NumisMedia Market Report: Where Do We Go From Here?

Posted: 10/9/2008

A guest article from NumisMedia

The current economy continues to be the main focus for most Americans. Bank failures and bailouts, an underachieving stock market with growing fears of total crash, talks of recession, and a political race in the foreground has most of us struggling to maintain a balance in this current financial atmosphere. Yet, this all may be playing right into the hands of the coin market; the potential for future growth in numismatics could be unparalleled.

This past week has seen a major increase in the amount of coins sold by dealers across the country. Many Americans have lost much of their trust in banks and the stock market, so many are buying the only thing they believe that will retain value – gold and silver. Whether they are buying rare coins or bullion, there is a tremendous amount of money coming into our industry. Premiums have increased on gold and silver bullion because of this current demand. The quantity of coins coming into most coin shops has dwindled to but a small percentage of what dealers need for their customers, forcing many to venture into the open market to fill these needs. With demand this strong premiums may continue to rise.

Collectors were out in force at the just completed Long Beach Expo, and whether they were buying bullion coins or nice collector coins, they were spending money. Dealers were satisfied with the amount of show activity, however, like most concerned Americans, they are not sure what will happen next. Coin dealers may be in the enviable position of “being in the right place at the right time.” Dealers must realize that large inventories will attract collectors and investors as they scramble to numismatics.

Besides bullion coins, demand remains very solid for Early Bust coins. Collectors are focusing on quality for the grade and the number of coins within a specific grade. It boils down to how many coins are available and what the future holds for increased demand and potential growth. When you take a coin like a 1796 Draped Bust Half Dollar with 15 Stars, which has a mintage of only 3918 coins, it does not take a lot of demand to spur a price increase. There have been approximately 72 coins certified by NGC and PCGS in all grades. Since the beginning of 2008, this coin has increased from $59,380 FMV to $84,380 in Very Fine 20. In Extra Fine, it has jumped from $91,880 to $118,130. The grading services have only certified four coins in Very Fine and five in Extra Fine. There are only 20 coins graded higher and most numismatists assume there is some overlap because of resubmissions. The worst case scenario is that there are only 29 coins graded in Very Fine and higher. This is truly a rare coin and the potential for growth is outstanding. Add to this the fact that many of these coins are in strong collector hands and are not available.

Not all coins can have this kind of potential. Yet, this is the typical strategy that many astute numismatists use in today’s market. Seated coins are on the radar and you might be surprised by how many coins have high original mintages yet very low populations of certified coins. The 1857 O Seated Quarter has an original mintage of 1,180,000, yet only 110 coins have been certified in all grades. Twelve have been graded MS63 and there are only six coins in higher grades. The FMV was $3,690 in MS63 in January of this year and it is now $4,470; the MS64 had an FMV of $7,060 in January and now enjoys an FMV of $7,410. Not much of an increase for a coin with fewer than six coins certified. We would seriously doubt that more than one or two coins have traded hands since the first of this year in MS63 and higher. What do you think would happen if someone wanted to purchase all 18 coins in MS63 and higher grades? What do you think the FMV will be a year from now if someone aggressively pursued these coins? This is the type of strategy that has been used by dealers for many years. Only the last 5 years or so have collectors and investors adopted this strategy.

The Heritage Galleries Auction was a tremendous success; with over $35 million in prices realized from all of its sessions, it was their best Long Beach ever. There were so many important highlights that it was difficult to choose a few select examples. There was a pair of 1915 S Panama Pacific $50 Gold coins graded by NGC; both were MS64. The Round brought $103,500 and the Octagonal realized $92,000. A 1796 Draped Bust Half Dollar 15 Stars sold for $86,250 in PCGS VF25, while an extremely rare 1839 O Bust Half Dollar in NGC PR63 realized $149,500. The following highlights are significant results showing how aggressive buyers are in today’s market. For complete prices realized please visit the Heritage website.

Denomination   Grade   Price Realized
1849 Seated Half Dollar   NGC PR66   $86,250
1879 $4 Flowing Hair   NGC PR65 Cam   $204,125
1796 $10 Gold   NGC AU55   $80,500
1907 $10 Gold Wire Rim   PCGS MS65   $80,500
1871 CC $20 Gold   NGC AU58   $65,600
1875 CC $20 Gold   NGC MS62   $10,350
1877 CC $20 Gold   NGC AU58   $11,500
1927 S $20 Saint   PCGS MS65   $161,000
1929 $20 Saint   PCGS MS66   $184,000

Over the last several years, one of the strongest segments of the coin market has been Twenty Dollar Liberty Gold coins. Although, this is truer for the TI and TII issues than the TIII coins. With gold making such an impact on the coin market, collectors have the opportunity to gain profits not only from the collector side of the coin but also from the value of the bullion. Five years ago, an 1852 $20 Gold had an FMV of $840 in AU50; today that same coin lists FMV at $1,310. This is a fairly common date in the AU grades but begins to get expensive in MS62 and higher. Many of the TI and TII coins fall into the same category. That is, they are somewhat common up to a specific grade and then the populations in the next higher grades fall off precipitously. Again, these higher grade, low population coins are the types that astute collectors have been putting away for several years. That is also why many of these coins have enjoyed such an increase in values over this five-year period. Demand is strong and supplies have dwindled.

The last year has seen a further rise in demand for Carson City coins, especially $20 Gold. They are large coins and the Carson City mint mark has a certain mystic about it that attracts collectors of western memorabilia along with the typical coin collector. The rise in demand has brought some dynamic FMV increases for many dates in nearly all grades. The 1870 CC is the rarest with a mintage of only 3789; there are only 56 coins certified by NGC and PCGS. The highest grade is an NGC AU55 that currently has an FMV of $546,000. Five years ago, we only reported an FMV for the XF grade at $115,690. Today the XF is $306,250 and there are just 12 coins total reported. Not everyone can afford this coin; however, many collectors are sure pursuing all the other CC’s. The 1872 CC was listed at $43,690 in MS61 five years ago; today it is $60,080 and this is the highest reported grade by NGC. The difference in today and five years ago is that many collectors now are willing to pay multiples of the reported FMV when one of these highest graded coins comes onto the market.

Quality has always been the name of the numismatic game; however, today, there are thousands of numismatists willing to place large amounts of money on the finest known coins along with other low population coins because they believe in the future of numismatics. Add to that the many investor types entering our market because of their lack of trust in the other markets which leads them to choose gold and silver over other investment opportunities, there is an abundance of money available for purchasing coins. The spending and attendance at the Long Beach Expo and other recent shows is also a strong indicator of the strength of our current and future market. This could make for a very prosperous last quarter of 2008.

The NumisMedia Market report is available each month in the NGC e-Newsletter

This article is a guest article written by:
 
NumisMedia

The thoughts and opinions in the piece are those of their author and are not necessarily the thoughts of the Certified Collectibles Group.




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