Collectors are driving the market, and they prefer coins with eye appeal
By Jeff Garrett for Numismatic Guaranty Corporation (NGC) ……
The rare coin market evolves over time, and many series come and go out of fashion.
In the 1960s, BU Rolls and Proof Sets were all the rage. In the ’80s, generic gold coins dominated the interests of many collectors and dealers. The ’90s and onward seemed to focus progressively more toward rarity. This has culminated in an extreme explosion in price at the very top end of the market. Multi-million-dollar coin sales are not the headline-grabbing news they once were.
This has left nearly everyone wondering what the next predominant trend will be in the rare coin market. This can be a confusing prospect, as the market sends a barrage of mixed messages. When a classic, old-time collection of fresh material is offered to the market, chances are there will be new auction records set. This is contrasted sharply by the disappointing sales results seen for many coins in just about any sale held in recent months.
Many of my fellow professionals discuss the market for rare coins on a regular basis since it’s in our best interest to understand what is in demand. If we buy coins offered solely on price without regard for demand, our working capital will be quickly depleted. This is not as unusual as you may think. There are plenty of dealers and collectors holding coins that would be hard to sell and would only be saleable at sharp discounts.
What’s going on?, you may ask. Most professionals in the know can tell you that the current market is focused on one thing: quality. The market has become obsessed with eye-appeal and quality. You can have a dozen Proof Morgan Dollars in your showcase, and if the coins are unattractive, they will sit there with little interest from dealers or collectors. A coin with great color and crisp surfaces will fly off the shelf. There is much more emphasis on quality than on price.
This phenomenon is probably the result of a collector-based market that seems to be in control at the moment. Collectors in general are much more discriminating than investors. Investors do not understand the subtle differences in coins of the same grade. They are more interested in whatever seems to be hot or they will flood into the market based on what large marketing companies are promoting.
In my opinion, collectors in the last few years have become much more sophisticated, demanding quality with less regard to price. This can be seen in many of the auction results reported lately.
The drive for quality has been unfolding for several years. NGC recognized the need to note extraordinary quality when they introduced the “Star” (★) designation for coins with exceptional eye-appeal. Later, “Plus” (+) grading was introduced for coins that were above average for the grade, but not quite at the next level. A coin that has been Plus-graded with the Star designation is probably the ultimate premium quality coin.
These coins are currently in high demand, and prices collectors are willing to pay for them usually exceed most expectations.
For years, most numismatic professionals have preached the virtues of buying the best quality you can afford. This advice has paid off handsomely for those who chose to be a fussy collector. Currently, however, the price premium for above-average coins is historically high. I still think collectors should pay careful attention to quality but avoid paying astronomical premiums that some coins seem to be selling for at the moment. There are many bargains to be had for nice coins that others have not deemed to be extraordinary.
The hardest thing for most collectors to understand is what great eye appeal really means. This is truly subjective, and what seems great to one person may seem average to another. And don’t forget, some prefer frosty white coins while others insist on original toning.
If you are a serious collector, you owe it to yourself to understand the subtleties of eye appeal. You should examine auction lots and dealer inventories. You may also consider taking one of the advanced grading class offered by the American Numismatic Association.
Numismatic education has also been an important part of being a successful collector. The market’s emphasis on quality now demands that you learn as much as possible about the series you collect. In the long, run you will be well rewarded.
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Questions about the rare coin market? Send them to [email protected].
NGC-Certified Proof Morgan Silver Dollars Currently Available on eBay
I wouldn’t describe the current market dynamics as predominantly collecting driven at all. I agree it appears the buyers of the coins described in this article are not predominantly financial buyers but it sure doesn’t make sense to attribute it to primarily collecting either. This buying isn’t only financial but still almost certainly predominantly so. Hardly anyone would pay what are actually exorbitant or inflated prices for otherwise mostly undistinguished coins unless they expected to recover most, all or even more or their money back.
By any sensible standard, the prices of the highest quality coins described here more often than not are disproportionate to the coin’s merits. Disproportionately, most of these coins exist in near quality by the dozens, hundreds and even thousands but still classified as “rare” under the contrived US collecting standards of today and the recent past.
The best description for the current price level and price structure isn’t increased sophistication but a combination of financial buying and the loosest financial conditions in the history of civilization. There are plenty of sophisticated collectors elsewhere outside the United States but hardly any f them demonstrate the same behavior because the price structure doesn’t require it.