Two Ways to Profit

Posted: 4/15/2005

A guest article from NumisMedia

Numismatics is not about making money. It is the study of coins and the history of why it was made, how it was minted, and where it has traveled over the years. However, we must add the fact that most collectors are interested in how and why coins became so collectable over the years. We are not going to answer these questions because the answers are in the everyday collecting habits of all numismatists. What has transpired over the years is what makes the collecting of coins as relevant as it is today. The fact that some coins are worth more than others is the ultimate relevance of collecting coins. The profits lie in the knowledge gained by all who study numismatics. Some study for education and the history, while others simply study the market in an effort to profit from the coins themselves.

In an effort to understand some portions of these questions, we sometimes contemplate what the masses are doing with their disposable income. Not those numismatists already aware of the benefits of collecting coins, but those who do not know the value of numismatics but may become attracted because of the recent exposure. The history, the lore, the potential, the significance of accomplishment, the gift of studying past pricing data and a common bond with those involved in numismatics, these are all elements that make up one of the most viable collecting markets in history. So what other significant fields suggest all these elements along with the very reasonable entry level of cost to learn and collect an item that has a ready made value. We can think of none.

Coins have at the very least a face value; and many have a silver or gold (and even platinum) content that adds to the significance of its natural state. When you add the multitude of other elements such as original mintage, quality, availability, historical notoriety, attrition, recalled coinage, then mix these with today’s massive supply and demand you can virtually understand how FMV prices have been rising with so much fervor over the last few years. When you continue to add new collectors to this impressive scenario, the realization that many values may still have a long way to go has far more significance than many long-time numismatists can fathom.

Over the last few decades professional numismatists had become accustomed to the limited supply of rare coins, but there were also a minimal number of actual collectors other than the dealers themselves. The market cycles were controlled by the economy and how healthy the dealers were with cash flow and inventory. Rising markets could be predicted by inflationary concerns, interest rates, direction of the metals and the stock market. Today the coin market has overcome most of these variables chiefly because of the terrific increase in the numbers of collectors in the numismatic field.

Some numismatists who have been around the coin market for several decades have voiced concern that the market has been rising for too long a period and it is sure to fall off soon. We tend to disagree with that notion mainly for the reasons we have mentioned previously. This is like no other market we have seen and you cannot make logical comparisons to previous cycles because of the sizable increase in the collector base over the last several years. In our estimation the size of the collector base has jumped at least 100 times of what it was in 1998. This puts an awful lot of pressure on supplies of rare coins and does so on some of the so-called common coins as well. There might be some softness on the more common coins that are readily available in every dealer inventory, but after that we see buyers at FMV levels for nearly everything else. The common coins may represent about 10% of the coin market. That leaves a very large portion of the market as hard to find, especially when you consider proper grade and price.

As a comparison we have listed a few key examples of FMV prices for $20 Gold Liberties. In this series we have the opportunity to see the FMV rise on the basis of the gold content as well as the specific issue’s rarity. The rarity is based on the original mintage, long-term attrition, and the current availability by grade. This is a series that is well respected because of the overall beauty of the coin, the history, and the gold itself including the massiveness of the coin. When you throw today’s demand into the picture, you have the potential for unabated FMV increases for a myriad of these dates. Two reasons we selected these issues are availability in the market and a history of trading activity. Here is a side by side comparison of the FMV in April of 1999 against today’s levels.

Date Grade 4/99 4/05
1850 O AU 55 $7,540 $13,130
1850 O MS 60 $22,770 $43,750
1853 MS 62 $9,410 $12,350
1853 O AU 58 $7,280 $12,060
1854 O AU 58 $120,000 $260,000
1857 O AU 58 $12,340 $21,880
1859 AU 55 $5,340 $8,440
1860 S MS 60 $5,010 $7,500
1866 S N/M AU 55 $16,500 $40,950
1870 S MS 61 $7,320 $10,730
1871 MS 60 $3,040 $6,250
1875 MS 63 $9,080 $13,330
1876 MS 63 $9,130 $13,330
1878 S MS 62 $2,970 $4,550
1882 S MS 62 $1,430 $2,750
1884 S MS 63 $2,660 $7,060
1896 S MS 63 $1,900 $2,750

Granted, you might think that since these coins have gone up in value so much that they can’t go much further; that may well be true. However, in most cases the reasons these coins increased in value in the first place was not only because of the demand for them, but the fact that they are not all that plentiful. So, we would think that the more astute numismatists would simply study the populations of these coins to see how many are in the market and possibly determine how many have been certified in the last five years. In this manner, you can determine the number of coins that have been added to the overall marketplace.

What if we begin to hear talk of inflation or the metals start to make a run like they did in 1979? Where will the coin market go then? Only time will tell but buying a diversified portfolio of rare coins, as long as they are properly graded and priced according to current FMV levels, might well be one of the best moves in today’s economy.


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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