By Louis Golino for CoinWeek ............
As the dust settles on the largest and most important coin show of the year, the American Numismatic Association's (ANA) World Fair of Money held in Rosemont, Illinois last week, it is a good time to take stock of the launch of the 2014 gold Kennedy half dollars, which has important implications for future coin show releases and numismatics more broadly.
To a certain extent, the widespread mainstream news coverage and the great interest in these coins is probably good for the hobby and brought in some new collectors. But much of the coverage was not very flattering, especially as the week continued, and it gives the hobby an ugly image.
News accounts at the beginning of the week focused on the long lines of people waiting to purchase the coins at the ANA and the Mint’s three retail sales outlets, as well as the extensive use by dealers and speculators of shill buyers. Those buyers were generally not collectors and were getting paid anywhere from $20 to $600 or more to enable dealers to secure large quantities of the coin that were then graded at the show and given special show release labels, resulting in profits of around 300% per coin when sold.
The first four coins, which David Hendrickson purchased for $5,000 each plus a replacement coin, later changed hands for a cool $100k after the coin was graded by PCGS and received a special “first coin sold” label. How interesting that the first four coins bought and graded all happened to receive 70’s, while the next two got 69’s. Personally, I think it was all a publicity stunt to create even more frenzy for the show release coins. What makes the fourth coin worth $5,000, and the 5th worth much less?
As the crowds continued to form each day, stories began to emerge of people rushing to get in line and trampling others in the process, of shady characters hiding in bushes until the police left at night, and unconfirmed reports of robberies. On August 7 the Mint first suspended sales at its retail locations around the country out of safety concerns, and later in the day it and the ANA announced that in-person sales were also being halted in Rosemont.
Meanwhile, first day sales online and via call centers were extremely strong, reaching 54,825, and total sales for the day including in-person were 56,694. But by the second day online sales dropped to 4,090. I have heard numerous reports of buyers cancelling their orders since then, and I expect online orders to slow down even more in the coming days and weeks. Speculative demand is what drove sales the first day, and that is gone.
The Mint also announced on the 7th that in addition to the 40,000 coins it had ready before the launch, it will produce 6,000 coins a week with the goal of having 75,000 by October 1. And if the demand is there, it will continue striking coins all year, though no specific cut-off date has been set.
However, I think the Mint is overestimating demand based on unusually strong first day sales from buyers who wanted to have coins in hand as soon as possible to send them in for first strike and early release grading, and who wanted to ensure their coins were among those shipped first in light of past delays with order fulfillment.
E-Bay sales have been uneven for such a high-interest release, with raw coin pre-sales anywhere from barely over Mint cost to close to $2,000. This is very different from, for example, pre-sale prices of the Baseball Hall of Fame coins, which rose very quickly. The reason is the baseball issues sold out in hours, and only a small portion of them shipped in April, so demand continued to build for coins that could be delivered and prices rose until enough supply was on the market. Similarly, the 2009 Ultra High Relief gold double eagle did not ship for a month from issue date, and the delay as well as rising gold prices pushed premiums up.
The long-term market outlook for the JFK gold issue will depend on the final number sold, gold prices, and future demand. The ones that in the short to medium-term are likely to continue selling over issue price are the show releases, especially now that the number of ANA releases was reduced from 2,500 to 1,500. In addition, graded-70’s, especially first strike PCGS coins will surely be well over $2,000 when they hit the market in about a month.
Raw coins that ship in the coming weeks should have some premium since new orders are being backordered by the Mint to at least mid-September while the coins are produced, but overall I do not see these coins as having much “flip” potential. They are collectible coins to be enjoyed for their beauty.
And buyers of show releases and first day coins should bear in mind that values for previous show release coins from the past year have not held up very well over time. I would not recommend paying the current retail of $4,000 for 69 show coins and $5,000 for 70’s. Buy four raw coins for the same money.
As for the Mint releasing major new issues at coin shows, which Deputy Director Richard Peterson said in Rosemont on the 7th the Mint will repeat next year, I am sure Mint officials and the ANA will be reviewing what happened last week with a view to seeing how to avoid some of the problems encountered.
More broadly, I think it is time for coin buyers to ask some hard questions about the real value of coins sold at shows, and whether putting their money in those coins is really a wise move. In addition, while coins sold the first day in Philadelphia, Denver, and Washington, D C were eligible for first day release labels, the ANA first day coins seem to be priced higher. But what makes them better, and why aren’t the first ones sold online special too? To me this is all an artificial creation of the grading companies and dealers that is unhealthy for the hobby because it puts too much emphasis on labels.
One collector discussed the issue with a dealer at the ANA convention, who had stacks of graded coins offered for $5,000 a piece, which he said would mostly be sold to unsuspecting buyers on coin television shows. He noted that those buyers are so clueless they think they are getting a good deal.
There is nothing wrong with trying to maximize your profits, but is this really good for the long-term health of the hobby? When someone finds out a year later that the coin he paid $5,000 for is worth $3,000, do you expect him to continue being an eager collector?
Since this is going to continue, it is time for some major changes to the process to give the average buyer a better shot at getting a coin at the show. One idea is to require that buyers have a Mint account. Another is to just display the coins and take orders for them. Perhaps the first buyer can get his receipt framed and auction it off! I would welcome any suggestions from readers.
Copyright © CoinWeek – 2014
Editors Note: The issues raised in this commentary, along with a host of facts surrounding the events in Chicago and the other mint facilities will be the subject of a series of forthcoming articles by CoinWeek. There are strong opinions being expressed and numerous questions being raised as to the marketing decisions made and the unintended consequences of dealer actions taken to capitalize on the release of the Gold Kennedy Half Dollar. There are also divided opinion as to how this situation reflects upon the modern coin market and on numismatics as a whole. We hope you will join us as we investigate what actually took place and sample the mood and reactions of both collectors and dealers.
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Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His article, “Proposed Design Change Takes Flight,” which deals with the CCAC’s recommendation for a new reverse for the American silver eagle, appears in the July issue of the Numismatist. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA,PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.
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