COLLECTABLE: THE OTHER SIDE OF THE COIN
Chock full of their own personal stories, rare coins are appealing to a niche group of collectors – and, increasingly, investors who are realising their potential.
Chock full of their own personal stories, rare coins are appealing to a niche group of collectors – and, increasingly, investors who are realising their potential
It is the dollar that is worth millions and has travelled through time.
A rare 1794 ‘Flowing Hair’ silver dollar, depicting a solemn Lady Liberty with her hair swept backwards, was one of the first dollar coins struck by the US Mint and is set to be auctioned off at Stack’s Bowers & Ponterio in August. The iconic ‘St. OswaldNorweb 1794’ coin was obtained new as part of a pair by William Strickland, an 18th-century English gentleman during a tour of the United States, where he met with Thomas Jefferson and thenpresident George Washington. It would stay in Strickland’s family – eventually taking on the name of his descendant Lord St. Oswald – until 1964, when it was bought by famed American coin collector and diplomat Henry Norweb for £4,000 (HK$40,400). The coin sold for US$242,000 in 1988 and remained out of the public eye for 29 years. Eyed by collectors from around the world, the 1794 dollar is expected to fetch the price of its sibling, which sold in 2015 for US$4.99 million.
Once a gentlemanly pursuit, collecting rare coins is now a billion-dollar business. The 2017 Knight Frank Luxury Investment Index shows coins to be the world’s third best-performing luxury asset – with a 195 percent appreciation in value over the last decade. A recent survey by the Professional Numismatists Guild suggests coins sales by major auction firms totalled more than US$4 billion in 2016 alone. Six- or seven-figure price tags are now the new normal for rare specimens like the St. Oswald-norweb 1794 silver dollar – in 2016, a rare San Francisco dime from 1894 sold for twenty million times its original value.
Collecting coins is a pursuit that has been enjoyed by the wealthy since the Renaissance, a trait that earned it the moniker ‘the hobby of kings’. But for many of today’s treasure seekers, it is as much about making a smart investment as it is about acquiring a rare collectible. An increasing amount of investors are seeking out rare coins as a way to diversify their portfolio and protect themselves from stock market turbulence. Emerging markets have also introduced new collectors, with a quickly expanding pool of bidders and buyers from China, India, Russia, eastern Europe and Latin America.
Experts point to the 2008 financial crisis as a turning point; prompting many to pour their fortunes into tangible non-financial “treasure assets” that were not correlated to the stock market, including rare coins. Blanchard & Company, an American investment firm specialising in coins and precious metals, suggests that collectible coins can deliver a higher annual return than gold and act as a successful hedge against inflation.
“During periods of uncertainty and economic turmoil, people have always put their money in
THE 2017 KNIGHT FRANK LUXURY INVESTMENT INDEX SHOWS COINS TO BE THE WORLD’S THIRD BEST-PERFORMING LUXURY ASSET – WITH A 195 PER CENT APPRECIATION IN VALUE OVER THE LAST DECADE
hard assets like gold and silver,” explains Nirat Lertchitvikul, director of Asian operations for coins auctioneer Stack’s Bowers & Ponterio. “There’s the belief that hard assets are something you should be keeping your wealth in. Investors are also now making collectibles a small part of their portfolio. With gold and silver coins, you get the best of both worlds.”
But the pull behind collectible coins market is also emotional. “Holding a rare coin is like holding history in your hands,” says Lertchitvikul, who describes investors and collectors as being lured by the rarity, uniqueness, and condition of the coins. The history or character portrayed on a coin will often increase its appeal.
“All coins and banknotes have a story behind them,” he adds. “How were they made? Why were they made? Of what interest are they to the region? The value of rare coins is in fact largely determined by their collectible value – not their precious metal content.”
Research by Barclays Wealth and Investment Management found that the world’s millionaires currently devote an average 9.6 per cent of their wealth to treasure assets, citing a desire for tangibility, a belief that they will appreciate in value, and concerns about global markets. For Hong Kong millionaires, that figure climbs up to 14 per cent, with coin collections being a preferred investment.
And the trend is proving true across Asia as a whole. While the coin industry in Asia has a long road to maturity, local coin markets in China, India and Southeast Asia have all exploded in recent years.
“The rare coin market, especially in China and Hong Kong, has grown by more than 50 per cent for us in the past six months,” says Kenneth Yung, who heads Asian operations for Heritage Auctions. “Modern coins have been slower, but the vintage coins market has been going very strong in 2017, with the internet making it easier than ever before for collectors to join.”
Every time Heritage organises a show in Asia, “thousands of dealers and collectors have come, mostly from China, but also from Southeast Asian countries like Malaysia, Singapore, and Indonesia,” notes Yung.
Other experts and collectors concur, describing the value of Asian coins as ‘burgeoning’ as a result of their growing economies.
“Coins from the region have historically been removed to the west. But now that Asian economies are doing well, Asian collectors have started buying their own heritage back,” Lertchitvikul says.
In India, rare coins issued by long-reigning emperors are particularly prized by collectors, while in China, coins from the late 1800s and first half of the 20th century are favoured.
One notable exception is Japan, whose coin market is considered Asia’s most diversified.
“Since the 1970s and 1980s, Japanese coin collectors have bought everything in sight, says Lertchitvikul. “Their coins have peaked out so they are buying European coins, especially English
“COINS FROM THE REGION HAVE HISTORICALLY BEEN REMOVED TO THE WEST. BUT NOW THAT ASIAN ECONOMIES ARE DOING WELL, ASIAN COLLECTORS HAVE STARTED BUYING THEIR OWN HERITAGE BACK”
– Nirat Lertchitvikul, Stack's Bowers & Ponterio
ones. The market for British coins in Japan right now exceeds the local market in England.”
Yung expects other regional markets to soon act similarly. “Asian collectors are expanding their focus and looking at more countries,” he says.
In the meantime, the rapid blossoming of the Asian coins markets has meant that western dealers are flocking to the region to establish a presence.
According to collectors, the top end of many Asian markets is being driven by rare, showy coins, which grab the headlines. Their high prices are being driven by investors seeking to make a profit.
“Speculators who don’t know about coins are usually looking for something sparkling. This group entered the market because of the rising popularity and prices of coins,” notes Lertchitvikul. "They usually go by the type of coins that are on the news."
This is a risky strategy that has led to rare coins selling for far above their market value. “When you turn over coins to re-sell too soon and too fast, it makes the prices peak,” he adds.
This led to a bubble burst in the Chinese coins market in 2012 and a general slowdown of the Asian coin industry until 2014.
Investors looking to start buying rare coins are typically advised to treat them as a mediumterm asset and wait a minimum of five to ten years before selling.
But treating coins as a longterm investment can be even
more beneficial. “Coins have the characteristics to become antiques of the future,” writes the British research firm Intelligent Partnership in the Alternative Investment Report on Rare Coins and Stamps (2015). As nonrenewable assets, preserving collectible coins for future generations can thus be an effective way to protect wealth.
But not everyone agrees. Some brokers recommend clients to steer clear from buying rare coins and other treasure assets because they are intrinsically speculative investments.
A lack of specialist knowledge can also expose potential investors to risks of fraud and overpaying. As a largely unregulated market, rare coins can be bought from auction houses, dealers, or directly from individual owners. Unscrupulous sellers will regularly inflate the grade of their coins or sell clients fake products.
Experts urge collectors to only work with reputable dealers and to make sure any prospective purchases have been independently authenticated and graded.
“I’ve seen people come crying to me because they lost their life savings after buying fakes,” notes Lertchitvikul. Both he and Yung emphasise that any coin they auction will have first been authenticated by either the Professional Coin Grading Service or the Numismatic Guaranty Corporation
Soon, it may not just be authenticity that collectors will have to prove, but also legal pedigree. The advent of more stringent cultural protection laws around the world means collectors and dealers can now find themselves breaking the law if they can’t account for provenance.
In April, the German police arrested four collectors in Munich on suspicion of the illicit sale of illegally obtained coins. Under its 2016 Cultural Property Protection Act, the country requires a legal provenance that extends a minimum of 20 years back for “objects of cultural importance” and the granting of an export license for objects more than 70 years old that are worth more than €300,000 (HK$2,600,000). The law aims to prevent the looting of antiquities from vulnerable countries (notably by terrorist organisations) and ensure that art of “national significance” does not leave Germany.
And other countries are following Germany’s lead. In the United States, legal import restrictions on cultural heritage and trafficking led federal prosecutors in 2017 to seize from dealers ancient coins from China, Cyprus, and China.
“Those laws are a positive step against trafficking, because they are asking for this almost positive sort of due diligence, not just from dealers, but also from collectors,” says Steven Gallagher, associate dean at the Chinese University of Hong Kong’s law faculty and an expert in cultural heritage laws.
Countries in Asia with cultural protection laws could be headed towards the same path.
So what should budding coin collectors do to get started on the right track?
“Establish a rapport with a dealer you trust and ask them a lot of questions, making sure you get detailed provenance,” Gallagher advises. “In due course, if provenance is an issue, it will become more difficult to sell those assets, in which case their value will depreciate, not increase.”
THE TOP END OF MANY ASIAN MARKETS IS BEING DRIVEN BY RARE, SHOWY COINS, WHICH GRAB THE HEADLINES. THEIR HIGH PRICES ARE BEING DRIVEN BY INVESTORS SEEKING TO MAKE A PROFIT
OPENER A 1804 Draped Bust Silver Dollar coin sold for US$3.3 million in 2015.
RIGHT A 1815 Capped Head Half Eagle coin was snapped up for US$ 822,500 in 2015.
RIGHT A selection of very rare American coins, including a 1822 Half Eagle, or Five Dollar Gold Piece, and an 1804 Silver Dollar, went under the hammer at Sotheby's London in 2015. BOTTOM RIGHT A 1794 Flowing Hair Silver Dollar coin from the St. Oswald-norweb collection will be up for grabs at a Stack's Bowers & Ponterio auction in August 2017.
BOTTOM LEFT A 1793 Flower Hair Cent was sold for US$998,750 in 2013. BOTTOM A 1913 Liberty Head Nickel was sold for a record-breaking US$3.17 million in 2013.