But it was the overnight lines and the rowdiness of the crowd in Denver on the sale’s opening day, more than anything else, that led to the suspension of physical sales of the coin there and at the two other Mint retail locations.
And that, coupled with the fear of even more pressure placed on security at the World’s Fair of Money, led to the Mint’s (and the ANA’s) decision to halt sales of the gold coin in Rosemont as well.
Many dealers at the show and ANA officials voiced relief that it was over. However, several industry figures involved with the promotion of the coins weren’t happy. Some even downplayed security concerns.
CoinWeek was unable to get anyone directly connected to comment “on the record”.
Follow the Money
A quick breakdown of who gets what should give a clearer picture of what happened and what’s going on.
The Kennedy Gold Proof coin is a ¾ ounce .999 fine gold coin. At current market levels, each coin has a bullion value of $960. This leaves the Mint $280 per coin to cover manufacturing, packaging, and marketing costs. Given these costs, the 3600 total coins sold at Denver, Philadelphia, Washington, and the ANA earned the Mint approximately $1 million gross, before expenses.
As for the dealers involved, prices for the Kennedy Gold Proof with “show-graded” or “first day” labels at the ANA were fetching upwards to $5,000 the week of the show. A week later, the average price had dropped to around $4,000 and it’s been falling ever since.
On eBay last week, NGC coins were bringing close to $3,000, while PCGS coins have been fetching just over $2,800.
We know the coin costs $1240 to purchase from the Mint and $100 to grade. And while we don’t know the actual “cost of acquisition” for each coin (reports have dealers paying stand-ins anywhere from $100 to $500-$600 to buy one; the average is likely under $400 a piece), if the current pricing for “show graded” Kennedy Gold Proofs holds true then there’s at least a $1,100 per coin margin for dealers to take in as profit. At these margins, dealers stand to make upwards of $4 million dollars on the deal.
The grading services are also highly incentivized. The fact that an immediate secondary market can be generated by show-grading coins released at major coin shows is no accident.
The contemporary modern coin market is highly dependent on third party grading, the vaunted MS- and PR-70s, and novelty labels.
If the services charged $100 per coin and graded every coin released at the ANA and the three mint retail sites, then they would’ve earned $360,000 in grading fees.
Assuming the buzz surrounding the gold Proof continues for the next month or two, modern coin dealers and collectors will keep buying Kennedy Gold Proof coins over the course of the next 30 days and submit them to the services using their First Strike or Early Release / First Release programs, which have been wildly popular since their introduction in 2005.
The certified populations of coins in First Strike / Early Release holders tend to mirror that of the general population, yet the market’s support for these programs demonstrates a level of trust in the certification services’ willingness and ability to offer a transparent and meaningful product.
After the First Strike / Early Release Window closes, the Kennedy Gold Proof (if still profitable) will receive a panoply of novelty labels–all geared towards clients wishing to differentiate their stock from that of their competitors.
And all the while, the Mint will continue to offer the coin in a handsome wooden display box for $1240. For collectors, this will probably be the lowest price a Kennedy Gold Proof will sell for during its production window.
ANA Show-Graded Coins
The reason for the long lines, the surrogate buying, and the instantaneously lucrative secondary market is obvious: manufactured scarcity.
Dealers are banking on the coin’s limited distribution in the first week to create buzz and demand. That the grading services are eager to differentiate these coins from the general release underscores that dealers who secured product could market the coins as being more valuable than Kennedy Gold Proofs purchased directly from the Mint.
This requires not only the development of limited-edition labels, but also confirmation that the coins are actually different. So to generate this difference, the grading services have created special designations.
NGC offers five labels:
- First Day – Chicago ANA
- ANA Inaugural Release (for coins sold in Chicago)
- First Day – Denver
- First Day – Philadelphia
- First Day – Washington, D.C.
PCGS created individual labels for the first six coins sold at the ANA (which were bought by Lipton and Hendrickson). The company also made a special First Strike label (Label #118) that includes “Chicago 2014”, and first day labels for each of the three retail locations. We haven’t seen those last three yet so we don’t know their exact wording, but CoinFacts calls them “First Day of Issue-Denver”, etc.
ANACS, which didn’t grade coins at the show but did accept submissions, also created a show label. It reads: “Chicago Convention Limited Edition”.
Keeping this accounting of show labels in mind (and remember, we also know how many coins were issued based on numbers provided by the United States Mint), if one takes the label designations at face value, then the numbers don’t add up.
* NGC data supplied by Max Spiegel at NGC; ANACS data supplied by Paul DeFelice at ANACS; PCGS data supplied by PCGS CoinFacts. NGC ANA data combines NGC’s ANA 1st day labels and generic ANA labels.
So, what happened?
The services had to have accepted more coins at the show than were sold there, so at least some portion of the coins in “ANA” holders were brought in by dealers from Denver, Philadelphia, and Washington.
NGC required submitters to provide an original copy of their receipt to prove that the coin was sold at the ANA. Dealers at the ANA show reported this and NGC representatives verified that every Kennedy Gold Proof that they accepted for their show label program had to come with an original receipt, which they inspected, stamped and dated. NGC says this was done to prevent submitters from gaming the system and use the same receipt for more than one coin.
NGC also says that while they did certify first day issues from the three Mint retail locations, they did not accept coins from the second and third days of the sale for special label inserts. Dealers are encouraged to submit those coins to the NGC “First Release” or “Early Release” programs. NGC’s current combined population report for coins in their two ANA show labels currently sits at 1136 coins.
ANACS also accepted coins and verifying that they were from the Chicago ANA World’s Fair of Money. ANACS isn’t a major player in the show-grading arena, but Paul DeFelice, ANACS Vice President of Client Relations and Marketing, did confirm with CoinWeek that ANACS accepted 30 coins at the show–including an order of about 14 coins offered earlier this week on the Home Shopping Network.
PCGS also accepted coins at the ANA Show, and by the numbers, received the second most Kennedy Gold Proofs of any of the grading services (behind NGC). PCGS’ population report for coins in their “Chicago August 2014” label currently sits at 947 coins.
What’s unusual is that when you add the total population of all three firms’ ANA labeled coins, the total number of coins graded exceeds (by a wide margin) the number of coins issued at the World’s Fair of Money. The total number of coins issued by the Mint was 1500. The total number of coins in “ANA” holders is 2113.
To figure out how this could be, given that NGC and ANACS both say that they required receipts, we reached out to PCGS President Don Willis, presented him the numbers and asked for help in understanding what coins PCGS had graded and how they were handled.
His response is reproduced in full below:
This is an interesting situation. Without going into too many specifics about our marketing programs we can confirm the following.
1) All JFK coins graded by PCGS in Chicago were submitted in Chicago. We believe all these coins were sold in Chicago but we can guarantee only that they were submitted in Chicago. We did not require a proof of purchase. This program was announced by PCGS weeks before the ANA. Emails were sent to both dealers and collectors and announcements were run on our website.
2) Any JFK coins that received a First Day of Issue label, regardless of the mint, had to adhere to very strict chain of custody requirements. We can guarantee that those coins were sold in those locations on that day.
3) There continue to be JFK labels available for coins submitted to our office. This includes both First Strike and non-First strike labels. Standard First Strike rules apply which are described on our website.
Our intention with the JFK coin has always been to offer a variety of programs and service to satisfy the diverse requirements and many requests of our customers and the collecting public. We believe we have done that.
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