Collectors driving bull market
1/16/2006
By Mark Ferguson
COIN VALUES Market Analyst
Speculation is rampant among professionals in the hobby as to the total amount of business transacted during 2005. Most agree it's at least a few billion dollars, but until someone qualified conducts a competent study, any answer is just a guess.
New Mint products are creating at least thousands of serious new collectors each year. In addition, experienced collectors and some long-lost familiar dealer faces are returning to the market after dropping out of the scene during slower times.
As this bull market has continued during the past three-plus years, various market segments have stepped up to take the lead. We've seen modern coins, registry collecting, rare gold, key-date coins,
State Quarter dollars and other areas drive the market. But one important fundamental for this bull market is that it's been collector driven.
It is very important because this collector base gives the market great stability. In the past, like during the 1979 to 1980 and 1989 bull markets, the driving force was profit-oriented investors and speculators. They are still in the market, but signs are that buyers are now taking a serious collector interest in their coins. There's not much of the "here's some money, buy me some coins" mentality we saw in previous bull markets.
Still, collectors have to consider the financial aspects of purchasing and holding some of these coins. For example, "carrying costs" of the 1933 Saint-Gaudens gold $20 double eagle bought in 2002 for $7.59 million, the Child's 1804 Draped Bust dollar bought in 1999 for $4.14 million and the 1913 Liberty 5-cent coin bought in 2005 for $4.15 million carry "lost-opportunity" costs for the funds invested.
In other words, if invested elsewhere, all these millions would produce investment yields for their owners. At just a 5 percent return, carrying costs of these coins are several hundred thousand dollars each per year! This fact is also understood for smaller size collections. Such financial aspects of collecting should be thought through before purchasing. However, most collectors today realize that holding rare coins in this market has provided much better returns than from traditional investments.
While price resistance and an over-saturation, particularly of modern coins, has impacted the market for lower priced coins, wealthy collectors who appreciate outstanding coins have often thrown the price guide away to nail down particular pieces. This money is often subsequently dispersed throughout the market in purchases using proceeds from these big-money coins.
Generating such funds are the famous coins mentioned and such rarities as the high-grade, uncertified 1795 Flowing Hair silver dollar recently sold for $1.265 million. They even include high-grade common-date coins like the 1908 Saint-Gaudens, No Motto double eagle Professional Coin Grading Service graded MS-69 that brought $94,875 and a 1924 Saint-Gaudens double eagle Numismatic Guaranty Corporation of America graded MS-68 that realized $48,875. Both of these double eagles' mintages exceeded 4 million coins each.
To illustrate just how much the high grades for those two common double eagles account for their prices, we'll note that Coin Values lists the 1908 Saint-Gaudens double eagle for $3,000 in MS-66 and the 1924 double eagle at $2,800 in MS-66, the highest grade listed for these gold coins in our price guide.
Posted 01/25/2006 3:21 pm
