Rare Coin Market Report – November 2011
Dear Rare Coin Enthusiast,
The rare coin market is constantly changing. Both the Bullion markets and traditional financial markets push and pull the rare coin market. With the downward trend in bullion markets since August and the European financial crisis, we have seen strengthening of the ‘dollar’ itself. The generic markets have been pulled down because of the soft bullion markets. $20 gold coins and generic Morgan and Peace Dollars are flat, although we have seen a little more interest in the generic $20 gold market since gold has bounced back up into the mid $1700’s.
Dealers are trying to hold as much good numismatic related material as they can while maintaining their cash flow. Let me give you an example to illustrate what is happening in the rare coin market. Hypothetically speaking, two deals ‘walk’ into a coin show. Both of these deals have a market value of $100,000 each.
Deal ‘A’ is high grade, albeit bullion related, generic $20 gold coins in PCGS or NGC graded mint state 63 and 64 holders. There are roughly 50 coins in the deal and individually they are worth $1900 to $2000 per coin. Deal ‘B’ is a handpicked group of high grade PCGS or NGC graded numismatic related items. Deal ‘B’ has 50 items most of which are collector coins.
Deal ‘A’ is very saleable, but there are only two or three dealers at the show who really STOCK this type of generic $20 gold coins. Although most of the dealers in the room will put a ‘number’ on deal ‘A’, what they will pay is directly related to what they can get from the two or three dealers at the show who really STOCK these coins. In other words, most dealers will quote you a price, but that price is based on what they can ‘layoff’ the 50 pieces of $20 gold coins at that point in time. Most of the dealers at the show don’t want to tie up $100K on generic $20 gold coins which could be worth 10% less in the morning if bullion prices fall over night. They will buy the deal, if and only if, they can sell it immediately and protect their cash position.
Deal ‘B’ is a completely different story. Although deal ‘B’ contains 50 items that are numismatic related with an average value of $2000 per item, Deal ‘B’ isn’t as easy to figure. Deal ‘B’ isn’t as saleable on an immediate basis. Deal ‘B’ will tie up $100K for at least a couple of months. Yet, there are several dozen dealers at the coin show that will stock Deal ‘B’ even if they have to borrow the money to buy it.
Deal ‘A’ is comprised of ‘stuff’ while deal ‘B’ is comprised of rare coins that have some potential and dealers will STOCK Deal ‘B’ but dealers will immediately ‘lay off’ Deal ‘A’.
There is nothing wrong with the generic high grade $20 gold coins in Deal ‘A’, but…..dealers know they can go out and buy that type of material ANYTIME they want. Deal ‘B’ is very much in demand because this type of numismatic related rare coin IS NOT available anytime those same dealers want to buy them. Although there is strong demand for the $20 gold coins in Deal ‘A’, dealers are afraid they will get ‘stuck’ and have to take a loss on the generic $20’s if the bullion market falls over night. Deal ‘B’ is an entirely different ‘animal’. Dealers will find a way to buy Deal ‘B’ even if they have to STOCK it.
Deal ‘B’ won’t make it past the first two or three dealers in the room that have an opportunity to buy it. Even if Deal ‘B’ is a little too much price wise in relation to ‘market’, dealers will ‘stretch’ to buy it. Dealers will not stretch for Deal ‘A’. Dealers might buy Deal ‘A’, but they are going to sell it immediately and work on as little as 1 to 2 percent.
Rare coins are selling. Because rare coins are selling, dealers will ‘stretch’ to buy them. Recently I was offered a Deal ‘B’ like group of coins at a show. One of the coins was bid at $7500 on Greysheet. I figured that coin in the deal at $16,900. I got to see it first. I can virtually guarantee that any other dealer with some numismatic expertise would not have passed at the higher number. There were coins in this Deal ‘B’ that had not appeared in auction for 10 to 15 years.
As an individual buying rare coins do you want Deal ‘A’ or Deal ‘B’. If you are looking for a bullion play, then Deal ‘A’ could very well be for you. Select rare coins are selling quickly when they are available. In last month’s Rare Coin Market Report, I called them ‘already sold’ coins. A lot of the coins in Deal ‘B’ would fall into that ‘already sold’ category. The difference between the two deals is that everyone wants Deal ‘B’. What deal do you want?
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