Two Winds Blowing in the Coin Market

Posted on May 23, 2011 by

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

Filed Under: News

Comments (10)

 

  1. Rick P. says:

    Collecting rare coins is a hobby of the middle class. When the middle class is hurting, luxuries like rare coins suffer. However, when investors fear the destruction of a currency and possible hyperinflation, gold and silver bullion has always been preferred as the most secure choice. In addition, the average new investor can become knowledgeable in bullion choices in a few hours on the internet. Achieving the same level of competency in rare coins involves the intricacies of grading, scarcity, errors, and a variety of other minutea that can takes years to master. See Why You Must Buy Silver Now http://survivalus.blogspot.com/2011/02/why-you-must-buy-silver-now.html

  2. Mark Sonksen says:

    The site you allude to is shadowstats.com, I believe. A good dose of “reality” as opposed to the manure that is continually forked to the general public by the US govt. Even my parents don’t believe any govt issued stats anymore!!
    -Mark

  3. Sunflower says:

    Love the shirt, but your coins are prettier. LOL
    Nice and meaningful message.

  4. Jack Doe says:

    Rick P has a bit of a point in the fact that bullion is a market and medium that most folks can jump on very, very quickly whereas coin collecting takes much longer.

    But, from where I stand, the reason that rare collectable coins seem to be running behind (percentage wise) is because their value as coins is far outstripped by their value as metal. The reason the value of my F-10 ’28 Peace hasn’t moved is it’s worth more as a Peace dollar than as .715ozt of silver. The same holds true for gold dollar enthusiasts. A 1921 St. Gaudens double eagle can fetch up to $30k. It’s still only $1500 in gold, but who would sell at that level? If you’re looking to ride the prescious metals surge, buy bullion. A $50 Gold Eagle is easier to find and buy than a $20 St. Gaudens, and you buy it at or near the price of gold. You aren’t going to get ripped off, because a $50 eagle is a $50 eagle is a $50 eagle. Your pre-33 coin is a different animal and should never be considered on the same level as modern bullion.

  5. Joshua says:

    Rare coins are expensive and more like a hobby. Bullion coins are much better because you buy more silver and gold with less money.

  6. Brian R. says:

    My dentist collects coins and we often talk prices of dental gold and bullion. Most of his silver coin collection is now only worth melt because it is silver melt prices higher than collector values. Buying and selling silver coins is now very easy because you do not have to know much about how rare it is because of how high the value of silver. http://www.highlinefamilydentistry.com/ he is a great dentist in Littleton Colorado, – Brain

  7. Steve Aden says:

    I’ve been considering expanding some of my investment portfolio into rare coins. First, I need a list of target coins, dates, condition, etc. Do you have a target list of coins that would be good investments? Also, are slabbed coins worth the extra cost, or do you recommend raw coins?

  8. Tom "the coin guy" says:

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    Steve:

    David Hall works for PCGS, how do you think he is going to answer your question about wheither or not it is worth it to buy graded coins?

    I’m a coin dealer, and most of my coins are raw, not graded. That being said, it sounds like you are looking to invest in coins, and are not buying them just to collect. If I were you I would stick to graded coins. They would have some advantages for you over the raw coins. You don’t need the experience to tell if a coin had been cleaned, altered, or is a counterfiet. You also have a professional opinion on the grade. Buy an expensive raw coin, and make a mistake on one of those, and you could loose a lot of your investment instantly. Buy a graded coin from one of the top three grading company’s (like PCGS) and they gaurantee those things for you.

    If you are buying to collect I would have a different opinion. It is just up to personal preference whether you like them grade or raw.

    As for your first question, about which coins to buy, I would be interested to hear David’s opinion on that.

  9. Sam Di Giorgio says:

    When it comes to rare coins , , , as you say ” the US dollar is headed for toilet paper status ” Keeping this in mind, May I ask , , who will want rare coins from a toilet paper financial country ? Maybe if you are still fighting the civil war, you may be interested in some confederate money (rare coins) too. At any rate I think we are headed for a cashless society and that means bullion will be valued, everything else is just so much toliet paper ( valued depending if new or used ).

  10. Ger H says:

    One reason why the 1892 – 1954 silver commemoratives may be currently out of favor is the emphasis on either the 50 Piece Type Set or the 144 Piece Mintmark & Variety Set. The 50 coin set is, in a way, just too simple. I like collecting meaningful coins. There just something about the Grant with star, Alabama 2×2 and Missouri 2 star 4 that excites me so that I want to own them AND their plain brothers. Normally to do that, one takes on the challenge of the 144 Piece Mintmark & Variety Set which is a bit of an overkill because so many of the additional coins are common and inexpensive except as condition rarities. Thus, a 55 Specialized Set, which would include both Alabama, Grant and Missouri varieties as well as a single date and a two date Boone and Pilgrim coins, seems to be a more worthwhile concept for advanced collectors to complete rather than the 50 or 144 coin sets.

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