By Louis Golino, special to CoinWeek …..
Today’s Coin Market
There is no doubt we are in the midst of a very bullish coin and bullion market today in the United States.
Since the start of the pandemic the demand for and premiums on physical precious metals, especially silver and gold, have reached some of the highest levels seen in decades with mints such as our own struggling to secure sufficient planchets to produce all its various coins.
Prices for major rarities continue to hit new records such as the June sale of the only legal-to-own 1933 Double Eagle for $18.9 million, almost double the prior record set in 2013 for the finest known 1794 silver dollar. There are numerous other auctions where some of the scarcest coins reached either very strong prices or new records such as the finest Brasher Doubloon that sold for $9,360,000 in January.
Also, it is not just American rarities that are fetching amazing sums today. It’s also ancient coins like the gold aureus (EID MAR) of Brutus or the Islamic medieval Umayyad from 723.
Coin shows have finally begun to return, with activity at ones like the August ANA World’s Fair of Money and the recent Summer FUN show (the largest in its history) notably strong among dealers and retail sales, and dealers continue to report having difficulty sourcing quality material.
Prices for even common date silver dollars are at the highest levels in years partly because of interest in the 2021 Morgan and Peace dollars being issued to mark the centennial of the final Morgan in 1921 and the first Peace the same year. Better dates are doing even better, and the major rarities in this field are also setting records.
Limited edition, high-demand modern U.S. Mint products like those new silver dollars and the collector versions of the new, Type 2 American Silver and Gold Eagles continue to sell out instantly and fetch strong premiums in the aftermarket. For example, the 2021-CC privy-marked silver dollars that were $85 from the Mint have been selling in the $500 range in recent eBay sales. That reflects the way that coin was dispersed into strong hands and the enduring allure of the Carson City Mint even though the pieces were not made there (otherwise the 2021-O privy dollar would sell for as much).
Finally, while not as widely known or mentioned, prices for modern world coins have been unusually strong too. For example, the 2021 completer coin in the Royal Mint’s popular Queen’s Beasts series that features a depiction of all 10 beasts together was released in multiple formats with all selling out very quickly. The 1-ounce silver Proof version that was a little over the equivalent of $100 from the mint is now bringing about $500 and more for graded 70s.
And they are countless other modern world issues also doing very well, including premium bullion releases selling for double or more their melt value.
With a market this hot seemingly in every area of collecting and bullion, one has to wonder whether this level of strength can continue to be maintained, or whether there is a risk of hitting a peak and then declining, especially if the economic recovery falters perhaps because of rising inflation continuing longer than anticipated by the Federal Reserve, or because of the spread of the Delta (formerly the Indian) variant of COVID-19.
To help gauge how sustainable today’s coin boom really is, it may be instructive to reexamine the major boom of the 1980s when a number of similar trends existed.
Bullion was setting all-time highs (just as gold did early last year). Concerns about inflation then as now led many to seek hard assets to protect their wealth. Prices for common coins like MS65 Morgan dollars reached their highest levels ever.
And among other aspects to the boom, coins were receiving a lot more mainstream attention than usual because of the strong market and the launch of third-party grading–not to mention the debut of the first modern American bullion coins, American Silver and Gold Eagles in 1986–all of which spurred Wall Street to get involved in the rare coin business, creating investment funds in rare coins and pushing up prices for collector coins (in many cases, to astronomical levels).
As those who were in the market then or are familiar with how the market unfolded, things did not end well.
Gold and silver spot values dropped sharply just a couple of months after hitting new records, and prices for most of those common coins in high grades also came crashing down. By 1989, as reported in an excellent piece, “Record-Setting Year: The Boom of 1989”, by Alexander Hall in the April 2018 Numismatist, MS65 Walkers went for $400, similar grade Morgans for almost $600, and a Saint-Gaudens double eagle in the same grade was $4,000, or about 10 times then-spot of $400 an ounce.
Today, these coins sell for a fraction of those levels.
The areas that did much better was genuinely scarce, properly graded classic U.S. coins like MS65 1909-S VDB Lincoln cents, 1893-S Morgans, or 1921 double eagles – all coins that remain in demand — whose values have continued to increase since that period and are today worth many multiples of their 1989 levels, as Hall reported in his piece.
Crazy Prices and Artificial Scarcity
In terms of prices going crazy for more common material, one troubling trend today in that regard is the money some collectors will pay for graded coins in special labels with one of the more absurd ones being “advance release”, which are coins that dealers who are part of the mint’s bulk purchase program can obtain before sales commence for everyone else. For example, a PF70 example of the new 2021-S American Silver Eagle Proof coin that might bring $200 otherwise can sell for $500 if it qualifies for advance release designation.
Then there is the U.S. Mint’s recent decision to market the final Type 1 American Silver and Gold Eagle 1-ounce coins struck and the first of the Type 2 versions of those coins as well as special sets of them that were personally struck by Mint Director David Ryder. This unusual and controversial move will surely bring plenty of revenue for the Mint but may have negative long-term consequences for the hobby.
It would be one thing if the final and first coins struck had something different than the other coins apart from when they were made such as a special privy or mint mark or something else. But they are identical to all the millions of other examples. And marketing them as being special is likely to make newer collectors think such coins are scarce. While the market may currently value them as worth more, it is questionable whether that will continue to be the case.
Coins struck by the Mint Director do arguably have special value, but there is little doubt they will be sold for very high amounts that only dealers and wealthy collectors can afford, further reinforcing the belief among average collectors that their business does not matter to the Mint as much as that of “the big boys” and those who can spend thousands on one coin and pushing many either out of the hobby or towards other collecting areas.
In fact, those director-struck sets harken back to the 18th and 19th century when the Mint frequently struck coins for wealthy collectors, VIPs, and friends of the Mint Director.
Recent U.S. Mint coins in special packaging are another area that may be troubling for the health of the hobby such as the recent two-coin American Gold Eagle set of Type 1 and Type 2 tenth-ounce coins. The appeal of the two designs together is easy to understand, but since the same coins were sold individually and in four-coin gold Proof sets, it is hard to understand why the market values the set’s packaging for hundreds of dollars over the value of the two coins even on the wholesale market for now.
As for Wall Street, the closest trend today that has some resemblance to that of the 1980s is the recent acquisition of Collectors Universe, the parent company of PCGS, by a private investor group and the parent company of NGC, Certified Collectibles Group, by Blackstone, the world’s largest private equity fund and the world’s largest corporate landlord.
In both cases, those acquisitions were related to the rise in the market for collectibles of all kinds in recent years, which was further boosted during the pandemic by the extra free time many had and the increased disposable income of those who retained their jobs but had reduced expenses during lockdowns.
That seems very different from the situation in the 1980s that was marked by speculative coin funds and people with little knowledge of the industry pouring large amounts of money into coins, made possible by a combination of what has been dubbed the “irrational exuberance” of Wall Street–especially in investment banking in the 1980s–and also by those who bought silver and gold when they were inexpensive and sold in early 1980.
Dealers who did that invested plenty of those profits in collectible coins, but the excessive amount of speculation and promotion of common coins resulted in large inventories that produced a supply glut. When dealers began to start losing money as prices crashed by the start of the 1990s, many were forced out of the industry.
Comparing the Booms
Only time will tell how today’s boom continues and when it will end or settle down.
But overall, while there are some interesting parallels between the markets of today and the 1980s–such as very frothy prices for a lot of coins that are not especially scarce or hard to obtain–there is good reason to think that the current bullish market is more sustainable and less prone to crashing across the board.
On the other hand, price corrections are healthy, just as with stocks.
There is no way to know what gold and other precious metals will sell for in the future, but demand for physical metal today exists for reasons that go far beyond the disruptions to coin minting due to the pandemic and mostly relate to longer-term concerns about the future of the American economy. These reasons include, of course, inflation, the levels of debt and money supply that exist, and the fact that interest rates can’t stay so low for much longer. Among others.
Recently premiums on the new Type 2 silver eagles have begun to return to more typical levels and those coins can be had for about $30 each compared to about $40 not long ago, but demand for them appears to remain strong.
As for rare coin funds like those of the 1980s, as Jeff Garrett noted recently, “there are at least a few funds with considerable capital devoted to trading rare coins from an investment standpoint” today.
But today’s rare coin market is also much bigger in participants and dollar terms. And while brick and motor shops have shrunk in number, there are more large coin companies than ever. The market is also much more transparent because of the continued expansion of third-party grading and the dissemination of knowledge made possible by the internet, making serious collectors today much more knowledgeable about coins.
It’s hard to estimate the exact size of the market in dollar terms, as Garett explained, but there is no doubt a larger number of serious collectors are bidding on scarce coins at auctions today with firms like Heritage having much larger client bases than existed 30 or 40 years ago.
Ian Russell, President of the auction firm GreatCollections, which recently spent $24 million to purchase three major classic American rarities for clients, added:
“I started in the collectibles industry in the late 1990s, so I did not learn firsthand about the boom and decline. I’ve definitely discussed it with a lot of people who did go through it, and I think the main difference today is how spread out the market is. Back in the 1980s and early ’90s, the market came down to a few dozen major coin dealers transacting at major coin shows. If they had run out of money to buy coins, then there was a big dropoff. Today, the market is spread out with the internet, and it’s not just a few dozen major coin dealers. There are hundreds of major dealers, and a huge number of collectors directly buying in the market. I just think the depth of the market is so much more robust in 2021 compared to in the past.”
And this points to perhaps the key lesson of the 1980s boom and bust in coins, which is that over time the market does better when the Mint and dealers increase the number of customers they serve rather than the amount of money individual buyers spend and when they market themselves more at a broad base of collectors who slowly build their collections, increase their level of knowledge about the hobby, and try to avoid short-term fads.
This is especially true for the U.S. Mint, whose mandate is to be self-sustaining and ensure broad access to its coins by the American people, not to earn as much as it can from sales of its collector and bullion coins.
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Louis Golino is an award-winning numismatic journalist and writer, specializing primarily in modern U.S. and world coins. His work has appeared in CoinWeek since 2011. He also currently writes regular features for Coin World, The Numismatist, and CoinUpdate.com, and has been published in Numismatic News, COINage, and FUNTopics, among other coin publications. He has also been widely published on international political, military, and economic issues.
His column “The Coin Analyst”, special to CoinWeek, won the 2021 Numismatic Literary Guild (NLG) Award for Best Numismatic Column: United States Coins – Modern. In 2015, “The Coin Analyst” received an NLG award for Best Website Column. In 2017, he received an NLG award for Best Article in a Non-Numismatic Publication with his piece, “Liberty Centennial Designs”.
In October 2018, he received a literary award from the Pennsylvania Association of Numismatists (PAN) for his 2017 article, “Lady Liberty: America’s Enduring Numismatic Motif” that appeared in The Clarion.