US Coins

Previewing 2017: The advantages of investing in coins

To open 2017, Steve Roach tackles the appeal of rare coins and why they command the hobby's attention. Below is the second segment of his extensive look at the rare coin market as it exists today and what may garner attention in the coming year:

As the stock market reaches for record heights and precious metal prices stay at relatively stable levels, one wonders where the rare coin market is headed in 2017. With all of the potential for change under a new presidential administration, many are optimistic but cautious; hesitant to make any major changes in their investment strategies and perhaps waiting for the right time to buy rare coins.

Will established collectors come out and buy rare coins in 2017? Will new collectors and investors enter the rare coin market, increasing demand?

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If you’re interested in stepping up your rare coin game, or if you’re entering the rare coin marketplace for the first time, you should look at the rare coin market as it exists today and seek to understand the pitfalls and possibilities inherent in rare coin investing. Smart coin buying today requires at least an awareness of the changes that might impact the future when it comes time to sell. 

Advantages of coins 

Investing in rare coins, rather than other collectible investments, offers some strategic advantages that can benefit the owner.

Coins are generally standardized products with known mintages, and with U.S. coins especially, many series have been heavily studied and the provenance of most important examples is well-documented. This collective understanding of a coin’s past ownership history helps thwart counterfeiters since it’s hard to create a new example of a rarity when all examples are known and accounted for.

Rare coins also benefit from having solid information on the relative rarity of quality within an issue, thanks to grading service population reports. Both Numismatic Guaranty Corp. and Professional Coin Grading Service have kept track of the coins that they have graded in the past three decades and the collective knowledge has helped the hobby create condition censuses to help identify the finest known examples as well as condition rarities within an issue.

Read more of Steve's look ahead at the 2017 rare coin market:

1835 Coronet centThe appeal of investing in coins: Even though it may not feel like it all the time, there are still hundreds of thousands of people who collect coins and millions who have fond memories of coins.

Some lessons to learn from three great collectors: In addition to Pogue, a number of other top collections have come to market recently — perhaps most notably Eugene Gardner and Eric Newman.

A condition rarity is one for which, if mintages were high, lower-grade examples might be common, but in higher grades, examples are rare. This is often seen in 20th century U.S. coins. A 1942-S Washington quarter dollar has a mintage of nearly 20 million pieces and is considered a bullion coin in circulated grades. Even in Mint State 65 it is easily available for under $100. The population thins in MS-66, and in MS-67 examples move up to the $1,000 level. PCGS has graded just two in MS-68 and one of these sold for $7,637.50 at Stack’s Bowers’ March 30, 2016, Rarities Night Auction. 

This understanding of quality allows the hobby to have many data points to help provide accurate pricing information. Online resources like PCGS Coin Facts and NGC Coin Explorer list individual auction transactions by grade, allowing buyers to see the underlying data that is interpreted by a price guide like Coin World’s Coin Values when assigning a single retail value to a certain coin in a certain grade. 

Data points are understandably limited because coins don’t trade every day. It has been estimated that just 1 percent of fine art changes hands every year. Art tends to stay in families longer, while coins are not as multi-generational in their ownership, so coins have a bit more turnover than fine art. Still, with many collectors keeping coins for their lifetimes, the overall turnover of the rare coin market each year is low. 

Repeat auction transactions of the same coin provide interesting fodder for market analysis pieces, but individual sales can be of limited value when evaluating the rare coin market as a whole. 

Take an 1870-S Seated Liberty dollar graded Extremely Fine 40 by NGC that sold for $423,000 at Heritage’s October 2016 New York auction. It is unquestionably rare with just nine examples known; however, it was a bit too familiar to high end coin buyers as it had appeared at auction multiple times over the past decade. 

It realized $805,000 at Heritage’s April 2008 sale of the Queller Family Collection then sold for $470,000 at Heritage’s 2015 Florida United Numismatists sale. A different example, graded EF-40 by PCGS sold for $505,250 at Heritage’s May 2015 sale of the Eugene Gardner Collection. Sometimes the perception of rarity is as important as actual rarity and when examples of a rare issue are offered frequently, buyers become fatigued and prices can drop. 

Check back later for more of Steve Roach's look ahead at 2017!

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