Archive for May, 2011

Two Winds Blowing in the Coin Market

Posted on May 23, 2011 by 10 Comments

I’m frequently asked the following questions (actually it’s really just one question expressed several different ways)…

“Gold went way up, but my graded gold coins haven’t went up. Why are my gold coins not going up when gold is going up so much?”

“Gold has gone up a lot more than my rare coins. Should I sell all my rare coins and just buy gold?”

“If the coin market is so hot, why haven’t my coins increased in value?”

The bottom line question is why is it that gold and silver done so well, while rare coins (some of them at least) haven’t moved at all?

Two part answer in my opinion. First, in past mega-moves for gold and silver, bullion went first followed by generic gold and silver coins, then finally rarer coins. Seems rare coins lag bullion movements, or have in the past, and need a little time to “catch up.”

Second, and most importantly, we have two winds blowing strong in the coin market, one blowing with us and one blowing against us. On the positive side (at least positive for us, but maybe not so positive for our grand kids) is the tremendous surge in gold and silver prices, driven by the deterioration in value of the U.S. dollar. This is very bullish for all coins, both generic and rare. And it’s a very strong wind at our back. The U.S. dollar is headed (eventually) for toilet paper status. The world knows this and is acting accordingly. And this deterioration of the value of the U.S. dollar is systemic and I for one see nothing on the horizon to stop this extremely long term trend. People, we have fiat money in the USA now and it seems like the fate of the dollar is sealed. The emperor has no clothes!

The negative wind blowing against us is the crappy economy. I have people call me often and say things like, “I can’t buy any coins now, my business is down 70% in the past two years.” I know some pretty intelligent, talented people that have been out of work for as long as two years. The 8000 square foot office space next to ours at PCGS (nice building in the Orange County Airport area business section of town) has been vacant for two years. The economy sucks and a lot of people who normally buy can’t now either can’t or won’t.

So, with two market forces pulling in opposite directions we have a mixed market. Some prices are rising and some are falling. What’s rising? What’s hot so-to-speak? All of the semi-numismatic bullion type coins are being forced higher by the bullion prices. $20 Saints in lower grades and circulated Morgan and Peace dollars aren’t going to sell below melt value! So their prices have gone up a lot in mirror movement to the bullion markets. And some really rare coins are also performing well…rare date circulated 19th century coins, super high end of the grading scale coins, and the Ultra Rarities (1913 Liberty nickels, 1804 dollars, etc.) On the negative side price movement wise are many modern coins (post-1964 coins, especially post-1980 coins) and a lot of the standard numismatic fare. For example, 1892-1954 silver commemoratives keep drifting lower in price even though they are at historically very cheap levels and they are great collector coins.

So what about the future? Depends on the bullion markets, the strength (or lack of) of the U.S. dollar, the real inflation rate (not the bogus government reported rate, but the real world rate), and the economy. It seems to me that at least some of those factors will remain bullish, and if they all turn bullish at once…then the entire coin market should do really well and some parts should soar.

As for me, I think everyone should have some gold and silver…and also some good rare coins. That’s what I do.

David Hall

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