The Coin Analyst: Minting to Demand of JFK Gold Coins Raises Problems
Once again the U.S. Mint, for reasons I fail to understand, made a major announcement via Facebook. And this was not even a major Facebook post, but rather it was a comment made on July 9 in response to a question from a collector, who asked how many of the gold JFK half dollars will be issued.
Collectors, and the coin media, have literally been chomping at the bit trying to find out the answer to that very question for months. But rather than issue a press release on its web site and to the numismatic media, this is how the Mint decided to make the announcement, one that has major implications for sales of this coin and its aftermarket value.
Money will certainly be made by those who get coins at the Chicago ANA August 5-8, as I suggested recently . NGC has already announced that it will be on-site and providing the usual special show labels for those who attend the show and have the stamina to stand in line for hours at the U.S. Mint booth, and then again at the NGC booth. I am sure PCGS will soon do the same.
On July 3 NGC announced on its web site that a special label bearing a portrait of President Kennedy will be available for each of the seven upcoming JFK half dollar tribute coins that will be issued. According to the announcement: “NGC has created a special large-sized label to enhance the presentation of these exciting new releases. The NGC label features an iconic portrait of John F. Kennedy, the 35th President of the United States, along with his famous quote: “Ask not what your country can do for you, ask what you can do for your country.”
As far as the ANA show, NGC adds: “ANA Sales Note: The US Mint is expected to release the 1964-2014-W High Relief Proof Gold Half Dollar and the 2014-P and D High Relief Uncirculated Clad Half Dollars at the ANA show.* NGC will designate these coins with the “ANA INAUGURAL RELEASES” pedigree. Coins must be submitted to NGC at the ANA show to receive this special pedigree.” For all the relevant details on submitting coins to NGC for the special JFL labels click this link.
Without question those buyers and especially dealers who go to the ANA and get their coins graded will be able to make a very substantial and quick profit by selling the same coins on e-Bay by the time they get home. Those who can’t attend the ANA, or who are disabled, and unable to stand in line for hours, will be unable to share in that bounty.
And others who order online, or who manage to get some of the limited number of coins that will be available at U.S. Mint headquarters and other branch mint sales facilities, get them graded in time for first strike and early release labels, and get their coins graded PF70 will also make nice profits.
But most other buyers will probably not see much, if any, appreciation from this coin over the long term. That is not to suggest they should not buy it if they want it for their collection, and I am still leaning towards getting one because I am an admirer of the slain president, and think the coin with the original higher relief and accent hair should look very nice.
The aftermarket for this coin is likely to mirror that of the 2013 Buffalo reverse proof coin that was launched at last year’s ANA show. I also suspect the mintage will end up being similar at around 50,000 units sold.
I fully understand the Mint’s desire to, as it says on Facebook, “ensure fair and equitable distribution” of the Kennedy gold coin. However, trying to achieve that goal by minting the coin to demand raises two major issues that are likely to end up suppressing interest in this coin other than at the ANA show, where buyers with dollar signs in their eyes will be clamoring for the coins.
First, the Mint’s order fulfillment process is essentially broken. I am still waiting on 2014 Baseball Hall of Fame silver dollars ordered during the first couple days the coins were available in late March. And previous “mint to demand” products sold by the Mint have seen even more extensive delays than the baseball coins, especially the 2012 and 2013 American silver eagle two-coin anniversary sets.
Those dealers and individual buyers who got their orders in first were able to reap the profits that came from getting the coins delivered first and then having them graded in time for first strike and early release labels and selling them while the market for those coins was still hot. Everyone else waited months for their coins to arrive, and by the time they did, they were barely worth what they had paid for them.
The “mint to demand” approach was a response to customer complaints in 2011 about the quick sellout of the 2011 25th anniversary American silver eagle sets, which were extremely hard to order because the Mint’s web site failed constantly, and the coins sold out in less than five hours. To address those concerns the Mint decided to release the 2012 and 2013 sets and the 2013 Buffalo reverse proof gold coins as minted to demand products so everyone who wanted one could get one.
I fully realize the Mint’s goals do not include driving up the secondary market value of its coins, but at the same time, it needs to realize that “mint to demand” destroys the value of those coins, especially when coupled with extensive shipping delays. In the end this approach really only enriches large buyers and dealers, who play the grading game, and hurts the average collector, who does not want to buy a product and see its value stagnate or decline.
I have always strived not to be like many other coin writers and collectors who jump at every possible opportunity to criticize the Mint, sometimes with little justification, because I respect and admire the Mint and its hardworking staff. But it is clear to me that Mint officials have not absorbed the lessons of the last three years.
The Mint has said for more years than I can remember that upgrades to its web site were on the way. The waiting room was used for the baseball coins, and while that did make things better than they were in 2011, there were still significant problems.
Why has it taken the largest Mint in the world so many years to make changes to its web site ordering system, which still remains very inadequate? It is easy to simply say it is because it is part of the government, as so many do, but that does not really explain the problem.
The bottom line is “minted to demand” is not popular with the vast majority of buyers, and a better way to handle releases of major new coins with a high level of interest would be to implement an effective online ordering system that can handle a large number of people at the same time, which is supposedly coming this fall.
The second piece to the puzzle is to revamp the Mint’s order fulfillment process, which has deteriorated significantly in recent years. This may also improve with the contract for the work going to a different company soon, but quite frankly, I will believe it when I see it.
The third, and most important, change that is needed is to couple mintage limits with household limits that are meaningful. Minting 50,000 of the first curved American gold coins ever and then saying buyers can get 100 each, and knowing full well that dealers use family members and staff to place orders for them, makes no sense. Those household limits were far too high to ensure “a fair and equitable distribution.” How many households can afford to spend $42,000 on gold coins?
Instead of “minting to demand,” have a low household limit such as one or two coins for such products, limit mintages to a level that reflects likely demand based on surveys, and ship the coins out expeditiously. Otherwise, the Mint is going to eventually destroy the market for its products, which will continue to drive collectors to buy the coins of other world mints, or to stop collecting altogether.