One of the most frequently asked questions in numismatics is about the state of the market...
One of the most frequently asked questions in numismatics is about the state of the market. You can try to distill current conditions from the headlines, or news of the latest auction results, but the truth is that it is much more subtle and harder to define. Every time a mega-rarity shatters a new price level many think the general market has also reached new heights. That could be the case for isolated pieces, but many issues have remained stagnant in price for several years. What explains these discrepancies?
In my opinion, several factors are at play to explain why some issues continue to sell for ever higher prices and others seem stuck in the mud. First, is the undeniable "flight to quality" seen in numismatics over the last decade. Buyers seem willing to pay whatever it takes to acquire the finest examples of the series they have chosen to collect. The "registry set" concept has been said by some to rival the “penny board” innovation in its impact to collecting. Collectors love collecting, but they also relish the idea of competing with fellow numismatists. The idea seems here to stay, and will only get better as NGC and others devise new ideas to enhance the experience.
Another factor has been the huge explosion in popularity of modern coin collecting. Years ago a new collector with modest funds might decide to collect MS 64 Silver Commemoratives 1892-1954. For decades this has been a core collectible in numismatics, and one of the so-called “entry points” for someone new to rare coins since there are 50 different coins in the set and most are quite affordable. Silver Commemoratives have been one of the most lackluster segments of the market in recent years and I believe many of those new to rare coins have decided to pursue modern coins instead of these traditional issues. Many are exposed to rare coins for the first time by mass marketing and the vast majority of this marketing involves modern coins.
Modern coins have become the new entry point for large numbers of beginning collectors. Many who criticize modern collecting underestimate the value of attracting so many new buyers to numismatics. The large marketing companies have to sell modern coins, because the supply of vintage numismatic items cannot support their sales operations. It is our job as numismatists to educate collectors about the exciting options available, which is my primary reason for spending so much time writing books and articles: educated buyers will invest more in rare coins!
This interest in modern coins has created a gap in the market for rare coins. Beginning collectors spend most of their energy and resources on modern coins and the die-hard collectors have focused on the “high end” of the scope. The supply for top quality coins is very limited, and this new attention to modern coins has pushed prices to even higher levels. As mentioned above, prices for average silver commemoratives are very soft. The exception is that superb coins break records every time they cross the auction block. Collectors will pay astonishing prices for a “finest known” or incredibly toned coin. Whenever I run across one of these caliber coins I consign them to auction. I don’t have enough imagination to assign a price for a superb, beautifully toned commemorative!
Bullion prices also have a significant and ever changing impact on the numismatic market. These changes are mostly psychological in nature, as the intrinsic value of most coins is not the major part of its value. The country has been plagued by recession and high unemployment and in the past the numismatic market reacted very poorly to such conditions. The current recession has even been compared to the 1982 recession in severity when the rare coin market was horrendous, and many of the nation’s top dealers were on the brink of bankruptcy. The major difference between now and 1982 is the bullion price levels. I think a strong case can be made that bullion prices have saved rare coins in the last few years. If gold were still around $600, the numismatic scene would be very different.
Like bullion, rare coins have enjoyed the status of "tangible asset" desirability. When gold and silver soared to record levels, rare coins went along on the ride. Lately, metal prices have retreated somewhat, and the coin market seems to have reacted in a similar fashion. Many of the coin shows in the last few months have been slow, and retail sales around the country are down. If gold and silver start to move again, interest in numismatics will surely rise. Nothing stays the same, but the next time someone asks you how the market is, you might tell them you need a few minutes to explain!