Are Markets for Rare U.S. Coins Poised to Skyrocket?

WHAT KIND OF COLLECTOR ARE YOU?

When discussing the idea of coin collecting for profit, there is a need to emphasize the collectors’ different motivations. A pure collector is not concerned about financial considerations after he forms his collecting budget. The purist collector does not care about how much the coins bring when sold, or cares little about such an outcome. The opposite is a coin buyer who does not care much about the coins themselves but is entirely focused on how much profit or loss he will incur when his coins ultimately sell. These are really two ends of a spectrum, extreme cases. Most coin buyers lie somewhere in between.

Profit-hopeful buyers often become emotionally attached to some coins or really enjoy viewing them. Passionate collectors are usually at least a little bit concerned about how much their coins will bring when they sell. Profithopeful collectors are sometimes people who are fascinated by economics and have an aptitude for understanding markets for rare coins. Certainly, profit-hopeful collectors should try hard to understand the risks involved.

A very passionate collector cannot be very profit-hopeful. Collectors who are thrilled about completing sets are usually near the other end of the spectrum. A profit-hopeful collector will not traditionally become very emotional about completing a set or emotionally attached to specific coins. It is practical for a profit-hopeful collector to seek to acquire rare or very scarce coins for prices that are in or near the applicable wholesale ranges for the coins sought.

Buying coins at wholesale prices does not guarantee that a collector will profit. On the contrary, a collector could pay wholesale prices for all of his coins and then lose money when he sells his collection. This occurrence would not be surprising. All other things being equal; however, the chance of profiting will be greater if a collector pays near-wholesale prices than if he pays rates that are retail or above-retail. Besides, if a profit-hopeful collector ends up losing money anyway, it is better to lose 10% rather than lose 45%.

Most coin buyers do not have the time or do not take the time to follow auction records, public internet sales, various dealer fixed-price offerings, and multiple price guides. The people who do take the time to do such research and keep up with market realities sometimes assume that most other buyers do as well, but such an assumption is wrong. Most collectors of rare coins pay substantial premiums over auction prices.

Frequently, a wholesaler buys a rare U.S. coin in an auction and wholesales it to a retail dealer who, in turn, charges a 10% to 35% premium over what he paid the wholesaler. Some retail dealers buy rare coins at auction and then charge 10% to 25% more than the auction prices. Of course, there are cases where markups are less than 10% or more than 45%. I am referring to customary practices, not to all relevant transactions.

BE MINDFUL OF COIN AUCTION RESULTS

Monitoring markets for rare coins requires a lot of time. Many coin buyers listen to what dealers or other coin professionals tell them on the phone and decide to buy or not buy in each instance. It must be mentioned that I am referring here to rare or scarce

U.S. coins, including coins that are rare in choice uncirculated grades (above MS-62) even if common in circulated grades. I am not referring to common coins, which should be analyzed in a separate discussion.

Almost all U.S. coins minted after 1933 are common. Generics are pre-1933 U.S. coins that are common.

Clear examples include 1881-S Morgan dollars, the vast majority of Indian Head quarter eagles ($2.5 gold coins), 1901-S Liberty Head eagles ($10 gold coins), 1926 Indian Head eagles, 1904 Liberty Head double eagles ($20 gold pieces), and 1924 Saint Gaudens double eagles. There are many additional generics.

Coin buyers interested in speculating in generics should seek the counsel of a coin professional who is enthusiastic about generics and has spent years tracking markets. I find generics to be uninteresting. I am partial to coins that serious and knowledgeable collectors regard as important, by reason and tradition.

It needs to be repeated that buying rare coins and buying generic coins are two different undertakings and should not be confused with each other, though there is overlap. Someone assembling a set of Saint-Gaudens $20 gold coins would need both rare coins and generics to complete their set. While markets for rare coins and markets for generics are cyclical, they do not move in tandem. Rare coins may rise in value while generics fall, or rare coins may drop in value while generics’ values rise. In other circumstances, prices for both rarities and generics may move in the same direction. There is not a simple correlation.

In any one major auction or sizable public online sale, some coins will bring retail prices, many coins will bring top-wholesale prices, a few coins will bring super-retail prices, and a few coins will bring low-wholesale or below-wholesale prices. Profit-hopeful collectors should not assume that they can buy targeted or especially desired coins at wholesale prices, as they will be competing with dealers and maybe collectors. There is no scientific way of precisely identifying a dividing line between a wholesale price and a retail price for a specific rare coin. In a significant rare coin auction, many coins will bring prices in the gray area about wholesale and retail. A price somewhere around upper-wholesale or