A Half Century of Coin Market Trends
By Mark Ferguson – www.MFrarecoins.com
I was recently involved in a discussion with a collector about historic coin market trends. He was fascinated with this history which gave him new insights into the areas he’s now collecting. Therefore, I thought more people would be interested in a short background of the coin market during the past half century – since the early 1960s.
Prior to that time the U.S. coin market was stable. During the 1950s the country returned to normalcy after the tumultuous World War II era. Coin collectors could find some wonderful coins in circulation and from banks. Remember, silver coinage was still in use during that time. One of the major motivations for collecting was that people could pick out coins worth more than face value.
Truly rare coins were just beginning their price march that has continued, with a few bumps in the road, on up to today’s spectacular multi-million dollar record price levels. But as we got into the 1960s, the focus remained on more affordable coins average collectors could afford.
Investors came into the coin market, causing a “roll boom,” pushing prices for uncirculated rolls of coins to sky-high levels. For example, the relatively low mintage 1950-D nickel is one coin issue that caught their attention. Prices climbed to around $1,000 for a roll of 40 uncirculated coins. By the mid-60s the roll market had crashed, resulting in one of the first major reversals for the coin market. The market has never recovered for these coins and today a roll of uncirculated 1950-D nickels trades for about a quarter of its 1960s price.
However, during that era other major developments helped the coin market surge onward. Coin dealers became connected by a network of “teletype” machines which enabled dealers to trade with each other around the country in a similar way to how we use the Internet today. The Coin Dealer Newsletter was founded in 1963, providing dealers with weekly wholesale price reporting, similar to stock market quotes in the Wall Street Journal.
This enabled dealers to buy coins from the public with reasonable expectations of the prices they could sell them for to other dealers who made markets in particular coins. Retail price guides provided collectors with information about what they should expect to pay for coins from dealers. The most popular of these were A Guide Book of United States Coins, known as the “Redbook,” published by Whitman Publishing, and the price guides found in Numismatic News and Coin World weekly newspapers.
The coin market was the recipient of another huge stimulus during the mid- to late-1960s when the Federal government announced it would stop redeeming Silver Certificates for silver bullion. The price of silver had climbed, making Silver Certificates worth more than $1.25 at the height, before redemptions stopped on June 24, 1968. Coin dealers made fortunes by buying them from the public and selling them through wholesale channels to those dealers who redeemed them with the government.
As the price of silver escalated, coin dealers also began purchasing silver coins from the public, which were minted in 1964 and earlier. All through the 1970s this business made new fortunes for coin dealers and investors. Additionally, price inflation grew during that time. Investors began throwing money at coin dealers, to buy rare coins. Prices for “investor quality,” Mint State and Proof, coins exploded exponentially. During this time ANACS, the American Numismatic Association Certification Service, was formed, giving collectors and investors additional confidence in the grades of the coins they purchased.
All the while the price of silver and gold continued climbing. The famous Hunt brothers tried to corner the market in silver, driving up its price, and the ban on ownership of gold, set in place in 1933, was lifted in 1974. The gold price was driven up to about $850 per ounce, while silver’s price peaked at about $50 per ounce.
That was during January, 1980, then the bullion market crashed. Prices for rare coins held up, but a few months later, right around income tax time in April, the rare coin market stopped on a dime at the Central States Numismatic Society convention in Lincoln, Nebraska. Coin dealers had to raise large amounts of cash to pay taxes on the high profits made the year before, and when a majority of the players in the market began selling, the market crashed.
The next few years were rough for the rare coin market. Some dealers diversified into jewelry, some into baseball cards, others just quit. But times would soon get better for the coin market as PCGS was founded in 1986 and NGC shortly thereafter. It was a “Rare Coin Revolution,” as PCGS called it.
A network of dealers began making markets in PCGS graded coins on a “sight unseen” basis and the concept changed the market…for good. Prices for rare coins began climbing again, peaking in 1989 when MS 65 Morgan dollars surpassed $500, then $600 wholesale, heading toward the $1,000 mark, but falling short. Like the 1950-D nickels, common date issues of MS 65 Morgan dollars haven’t recovered back to those previous levels.
The decade of the 1990s was a shake-out period for the coin market. Business was slow as prices settled to stable levels. It was a long decade in which the coin market transformed itself from an investor driven market back to a collector driven market. This transformation was healthy and that trend set up the coin market for the roaring 2000s!
Somewhere in the 2002 to 2003 time frame the coin market began picking up steam. Prices started solidifying and formerly reluctant sellers gained confidence in consigning coins to auctions. PCGS started its Registry collecting competition and NGC followed suit, which was a strong stimulus for the coin market. Registry collecting was also a major factor in stimulating the bull market for modern coins. Demand grew extremely strong for coins that were graded as perfect – Mint State 70 and Proof 70 grade coins, as well as for less expensive, almost perfect coins, grading “69” on the 1 to 70 scale.
During the 2000s the economy was strong and everything was right for the coin market, as it was for most other markets, such as for real estate and fine art. Prices for vintage rare coins soared, as they did for modern coins. Some dealers began specializing in modern coins by making markets in them, submitting coins in bulk for grading, and promoting them through mass-market advertising. Some of those dealers made millions of dollars in profits, while other dealers who dealt in vintage coins, skeptically scoffed at those who dove into the market for modern coins.
But the coin market, along with just about everything else in the economy, came to a halt when the financial meltdown occurred in the fall of 2008. Rare coins prices softened, but not as badly as real estate and stocks. It took a good nine to twelve months before coin buyers regained confidence in buying again. However, prices of precious metals started climbing, giving a boost to the coin market. The public became aware of higher prices for silver and gold and during the recessionary environment began selling silver coins and scrap gold jewelry to coin dealers who once again were the recipients of good fortune.
Well-heeled Investors also began to diversify their funds, putting large amounts of cash into rare coins. Demand for high end coins, including major rarities, has been very strong during recent years, to put it mildly. Endorsements of solid-for-the-grade and premium quality coins by CAC (Certified Acceptance Corporation) which affixes tamper-resistant oval green stickers to PCGS and NGC graded coins, that meet its standards, has been a major influence in the market for high end rare coins.
This influence has been the primary driver in revealing and accentuating a growing price divide between CAC stickered coins and those that barely make a grade or are perceived as being over-graded through “gradeflation.” PCGS and NGC answered this service by adding “+” signs to the grades of coins meeting similar standards. While the market has favorably accepted “+” grades, CAC has come to dominate this market and has become the preferred endorsement service for such coins.
So this is where the coin market is at today. What have we learned by reviewing past coin market cycles? One – collectors are largely motivated by a profit incentive. Two – the coin market is “trend” driven, influenced by factors inside and outside the coin market.
The economy and the precious metals markets continue to have a major effect on the coin market from the outside. Coin grading is another major influence, but from within the coin market. The creation of PCGS and NGC, Registry collecting and endorsements through stickering by CAC are major examples of influences within the coin market.
Another major factor is marketing. PCGS and NGC rose to dominance through effective marketing, even with numerous copycat grading services that have attempted to compete. Additionally, the market for modern coins grew enormously through marketing and the State quarter program. Some major coin auction firms didn’t fare too badly either, through creative marketing.
If we hope to sell the rare coins we buy today for profits in the future, one of the keys is learning from historic coin market trends and trying to imagine and predict what the market will want to buy in the future, when the time comes for each of us to sell. I hope this background helps you think about where the coin market is headed into the future, so that you can become a better collector and investor.
I started collecting coins when the “new” Lincoln cent, with the Lincoln Memorial on the reverse, was put into circulation in 1959, when I was six years old. Ten years later I began buying and selling coins as a business, and I’m still at it, nationally. If I can be of service to you in helping you buy or sell particular coins, or if you’re interested in a consultation or appraisal, feel free to call or email me. My contact information can be found on my website – www.MFrarecoins.com.