What happens to coin markets when the balance tilts away from investors?
By Jeff Garrett for Numismatic Guaranty Corporation (NGC) ……
My wholesale business covers virtually every aspect of numismatics. This broad range of business gives me a very accurate insight into what is selling and who is doing the buying.
In the last several months, collectors have been the driving force behind most of the market. This activity is reflected in many different ways — auction sales, bourse business, internet sales, coin shop sales, and mass market company promotions.
The rise of collector buying is also reflected in which coins are selling. The market is very quality-sensitive at the moment, and this is due to collectors who understand coins, buying what they like.
The market for “off-quality” coins is very thin, with little or no dealer support in many cases. Just to be clear about what the term “off-quality” means, some explanation is in order.
As an example, MS 65 Morgan silver dollars can look very different from coin to coin. A very small percentage display what can be viewed as having “attractive” toning. Also, a very small percentage of MS 65 Morgan silver dollars are perfectly white, with blazing luster. Most fall somewhere in between. Clearly, collectors prefer either the former or the latter, and not the majority of coins that have minimal eye appeal. Proof of this can be seen clearly in the auction results of most sales.
For years, rare coin dealers have been the market makers for new coins entering the market. Some specialize in a particular series, and others like myself are more broadly focused. In the past, a Morgan silver dollar specialist would make offers on just about any silver dollar offered to them. This approach helped support the market and gave dealers inventory for retail sales.
Dealers are now being forced to react to a collector base that is becoming much more quality-conscious. There is not much use in buying a coin for well below wholesale list prices if there are no ready buyers for the coin. Buying based on price will result in a quick buildup of unsaleable coins.
Years ago, when the market was dominated by investors, quality was less of an issue for unsophisticated buyers. Investors sometimes buy based on hype and marketing. Educated collectors buy coins for many different reasons, and in the long term are the healthiest for the rare coin market. These individuals buy coins based on history, the beauty of the coins, and a love for numismatics. Many also buy for the excitement of building an award-winning registry set collection. The thrill of competition is very compelling for some collectors.
Registry set collecting has become an important driver in today’s market. In my opinion, registry set collecting has replaced the age-old collecting style of filling holes in a coin folder.
The advent of third-party grading changed this when it became impossible to fill your coin album with coins that had been encased in plastic. Today, collectors can fill their “virtual” coin albums, and compete with collectors around the world in the process. It was a brilliant invention, and has been a giant boost to the rare coin market.
As mentioned above, the fact that the market is being dominated by collectors is also evident by which coins are selling, or not selling, at the moment. Generic United States gold coinage has always been a favorite of numismatic investors. The lack of investors in the market is very evident by the extremely low demand for common date United States gold coins.
At the recently completed Long Beach Show, my sales of rare-date gold coins was brisk, to say the least. Branch Mint gold coins were particularly strong, and early gold was hot if you were lucky enough to have any in stock. Common date gold coins were nearly dead in the water.
Quality is also an extremely important factor with collectors. Besides the many collectors looking for attractive coins for the grade, there is also a red-hot demand for finest known examples of nearly every issue. I am nearly always blown away by the prices realized at auction for top population examples when they cross the auction block. This is a true sign of active collector participation.
As a rare coin dealer, I find it difficult to accurately price amazing coins. Sometimes, auctions are the only way to gauge the true demand for these types of coins.
Many of the companies that I wholesale coins to have reported very active sales recently on their websites. Companies with well-run internet operations are seeing a surge of activity in recent months. This is very healthy for the market in general and should help boost prices for attractive coins which collectors are seeking.
The rare coin market is much more difficult to access than in past. A lot of business is done that no one sees or that is reported to the press. I am quite optimistic about the rare coin market, because there are so many more resources for serious collectors than in the past. These tools help to create interest and to educate those who wish to know more about what they are buying.
Make no mistake: Investors will be back. But for now, it’s a collector’s market.
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Questions about the rare coin market? Send them to firstname.lastname@example.org.
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