Rare coin market volatility: Managing the ups and downs

How can a collector manage volatility to help build a rare coin collection and manage rare coin investments?
By , Coin World
Published : 09/18/15
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The following is Steve Roach's Investment Column from the Oct. 5, 2015, issue of Coin World:

As both domestic and global stock markets have exhibited extreme volatility over the past month, investors have been told to buy on the dips, and then to continue buying as stocks continue to slide to take advantage of their new status as relative bargains. During this time, gold and silver prices have also fluctuated. 

Dips are good for those who are buying for the future, but not good for those who are looking to cash out. How can a collector manage volatility to help build a rare coin collection and manage rare coin investments?

Most collector coins have a slower reaction time to precious metal market changes than bullion coins do. Some coins straddle both worlds, such as Mint State 64 Saint-Gaudens $20 double eagles, which can have a blend of bullion and collector value. The common dates, called generics in the marketplace, have large populations, and dealers can acquire large groups of average third-party certified examples with a few phone calls.

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A 1925 double eagle and a 1925-D double eagle have similar mintages of just under 3 million. In MS-64 the 1925 double eagle is considered a generic coin with a value that is highly based on precious metal markets and the generic certified gold markets established by major dealers. A solid example can be found for $1,550 to $1,600. 

However, the 1925-D double eagle has a market demand that’s different, as all Mint State examples are scarce, and in MS-64 Professional Coin Grading Service has recorded just 129 submissions with only a handful graded finer. 

A nice example might cost around $20,000, and prices are fairly insulated from ebbs and flows in the bullion market until these fluctuations shake buyer confidence at the highest levels of the rare coin market. This coin’s value rises and falls with the larger coin market, somewhat more independent of bullion than its generic counterpart. 

Yet, it carries its own risk, as the discovery of a hoard of high-end Mint State coins could have a serious negative impact on the price by increasing the supply. 

How volatile are the coins in your collection? What’s the market for them and who are the main buyers? Understanding these factors can help you manage volatility in your collection. 

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