Jim Bisognani: How Are New Highs for Gold Affecting the Coin Market?

Numismatic experts weigh in on the “gold rush” of 2020

 

By Jim BisognaniNGC Weekly Market Report ……
 

Gold trading above $2,000 is truly a significant milestone — one that finds the precious metal enjoying a huge amount of attention in the mainstream media. Many veteran numismatists knew this lofty summit would be achieved at some point, yet now that it is a reality, is there a new playing field and rules? Will this virtually unprecedented demand perhaps drive gold even higher and potentially out of the reach for many would-be collectors? So much excitement and so many questions.

As the COVID-19 pandemic continues to wreak havoc on world economies, the oft-referred-to “safe haven” looks especially attractive. Gold is overwhelmingly the choice of many individuals and institutions seeking to preserve their savings, and they are scooping up gold bars and coins in record volume. For others — specifically the numismatic community — well, it just adds a bit of a higher price tag and another layer to the more bullion-related coins that we have been eyeing for our own collections.

All in all, it is an exciting time and a new horizon for our hobby, and as there are no shows to attend, collectors (and dealers) are flocking to the internet to locate new offerings of gold coins — bullion, semi-numismatic or rare. Of course, an even larger audience is “attending” the many “live” online auctions.

Yet, with the dramatically higher prices, are there traps that the collector should avoid? Just what are the best values for gold coins in this new market?

Soaring Gold Eagles

United States 2017 American Gold Eagle Uncirculated CoinWith gold presently trading in record territory, many gold coins are priced well above what the average collector can readily afford to buy in quantity. So where to start? One series is the wildly popular American Gold Eagle. The dealers whom I have spoken with have confirmed that the demand for NGC MS 69 graded US Gold Eagles is unprecedented. One well-known trader described the demand as “epic!”

As for this component of the market, one wholesaler expanded on one aspect of such dynamic demand: “Many of my clients cannot afford to put together an MS 70 collection of 1/4 ounce ($10) or 1/2 ounce ($25) US Gold Eagles as there are so many coins within this ultimate grade that currently trade in the high four-figure to the low five-figure range. So, my customers target MS 69s because the price generally drops off considerably there.”

My wise trader friend explained, “If they are putting together an all MS 69 set then that is where the demand is targeted for them to complete the series within that grade.”

This trader went on to advise that demand and rising gold spot have been the catalyst in elevating retail prices for many Gold Eagles graded MS 69. He said, “The demand for MS 69 $25 Gold Eagles is real and powerful. As a result, in numerous instances, I find MS 69s are pulling very close to the current pricing of many MS 70s, which makes those MS 70s look awfully appealing!”

There is a downside here with such overpowering demand. Many “middlemen” that I have talked to share that they have all but been eliminated from the equation because major companies are finding it so easy to retail themselves in this market.

How Are Dealers Experiencing the New Market?

Still considering the broader scope, and wondering just what mainstream dealers and traders think about this new golden horizon, yours truly decided to poll a few numismatic notables for their assessments.

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In your opinion, how does higher gold ($2,000+) affect the collectibles market?

 

Bob GreenPresident, Park Avenue Numismatics

I think that it’s mostly a psychological play for most collectors. It adds excitement for people who are looking to hedge their other more typical investments. It certainly gets dealers excited, especially those who are dealing in generic gold coins, as it pushes a wider spread and premium on coins that had basically eroded over the last few years due to quality and demand.

Ian RussellPresident, Great Collections

I think gold above $2,000 has lifted interest in all rare coins, whether it be something bullion-related, like a $20 Saint in MS 64, or a rare Lincoln Cent. There is definitely more interest across the board, and more interest equates to higher prices. It’s really lifted the whole coin market.

John BrushPresident, David Lawrence Rare Coins

When there’s positive news like gold hitting all-time highs, it can easily resurrect interest in former collectors who will look over their collection and may choose to sell into the rise, creating fresh opportunity for active collectors and dealers.

Kevin LiptonRare Coins, Inc.

We are in a bull market in regard to all bullion-related products such as Gold and Silver Eagles and generic gold. This “trickles down” to a much stronger market for numismatic collector coins as well.
 

How is high gold affecting your business?

 

Jeff GarrettFounder, Mid-American Rare Coin Galleries

We are seeing a lot of people with gold coins come into the office to take advantage of the record gold prices. There has also been an increase of investors/collectors wanting to buy $20 gold coins. Some have bought a few common issues, and then they move to better dates. It’s a great opportunity to create new long-term collectors.

Bob Green

As someone who deals primarily in classic US coins, we don’t see the big swings in our business that gold brings. Of course, it has brought about some interest in generic gold and in some of the certified modern material that we carry because people are looking for a way to “play” in the market, but things for us are still fairly stable. Once again, I think that it affects the larger gold traders, bullion houses, and local shops that deal in material that comes in over the counter thanks to the excitement.

Ian Russell

We’re seeing clients contacting us again to bid or sell that haven’t looked at coins for quite a few years (for a variety of reasons: some got busy with other things, some completed their collections and are tempted to sell at the strong prices, others are taking money out of the stock market to buy coins, etc.)

John Brush

Our business has seen its share of hot markets and soft markets. Lately, the gold bugs have been quite active buying generic gold and precious metals. So, our business has picked up quite a bit. We welcome new buyers as well as many old clients adding to their collections.

Kevin Lipton

We will have already had our record year in business before the month of August ends!
 

Are your clients’ attitudes changing because of the change in the price of gold?

 

Jeff Garrett

As mentioned above, some want to sell, and others are buying. The attitude change is that both are active and creating business. I think the recent drop this week was the result of profit-taking and some panic by speculators.

Bob Green

I’m probably the polar opposite of my colleagues in my reply to this question, but I don’t think that the change in gold’s price affected my clients’ attitudes. We’ve seen a huge increase in attention from collectors over the past few months as people are looking to put money into hobbies and physical assets right now, so we’ve already seen the more aggressive attitudes.

The shift in the price of gold has caused the smart folks to take advantage of it and sell as gold has been jumping. We’ve always been a fan of the folks who sell when gold is high and put the money into classic coins. You can go back and forth with this habit if you pay close attention, but buying on the dips and selling on the ups is what makes the most sense for us right now.

Ian Russell

For the positive — our auctions have been extremely strong since the pandemic started, helped by some amazing collections we’ve handled. One was the Catskill Collection that has realized over $5 million so far (and we still have some special coins to go). We have a few special coins in the pipeline as well that we’ll be announcing soon.

John Brush

Well, to be honest, we had a hard time selling gold generics at $1,500 to $1,800, but recently we broke out to an all-time high. The same folks who wouldn’t buy before are buying stronger than ever now.

Kevin Lipton

We deal strictly in the wholesale market. My clients are all selling a tremendous amount of gold and silver. The public is once again running to metals due to COVID-19 and what appears to be a stock market with no good reason not to be going down sharply.
 

What are the best “values” in gold at these levels?

 

Jeff Garrett

I still recommend American Gold Eagles for those buying pure bullion. They are easy to understand and easy to buy and sell. Another bargain in my opinion is the US gold commemoratives struck by the United States Mint from the 1980s onward. They can be bought around melt price and are interesting. Another bargain is backdated US Gold Eagles in all denominations starting in 1986. Some are quite scarce.

Bob Green

The premiums on generic gold ($10s and $20s) are certainly higher than they were, so while we thought that those were the best values early in the year, I would stay away until the demand drops a bit. Frankly, I think that classic gold coins are a far better value right now than anything that fluctuates based on the price of gold. These are far more stable and as collectibles continue to strengthen in popularity, buying high-quality, rare coins seem to be fantastic opportunities.

If you can find and afford real rarities, I think that the six-figure and seven-figure coins are really the best values right now. There’s been a lot of excitement in the below-$50,000 price range, but the expensive pieces are going for far better values than they were a few years ago. One coin that you can never find when you’re looking for one, but seems to be available now, are $4 Stellas. I think it’s a good opportunity to sit on one of these for a while until the market clears itself up over the next few months.

John Brush

Well, that all depends on perspective. Rare coins with larger numismatic premiums, such as a 1932 $20 Saint-Gaudens in MS 65 at $100,000, haven’t gone up or down so significantly, but more are coming onto the market for sale and selling for good money when they do. I think that owning blocks of generic gold $20 Saint-Gaudens in MS 61 to MS 63 is a safe bet, with prices and premiums fair and realistic. In MS 64 to MS 65, the premiums are a bit high, and I’ve seen this supply versus demand reverse itself as fast as it came, so I’d stick with prices tied closer to the precious metal.

Kevin Lipton

I like any products that are scarce or even rare that can be bought at similar premiums to bullion. This gives you a bit of a hedge in case gold goes down. Often, rare modern gold coins are available at the same premium as bullion.

What is your prognostication for gold for the rest of 2020?

 

Jeff Garrett

I think a trading range of $1,800 to $2,000. It would take some unexpected bad news for it to go much higher this year in my opinion. That being said, there are a lot of things that can go wrong at the moment. The demand for more government aid that can only be provided by printing more money is reaching a boiling point. I still believe in gold as the ultimate safety net.

Bob Green

I’ve agreed with my father that gold is certainly worth more than what the market reflects. It’s so limited in quantity, but it seems to have been artificially repressed for years. I wouldn’t be shocked at $2,500 gold this year. If it hit $3,000, I’d be a bit more surprised, but I suspect that it will continue to rise — at least until the election. All bets are off in November…

John Brush

I think even with the recent pullback from the high of $2,085 to $1,935 (expected profit-taking) that gold will end the year above $2,000 and probably closer to the $2,250 range.

Kevin Lipton

I am no economist; however, the world is a mess, and the amount of uncertainty across the planet makes one conclude that gold is going to remain strong.

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Thanks again for the timely input from my numismatic brethren

Until next time, happy collecting!
 

Jim Bisognani is an NGC Price Guide Analyst having previously served for many years as an analyst and writer for another major price guide. He has written extensively on US coin market trends and values.

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