGS population was none for Uncirculated coins and five for AU58; NGC had graded two in Uncirculated (an MS60 and an MS61) and five in AU58. At the time, CAC hadn't approved a single 1863 in any grade; a good indication that the eye appeal of the typical example was not good.

(How can you, even without my experience, make the same conclusions? Look at the pictures of the 1863 half eagles sold at auction during the last ten years. Are the coin fresh and original or are they bright, abraded and processed? Then, look at the number of auction records. A quick scan of the PCGS archives showed a total of 30 records since 1941. What was immediately impressive to me about this figure was that the highly-regarded 1864-S half eagle had 32 auction records in that time period!)

Of course, all these statistics are just gobbledygook if the coin itself isn't "all there." As you can see from the photo above, this coin had really good eye appeal. In fact, my first question was "why is this only in a 60 holder?" (I recently overheard heard a wholesale dealer, who I regard as one of the top three graders in the world, refer to the MS60 grade as "dumb" and that he "hated it." I tend to agree with him but, in this case, I was smitten with the coin; even it was in the funkiest of all Mint State grades.)

So, at this point I was sold. What would I pay?

With no auction records for an Uncirculated coin, I looked at AU58's. The two most recent sales were $14,950 by Stacks Bowers in August 2012 and $14,375 by Heritage in May 2010. A quick look at images for both coins showed two pieces that were no better, in my opinion, than AU53 to AU55. So, after digesting this, I decided that I would pay at least $17,500-20,000 for a coin that was a real, CAC-quality AU58 (the last "real 58" I had seen was the Bass II coin which sold for $13,800 back in 1999...).

Having concluded that a "real" AU58 was worth as much as $20,000, I figured it would be OK to pay at least $30,000 for a really nice MS60. I wanted confirmation and then decided to see if there were comparable coins that had recent auction records in this grade. Back to the archives I went.

I didn't really find any good comparables for the 1864-P and 1865-P, two dates that I regard as somewhat similar to the 1863; at least in terms of overall desirability. I then looked at the 1863-S; an issue with 17,000 struck but a low survival rate. I believe that this date is about twice as available as its Philadelphia counterpart but, like the 1863-S, it is extremely rare in AU58 and above.

In their June 2011 auction, Stacks Bowers sold a nice NGC AU58+ 1863-S for a remarkable $25,875. This was the single best example of the date that I had seen in years and I thought the price realized would be strong but I was clearly not expecting a winning bid of over $25,000. But this was as good a comparable as I could find and it made me think that if a "gem slider" 1863-S half eagle was worth nearly $26,000 then a somewhat nicer example of a decidedly rarer date (the 1863-P) had to be worth at least $30,000-32,500.

After negotiations, I was able to purchase the 1863 half eagle in this price range. I sent it to CAC where it was approved, thus becoming the first and only stickered example of this date. I listed it for sale in the mid-30's and within a few hours I sold it to a specialist who had been looking for a high grade 1863 half eagle for many years.

And what exactly does this all prove? Here are a few thoughts that I gleamed:

1. With CDN Monthly Summary showing a "bid" of $20,000 for this date in MS60, I knew that I wasn't going to get any help from published price sheets. But that's not a surprise, given that no MS60 coin had ever traded.

2. A few things convinced me to stretch on this coin: its true rarity in all grades, its Civil War date of issue and its great eye appeal. But if I had been offered an 1863-P half eagle in MS60 that was ugly and processed, I might not have figured it for much more than the $20,000 or so that I decided a properly graded, attractive AU58 was worth; maybe even less, in fact.

3. When you are contemplating a purchase of a coin such as this 1863 half eagle, you have to be prepared to stretch. My quick analysis made me think it was a great deal at $25,000 and probably too much of a stretch at $40,000. So, at $30,000 I was still all in and at $35,000 I probably would have been as well but not without some complaining to the seller.

4. How effective is the comparable method I mentioned above for determining value? It can be very effective but it is fraught with potential landmines. Let's say there was just one comparable and it was from over a decade ago--would that be effective? Or what if there were three records and one was 100% higher for a comparable coin) than the other two--would you, as an informed buyer, know the circumstances behind this sale? Is it effective to compare a coin like an 1863 half eagle to, say, an 1863 eagle? Or is this too much of an "apples to oranges" scenario.

5. The bottom line is that no matter how pseudo-scientific we as dealers or collectors try to make pricing, a lot of the numbers that get placed on really rare coins are instinctual. If you are knowledgeable, you'll have a gut feeling that the price is "right" or its "wrong."

Would you like to read more about my thoughts on coin pricing? If so, feel free to email me at dwn@ont.com and fire away with some off your questions.

How to Price AU58 Gold Coins

As a buyer of rare gold coins, nothing makes me happier than seeing choice AU58 pieces with original color and surfaces. I love "Gem Sliders" as these coins tend to have better eye appeal than most MS60 to MS63's and are typically priced at a much lower level. They can be among the best values for savvy collectors but the question that often comes up with these coins is "how much of a premium do they command?" Not all AU58's are similar in quality. In fact, I think there is a huge range of quality and appearance within this grade. There are AU58's that are bright and have clearly been scrubbed. Other AU58's are more original but they are excessively abraded or a bit lackluster. The coins that I call Gem Sliders are ones that probably saw little--if any--circulation and acquired what little wear (or friction) they possess either from collector handling over the years or being transported from location to location. Out of all coins that are graded AU58, I'd say that fewer than 10% are true "sliders" and even fewer of these are what I'd regard as "Gems" for the grade.

The focus of this article is on how to price these Gem Sliders. In some series, such coins are seen from time to time but in most, especially those struck prior to 1880, they are rare enough that pricing can prove to be a challenge.

As I see it, pricing these coins falls into three categories: coins that merit a small premium, coins that merit a moderate premium, and coins that merit a substantial (or even a very substantial) premium.

A Gem Slider 1897-O eagle is a coin that merits a small premium over a less appealing AU58 example. This is so for a variety of reasons. First of all, the 1897-O is not a scarce coin in AU58 nor is it rare in the lower Uncirculated grades. Secondly, of the numerous examples graded AU58, a decent number are original and attractive. Thirdly, there is not a big price jump between AU58's, MS60's, and MS61's for this date. This means that an average quality AU58 might be worth around $800-900 while a truly superb AU58 might only be worth an extra $50 or so.

Gem Sliders that can be acquired for a moderate premium are generally priced at 15-30% over a less choice piece. An example of a coin that might sell for a premium in this range would be an 1851-C gold dollar. The 1851-C is not a rare coin by the standards of Charlotte gold dollars but it is certainly many times more scarce than the 1897-O eagle mentioned above. It is also an issue with a higher overall level demand since it is popular both with date collectors and with type collectors. The premium accorded a Gem Slider is not as great as one might expect for a number of reasons.

The 1851-C is relatively available in the lower Uncirculated grades and MS61 to MS62's sell for a reasonably moderate level in comparison to AU58's. This means that a collector on a limited budget has some options, unlike on an issue where the premium between an AU58 and an MS62 might be too great for him to consider the latter grade. Another thing to consider is the size of the 1851-C gold dollar. On small coins, the "gemminess" of Gem Sliders are not as apparent as on larger coins. This means that the premium tends to be lower.

It should be noted that not all small coins have their premiums held in check by size. An issue like an 1855-D dollar or an 1861-D could command a very strong premium in AU58 because of its rarity, its popularity and its prohibitively high value in Uncirculated grades.

The AU58 Gem Sliders that deserve to sell for a very significant premium are coins that have a number of factors working in their favor. They are typically large-sized coins (although not always; see below), coins that are extremely rare or expensive in Uncirculated and/or coins that are very popular.

To pick a fairly random example of a coin that would sell for a big premium in Gem Slider, let's look at an 1853-O eagle. This is a coin that has a fairly high population in AU58 (especially at NGC) and a scrubby, commercial-quality AU58 might be available for under $4,000. But a very high end, looks-like-an-MS62 Gem Slider is quite rare and could command a price in the $6,000-8,000 range. This sounds like an excessive premium but its not when you consider that there are only two or three properly graded pieces known in Uncirculated and if one were available it might sell for $15,000 or more.

A series that I think deserves high premiums for premium sliders is the Type One double eagle. With very few exceptions, this is a series which becomes exponentially rarer in grades above AU58 and one in which eye appeal is both critical and often lacking.

Again, let's take a random example; this time an 1855 double eagle in AU58. This is an undervalued, under-appreciated date in higher grades but one that is finally becoming recognized for its scarcity. A low-end AU58 example is worth around $4,000. In MS61, this date is worth in the $12,000-15,000 range. So what does that make a gorgeous, mark-free, frosty Gem Slider worth? $6,000? $7,000? Maybe even $8,000?

I can think of many coins where a Gem Slider (or possibly an especially nice AU55) might sell for more than a low end MS61 or even an MS62. An example that comes to mind is a 1796 No Stars quarter eagle. I haven't seen many Gem Sliders of this issue in the last few years but I have seen a number of really unappealing MS61 to MS62's. As a collector, I'd rather spend $200,000+ on a superb AU58 than I would an over-graded, processed MS62. The same scenario holds true on a number of other early gold issues, like 1795 half eagles and eagles, 1808 quarter eagles, etc.

Since the entire concept of Gem Sliders is so rooted in eye appeal which is, in and of itself, a hard concept to get universal agreement on, it would be impossible to publish a Gem Slider Price Guide. One man's $6,000 AU58 Type One double eagle might be another man's $4,000 coin. The addition of the "+" and "*" grades at PCGS and NGC to reward good eye appeal is a beginning of quantification but it is still up to the market to determine what premiums are applied to Gem Sliders.

Some Recent Observations From A Coin Show Perspective

Having just come from the Philadelphia Whitman Coin Expo show and, the week before this, the Long Beach show, I feel pretty qualified to make some market observations. Without further ado, I'd like to share them with you. 1. There Are Too Many Coin Shows Right Now. I'm sure I'm not going to make any friends with coin show promoters for saying this but with Long Beach occurring last week, Philly this week and the St. Louis show next week, this is too many coin shows in a short period of time. I saw few fresh coins in Philadelphia because I looked at many dealer's coins in Long Beach and the thought of turning around next week and going to St. Louis...uh, no thanks. The market just can't support this many shows and this is why you are seeing many formerly good regional three and four day events beginning to die rapid deaths.

2. Buying Nice Coins Is Tough, Tough, Tough. If you thought it was hard two or three years ago to buy nice coins at shows, it is as tough now as its ever been; maybe tougher. I've heard dealers all of all sizes and shapes complain how hard it is to find interesting fresh material at recent shows. I was lucky and I had an amazing ANA show with lots and lots of great new coins to offer DWN clients. But it is a real grind to find coins now and, clearly, the good stuff is going off the market and staying there.

3. Everyone Wants to Buy Type One Double Eagles. There are many firms and individual dealers (myself included) who are very active buyers right now of Type One double eagles. At the Philadelphia show I saw almost nothing for sale other than the usual motley assortment of Uncirculated S.S. Central America 1857-S , a few lower grade common dates and the odd overpriced rarity here and there. This is clearly an extremely popular area of the market and coins in the $2,000-15,000+ price range are exceptionally popular right now.

4. And CC Double Eagles Too. You can add $2,000-10,000+ Carson City double eagles to this list as well. They are most definitely in strong demand and if the coins are properly priced (or even just a hair too expensive) they are easy sellers. Even big money coins like 1870-CC double eagles are beginning to sell again and I am aware of at least two EF examples changing hands since ANA. If you have any nice CC double eagles for sale, please contact me as I'd like to buy them from you!

5. Nice New Orleans Gold Has Disappeared. Where has all the nice New Orleans gold gone? Good question. The last few months have seen very, very few interesting New Orleans gold coins available and the few choice or rare pieces that I have had in stock have sold quickly. Clearly, this is an area of the market that is very active.

6. And Dahlonega Gold Also. I think you can safely add choice, original Dahlonega gold in all denominations to the "where the heck are the coins?" list. I can generally only find two or three decent D mint coins at a major show and they seem to sell very quickly when I list them on my website.

7. Coin Pricing Is a Total Disaster. I've mentioned this a number of times but I am finding it more and more of a hassle that coin pricing is such out of touch with reality. What typically happens is that one very low quality rare coin trades cheaply at auction and Trends whacks the price for the issue down. This has recently happened with rare, desirable coins like the 1796 No Stars and 1808 quarter eagles and the 1795 eagle. I look at this as, in its own way, as big a concern in the coin market as the doctoring issue. One reason why good coins aren't being sold is that pricing doesn't reflect the real value of choice, high end pieces. Fix this problem and you will fix the lack of supply that is hurting the market right now. Don't fix it and new buyers will be more interested in purchasing MS64 Saints than "real" coins.

8. I'm Not Seeing Many PCGS "Secure" or "Plus" Coins. Either the new PCGS Secure and Plus program isn't working or its working so incredibly well that the coins in these holders never make it to the market, But I am not seeing many of these coins and I continue to feel that CAC has really set the pace in the high end segment of the market. It remains hard to price PCGS Plus and Secure coins when so few trade at auctions or at shows.

9. The Birth of the "Lucky Charms" Grade. I wish I was clever enough to have invented this term but, alas, I'm not. But I recently have seen coins graded "AU58+*CAC" and these pieces with all the attached symbols and stickers are now known as "Lucky Charms" coins because they seem to have imported their verbiage from the shapes found in this cereal. Magically delicious, no?

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.

When Auction Records Don't Tell the Whole Story

I’ve discussed how using previous auction records can be an extremely valuable asset in determining the current value of a coin. But there are instances when previous records can be misleading and they can keep a collector from making an intelligent buying (or selling) decision. When I recently attended the Heritage pre-ANA Platinum Night Sale, I was bidding both for my own account and for a number of clients. One of the coins that a client of mine had a strong interest in was an 1855-D quarter eagle graded AU55 by PCGS. The coin was pedigreed to the North Georgia collection and it had been off the market since its last auction appearance all the way back in January 1999. This could easily be confirmed three ways: it was in an older style PCGS holder, there were no auction records for this specific coin in the last decade and the consignor had been actively buying key date quarter eagles during the 1999-2000 era and it was likely that he had purchased it back then.

The next step for me was to view the coin in person and I travelled to Dallas a few weeks before the sale to look at the lots. I liked the 1855-D quite a bit. It had attractive medium to deep reddish-gold color, a nice planchet and I thought it was a high end example of a date that is seldom found with good eye appeal. I called the client the next day and reported the good news.

We then needed to determine the coin’s value. My first reaction was to go to Heritage’s auction archives and look to see what the last couple of PCGS AU55 examples had brought. Here’s what I discovered:

In February 2009, a PCGS AU55 had sold for $12,650. The only other relevant record for a PCGS AU55 was in June 2007 when an example brought $14,375. Trends for this date in AU55 is $27,500 which I told the client I thought was on the high side but I also mentioned that I thought the prior two auction prices seemed very low.

My next step was to go back to the two Heritage sales that the 1855-D quarter eagles had appeared and read my viewing notes. I first went to the February 2009 catalog. According to my notes, I thought that the 1855-D in that sale was “recolored with a large obverse flaw at 12:00.” Given the fact that I had scratched a large “X” through the photo and wrote “YUCK” next to it, I assumed I wasn’t crazy about the coin. Then, I checked the June 2007 sale. Voila! It was the same coin and my reaction was equally as harsh.

Just for grins, I also checked the Heritage January 2006 catalog where there was another 1855-D quarter eagle in PCGS AU55. This one had sold for $18,975 and, guess what, it was the same coin. So not only had this coin dropped in price from close to $19,000 to just over $12,000 it also meant that the PCGS population of nine coins in this grade was probably inflated as well.

My client was interested in this information but he was even more interested in what I told him next. According to my notes, the North Georgia coin had brought $32,200 all the way back in 1999. Even more interesting was the fact that this coin was graded the same ten years ago, meaning that it hadn’t magically gradeflated from, say, an AU50 to an AU55 as have so many branch mint gold coins.

As I stated earlier, the crux of the issue was what to pay for this coin. Based solely on the auction records cited above, I would have stated in the $13,000-16,000 range. But as I just explained, these records were misleading because they all represented one coin and this specific coin is probably the world’s worst PCGS AU55 1855-D quarter eagle.

In the end, we wound-up purchasing the coin for $23,000. Compared to the $12,650 that the last 1855-D quarter eagle in PCGS AU55 this seems like a high price. But I don’t think it is. What the auction records didn’t explain was that the 1855-D is an extremely rare coin in properly graded AU55, it is essentially unavailable any finer (PCGS has graded just three above AU55) and a high end coin with great eye appeal for the issue and a good pedigree is worth a premium to a serious collector.

My client hasn’t seen this coin yet (I just shipped it yesterday and he should be looking at it about the time I finish this blog) but assuming he likes it as much as I do, the moral of the story is don’t let previous auction prices keep you from making intelligent numismatic decisions. I give this collector alot of credit for being smart enough to figure much of this out on his own without me having to hold his hand through every step of the process. A good collector gets a great coin to add to his impressive collection. Sometimes, things work out for the best...

A User's Guide to the Inventory Pages on my Website

If you are new to coin collecting or you haven’t spent much time on my website (www.raregoldcoins.com) you might not understand some of the nomenclature that appears on the inventory pages. Let’s take a look at a typical listing and let me guide you through the information and the symbols that appear with each coin. I’m going to choose a coin that is currently for sale in my inventory, an 1844-O eagle graded AU55 by NGC. The listing for this coin appears as follows:

1844-O $10.00 NGC AU55CAC 10/9 91/62 5000 $3,500

This seemingly innocuous line actually contains quite a bit of information and if you are not familiar with the terminology I use, it is going to seem like so much numerical babble.

The first and most obvious fact is that the coin is an 1844-O eagle. All of the coins on my website are listed chronologically and they are listed in denomination order from lowest to highest. Mintmarks are listed in alphabetical order.

The next piece of information is that the coin is graded AU55 by NGC. I only sell coins graded by PCGS or NGC on my website. There are no exceptions to this rule. Ever.

The “CAC” designation means the coin has been sent to CAC and it has been given a green sticker that designates it as being acceptable for the grade by CAC’s standards. If a coin does not have a CAC sticker there are a few possible explanations. It may be right after a coin show and I have not yet sent it to CAC. Or, it may be a coin that I do not feel is necessary to send to CAC. Or, it might be a very expensive coin that I do not feel comfortable mailing to CAC. I like CAC and agree with its standards and objectives but I am not “locked into” selling only CAC coins. I would suggest that if you have a question about why one of my coins isn’t CAC-stickered, ask me. I’m happy to give you an honest answer.

The next two pieces of information have to do with certified populations. In this case, “10/9” means that the population at PCGS for the 1844-O eagle is ten in AU55 and nine in higher grades while NGC has graded ninety-one in this grade and sixty better.

Certified populations are something that I think are important but there is a downside to this level of transparency. For the most part, these numbers are inflated by resubmissions and, in the case of the 1844-O in NGC AU55, they are inflated to the point of irrelevancy.

In many instances, when I disagree with a certified population I will note this in the description of the coin. And whenever possible I will state what I believe to be a more accurate population.

The next number, in this case “5,000” is the price given in the most recent copy of Coin World’s “Coin Values.” This figure is better known to collector as “Trends” and it represents a suggested retail price for a coin. In most cases, I sell coins in the 60-80% range of Trends. There are clear exceptions to this rule and if I think that Trends is too low for a certain issue (a perfect example would be an 1883-O eagle in any grade) I will note this in the description and explain why my price is greater than the Trends valuation.

There are times when I use the designation “Q” for pricing and this refers to the Quarterly Bid listed in the current Coin Dealer Newsletter or Greysheet. This tends to be for coins such as Proof gold where Trends is not used or for higher grade listings (MS64 and up) that are not addressed by Trends.

After this comes my price; in this case $3,500. I try and price coins fairly and I try to price them at levels that discourage excessive negotiation. I never list coins as “POR” (Price On Request). If I have a new coin priced at $3,500 the chances are very good that I will not sell it for $3,000 but I might sell it for a small discount. As with most businesses, I tend to price coins most favorably to repeat clients or to those collectors that I have established a good rapport.

After the price is listed, I have a modifier that explains the status of a coin. If a coin has been in my inventory for two weeks or less it is designated as “new.” If I have had the coin for more than 30 days and I realize the original price might have been too high, I will mark the coin as being “reduced.” If someone has ordered the coin but I have not yet received payment for it, it is designated as being “on hold.” If you see a coin that interests you but it is marked as being on hold, I would suggest you still contact me. From time to time, deals fall through or people who order a coin return it and if you are next in line you might still have a chance to buy it. A coin that has been paid for is marked “sold.” I might leave it out on the website for a few more days to brag or just because it was a cool coin and I think visitors to my website would like to see the photo.

Last but not least is an icon that shows if a coin has an image or not. Generally it takes a day or two for images to get done and they are all shot in house by my talented wife Mary Winter. None of the images are “juiced” or manipulated in Photoshop and I think they give an extremely good representation of what the coin will look like in hand. I will say this: most of my clients tell me that Mary’s images are among the best on the web and that if the coin looks good on the computer screen, it almost always looks even better in person.

I try to be as candid and transparent as possible with my descriptions. If a coin has a noticeable mark on the obverse near star three, I will mention this because I think it is important. My descriptions tend to focus on the appearance of a coin and since originality and color are so important to me, these tend to be described in greater detail than luster or strike.

The bottom line is that I think I’ve created a website that is easy to use and that operates in the fashion that I would like the “ideal site” to if I were a collector. I am always looking to fine tune or improve my site and would welcome your creative input.

Market Musings

It’s a rainy Monday morning here in Portland and the sudden lack of sunshine is leaving me highly unmotivated. To try and shake out the cobwebs, I’m going to touch on a few miscellaneous topics of interest. If I were a syndicated folksy newspaper columnist, I’d call this Monday Mornin’ Market Musings. Lucky for you, I’m not. Sales of the Wexford Collection of Dahlonega Coinage have been excellent with close to $500,000 placed within the first few weeks of being posted on my website. I have noted a few definite trends thus far.

I have been surprised (but not shocked) by the extreme popularity of the key dates in this collection. One of things that was especially nifty about the Wexford coins was that nearly all the key Dahlonega issues were present and, for the most part, they were extremely nice. I could have sold half a dozen examples of the 1861-D gold dollar in PCGS AU55 and probably even more examples of the 1838-D half eagle in PCGS EF45.

While many of the coins were bought by existing clients, I did sell coins to at least two brand new people including one who had never bought a Dahlonega piece.

Two other observations can be gleaned from the first few weeks of sales. The first is that the Dahlonega quarter eagle series is clearly alive and well. I sold a number of expensive, key issues to serious collectors. The second is that gold dollars are a little weaker than I would have expected. I did sell the three most expensive gold dollars in the set but other examples, including a few that I felt would sell quickly, have not yet found new homes.

One last thing. In my rush to get the coins cataloged and imaged and out on the web for a few days before I took them to the ANA show, I didn’t have time to fully research them. It turns out that the 1840-D quarter eagle is the ex: James Stack coin while the 1856-D quarter eagle was formerly in the Bass collection. The new owners of each coin were quickly able to deduce this and I congratulate them on these terrific new additions to their collections.

I’ve been asked by a number of collectors how I think CAC is affecting the coin market. I can’t really speak for areas like Indian Cents or Buffalo Nickels but I think CAC is having a very strong affect on selected areas of the United States gold coin market.

In my experience, CAC is extremely tough on generic issues, especially common date Saint Gaudens double eagles. I have heard of dealers sending groups of 25 or 50 common date Saints in MS65 to CAC and having as few as two or three stickered. Because of this fact, MS65 and better Saints with CAC stickers are currently trading for significant premiums.

Another area that is definitely being affected by CAC is early gold. CDN Bids for early gold are continuing to go up but these bids are posted by John Albanese and are reflective of only CAC quality coins.

What this has done to the early gold market is to make it, effectively, two-tiered. As an example, John’s current bid for an 1812 half eagle in MS62 is $15,000. My guess is that a really nice, CAC-quality MS62 is pretty easy to sell for $15,000-16,000 on a wholesale level and might be worth as much as $17,500-18,500 on a retail level. But a nasty, overgraded MS62 example of the same date is not going to be of interest to John (or any other quality-oriented CAC dealer) at $15,000; it is more likely a coin with a wholesale value of $13,000-14,000. What the challenge for buyers of coins of coins like this is to determine which 1812 half eagle in MS62 is ultimately worth $13,000 and which one is worth $16,000+.

Speaking of early gold, I’ve had a few people ask me lately if they feel that prices on this material are going to continue to rise in the coming year. My answer to this is “yes but with an asterisk.”

As I mentioned above, the early gold market is becoming much more selective; partially on account of CAC. If coins like the aforementioned 1812 half eagle in MS62 are going to continue to bring these strong new price levels (remember, this is an issue that was trading for $8,000-9,000 just three years ago) they have to be very solid for the grade. By this, I don’t mean that every 1812 half eagle in an MS62 has to be an upgrade candidate. But for me (or John Albanese or whoever else) to pay $15,000 for one, it has to have good luster, a lack of significant wear or rub, nice color and a reasonably pleasing overall appearance.

I believe that there are certain areas of the early gold market that have become very pricey. For me to pay $35,000 for a 1799 eagle in MS61, it has got to be a nice coin that I feel is really “new.” If it is recolored, obviously worn, full of unsightly hairlines or covered with goop, I’m out at the current price levels. Same goes with Heraldic Eagle and Capped Bust Left half eagles in AU55 to MS64. If they aren’t really solid, original coins then I have a hard time liking them at current levels.

Conversely, there are other areas of the early gold market that I still like. As you no doubt know, I am a big fan of nearly all early quarter eagles, especially the Draped Bust series of 1821-1827 and the “mini-Fat Heads” of 1829-1834. And despite very strong price advances in recent years, I still feel that the half eagles of 1813-1834 form one of the most interesting and exciting series of United States coins for collectors with large budgets.

Most importantly, the demand for early gold remains strong. In addition to many avid collectors, there are a few coin funds that love early gold and they are continuing to buy it as long as the coins are “all there.”