As baby boomers become empty nesters, retirees and born-again collectors, they're dusting off their old blue Whitman coin albums, especially those holding Lincoln cents, and are beginning again where they left off years earlier to complete those collections.

New collectors who've begun with the State quarter dollars are also taking an interest in the United States' longest running series, the Lincoln cent, now 98 years old.

Registry collecting has propelled values for the highest graded, gem-quality Lincoln cents to lofty levels, but nowadays the collecting trend is moving back to the good old-fashioned collecting of circulated early Lincoln cents that collectors no longer routinely find in circulation. Collectors and hoarders have removed most Wheat Heads reverse cents from circulation, leaving behind primarily the Lincoln Memorial reverse cents (struck since 1959).

Circulated Lincoln cents are popular for many reasons. They are more affordable than Mint State coins. Mint State examples stand to lose a greater percentage of their value from such problems as spots, tarnish and fingerprints than circulated Lincoln cents with the same problems.

Values for circulated key dates, like the 1909-S Lincoln, V.D.B. cent and 1914-D Lincoln cent, have been moving higher gradually, right along with the bull market (which coins in general have experienced since 2003), so they have escaped the current rapid rises of many of the other early Lincoln cents. But more recently, the semi-key dates, like the early San Francisco Mint cents from the 1910-S coin through the 1915-S coin, are climbing in all circulated grades.

Interest has also been growing for many common dates, especially in the Extremely Fine and About Uncirculated grades. Typical examples of higher circulated grade value changes are the 1911-S and 1912-S Lincoln cents, which rose from $50 and $55 to $75 each in Extremely Fine.

Many lower grade early Lincoln cents have also climbed in their values. Examples include the 1915-S Lincoln cent, up recently from $9 in Good to $20; the 1924-D cent, up from $90 in Good to $125; the 1926-S cent, up from $3 to $10 in Good; and the 1931-D Lincoln cent, that went to $4 from $6 in this same grade.

It is also interesting to note that many collectors who are buying much more expensive and exotic coins are also collecting circulated Lincoln cents, as they did as kids. Nostalgia lives in the hearts of many collectors. Such collecting also allows them to enjoy the collecting bug with other family members (some affluent baby boomers who may specialize in more expensive series walk coin show bourse floors with their children and grandchildren buying $2 circulated Lincoln cents).

As we approach the centennial anniversary of the Lincoln cent in 2009, expect interest to continue growing in this series and anticipate future higher values as well. Greater demand for the circulated examples is causing dealers to raise their buy prices in attempts to find problem-free examples, which causes retail values to heighten. On the highest end of the grading scale, the full Mint red MS-66, MS-67, MS-68 and higher grade pieces are finding higher levels because of auction competition and registry collecting competition.

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 Rising, falling values sign long bull market continues

2007 has been a transitional year in the coin market in terms of the focus of activity and changing values.

Some values that had risen too high have since fallen, adjusting earlier gains. Many other values have continued to rise. Such mixed activity is normal in a bull market, especially in a market that has lasted as long as this one.

In historical terms, this is a lengthy bull market, having started in 2003. Most of the past cycles lasted just two to three years before running out of momentum.

This four-year longevity is a reflection of long-term fundamental advancements in the market: the advent of third-party grading more than 20 years ago; the influence of the Internet on trading and information exchange; the introduction of new circulating coin designs starting in 1999; and the set registry programs operated by Professional Coin Grading Service and Numismatic Guaranty Corp.

In addition to these innovations and natural long-term coin market trends, changing precious metals' prices have also affected the coin market, including the market for certain gold coins. The spot price of gold bullion has bounced around in 2007 from a low of nearly $600 per ounce in January to a high that approached $700 in April.

The fall from 2006's high of $725, reached during May, caused "generic" gold coins (common-date pieces with values closely tied to their bullion content) across most grades to fall in value. For example, common-date Indian Head $2.50 quarter eagles have dropped from $8,500 last year in MS-65 to $4,500 at this time (the prices for these quarter eagles had simply risen too high).

Other factors account for falling prices. Many prices have languished because the market focus has been on other areas. Twentieth century circulated coins are a good example of a dormant market with the retreat of a great number of collectors who had been purchasing high-grade modern Mint State and Proof coins.

It's obvious from watching advancing values that many people who've been collecting contemporary coins are now collecting earlier 20th century coins, like early Lincoln cents, Liberty Head 5-cent coins, and Standing Liberty quarter dollars. The 1921 Standing Liberty quarter dollar in About Uncirculated 50 is a good example; it advanced from $750 in July 2006 to $1,100 today.

Additionally, an increasing number of circulated coins are turning up at auction graded and encapsulated by third-party grading services. Previously, most of these coins appeared in auctions and dealer inventories "raw," not graded by the third-party services. The encapsulation of circulated coins is a natural market phenomenon when values rise.

The evolution of third-party grading during the past 20 years has been full of fits and starts. PCGS was the first service to begin "slabbing" graded coins in 1986. The concept was received with much skepticism in the beginning. But the grading and encapsulation of coins really began taking hold in 1989 when a short bull market took place. Once that short market was over, the coin market remained in a lull during most of the 1990s.

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Gold futures dropped May 26, 2007

Gold futures dropped more than $9 an ounce Thursday to finish the session at their lowest level in more than two months, as a steep drop in crude-oil prices and a modest gain in the dollar against the euro squeezed demand for the precious metal.
"Again, the dollar is the heaviest influence on the gold price at the moment, with the oil price not directly pressing down on the price," said Julian Phillips, an analyst at GoldForecaster.com.
"We believe the gold price is being held back, not only by heavy and continuing sales from the European banks, but from the U.S. gold exchange-traded fund, StreetTracks, where over 30 [metric tons] of gold has been sold since the middle-of-April peak," he said in e-mailed comments.
"With gold sitting on support after the funds tried to take advantage of the technical weakness of the market today, all are watching to see if gold can recover again," he said.
Gold for June delivery dropped $9.30, or 1.4%, to close at $653.30 an ounce on the New York Mercantile Exchange, marking its lowest closing level since March 15. In the previous session, gold futures gained $2.70.
"The bullion headed for the $650 mark as soon as the U.S. dollar received a fresh adrenaline shot from the durable goods and new-home sales reports, mid-morning," said Jon Nadler, metals analyst at Kitco Bullion Dealers, in an afternoon note.
The dollar extended some of its gains against the euro and trimmed losses against the yen Thursday as traders digested the latest U.S. economic data. See Currencies.
A Commerce Department report showed new orders for U.S.-made durable goods increased 0.6% in April, above expectations for no change. See full story.
In a separate report Thursday, the Commerce Department said sales of new U.S. homes unexpectedly surged in April, rising by 16% to a seasonally adjusted annual rate of 981,000. See full story.
But first-time applications for state unemployment benefits rose by 15,000 to a seasonally adjusted 311,000 in the week ending May 19, the first increase in the past six weeks, the Labor Department reported Thursday. See full story.
Meanwhile, weakness in crude-oil futures likely contributed to gold's retreat, with the lower energy prices helping to ease investment demand for the precious metal. July crude touched a low under $64 a barrel. See Futures Movers.
Gold sales
Taking a look at the bigger picture, Neal Ryan, director of economic research at Blanchard, pointed out that the dollar's trading near decade lows and oil has a "tight grip" on the mid-$60 range. Also, "most miners spent their time at recent conferences talking about flat to lower production totals and needing higher prices to justify capital expenses."
"These are the fundamental market issues," he said in e-mailed commentary. "This is what we believe in and this is what we follow. Nothing's going to change our outlook on this segment of the market as long as we continue to get more and more data about lower mine production, more de-hedging, increased demand and so on."
Meanwhile, Kitco's Nadler said that the U.S. Mint has sold only 1/10 of the amount of bullion coins month-to-date, vs. one year ago. See the U.S. Mint data.
"Just try to tell us that such a dismal sales level is not a reflection of souring investor mood, low expectations, and fast-changing purchasing patterns," he said.
"Yes, we are oversold; yes, we are due for another corrective pop," he said. "But, boy, this market is looking quite a bit different now."
Other metals prices also posted losses Thursday. July silver fell 1.4%, or 18.5 cents, to close at $12.92 an ounce, July platinum declined $16.30, or 1.3%, to end at $1,290.70 an ounce and June palladium fell $8.45 to finish at $369.10 an ounce. July copper closed down 12 cents, or 3.6%, to close at $3.1805 a pound.
On the supply side, gold warehouse inventories fell by 514 troy ounces to stand at 7.66 million troy ounces as of late Wednesday, while copper supplies fell by 260 short tons to stand at 30,621 short tons, according to Nymex data. Silver supplies were unchanged at 132 million troy ounces.

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Rarity and pizzazz attract

The market for high-grade contemporary coinage is acting differently from the market for earlier coinage.

In contemporary coinage, also known as modern coinage, collectors predominantly want the Mint State and Proof 69 and 70 grades.

However, as the availability of these coins in third-party-graded encapsulations increases to more than there's demand for, particularly among the more-common high-grade issues, their prices are falling. But rarer, high-grade modern issues are still appreciating in their values, greatly influenced by registry collecting.

On the other hand, 69- and 70-graded 20th-century and earlier coins are virtually nonexistent. A few 68-graded coins turn up once in a while, but the market focus is on 66- and 67-graded coins. Demand for the once popular 65 grade, sometimes referred to as an "investment grade," has diminished as preference has turned to the 66 and 67 grades, and the 68 grade when available.

"Gradeflation," a diminishing in standards, has also caused collectors to move away from the 65 grade.

For some coins, the highest grades known are circulated (below 60). Examples can be found in the early copper series, early coinage struck prior to the use of steam presses in about 1836, and among rare gold coins.

Demand has slowed for ordinary-looking and off-quality coins. Collectors want coins with that extra pizzazz – beautiful, original toning, strong strikes, dazzling luster and any other attributes that enhance the look of a coin. This trend is true for circulated coins as well. Collectors want problem-free examples.

Cleaning is another problem that turns connoisseurs off. Twenty years ago, the grading services were allowing almost no coins to be graded if cleaning was suspected. But since then, they've allowed many coins to be graded that have been lightly cleaned.

However, some appear to be rather harshly cleaned. For example, Charlotte and Dahlonega Mint gold coins were often weakly struck. Many dealers have thought these coins would sell better if they were bright and shiny, so they've cleaned them. Such coins are probably harmed forever, affecting their values. Original, uncleaned C- and D-Mint gold coins trade for strong premiums over their cleaned counterparts.

Coins that are just "ordinary" or are off-quality are sitting dormant in dealers' showcases and are going begging in auctions. Discounts are prevalent for such coins.

During previous similar market conditions, I've seen individual coins sit in the same dealer's showcases for months, and then I've seen some of those same coins appear in other dealers' showcases, only to sit again for months without selling. Dealers often welcome discounted offers for such coins. Dealers would rather sell coins that have been lingering in inventories and get their cash working again in coins that are more likely to sell much quicker.

Cash flows for some dealers are now tight, and offers on lingering coins may be welcomed. However, too much bargaining may work to a buyer's detriment. Strike a balance.

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Coin market seeking more normalcy after bull run

After about four years of a broad-based bull market expansion, the coin market is settling into a more normal pattern of activity in which values for many series are holding firm. A few areas are softening and others are still rising.

For many active collectors, this is a welcomed relief from the steadily rising prices encountered during recent years.

For many dealers, business has slowed from the frenzied pace of those years and cash flows have suffered for some. However, many dealers have made, and kept, substantial profits. Most dealers can use a much needed rest from all those long hours during both weekends and weekdays. Tax season and a slower economy have also been factors in the mix.

Optimism prevails, though, as we watch another major record price set by the best of the five 1913 Liberty Head 5-cent coins at $5 million – the second highest price on record for any rare coin. The sale of this coin is also a good example of the demand still present for high-quality rarities.

Quality is also a key ingredient throughout the market. Demand for "originality" is strong; off-quality coins are selling for discounts, now even more so than during the raging bull market. This is especially true for virtually any coins that have been cleaned, washed and even lightly dipped. Connoisseurs want coins with attractive, problem-free, "original" surfaces.

Values for Mint State 69 and 70 contemporary coinage are both rising and falling, depending on high or low populations for individual coin issues. It's important to note that the number of registry sets continues to grow.

Even though precious metals have risen substantially in price during recent weeks, dealers are reporting that common-date, pre-1934 gold coins, also known as "generic gold," are experiencing slow demand. Even 90 percent silver pre-1965 dimes, quarter dollars and half dollars, and the 40 percent silver Kennedy half dollars minted from 1965 through 1970 (1970 is only available from Proof and Mint sets) are selling for near their melt values and below, in large enough investment quantities to warrant those prices.

Early commemorative coins, minted from 1892 through 1954, have been about the only market segment that has virtually "stood still" during the great bull market we've been experiencing, except for very high-grade, toned examples. Modern commemoratives (since 1982), like other modern Mint products, have captured collectors' attention instead. However, the early commemoratives are finally getting some attention, causing a few values to rise.

Coin Values is in the process of expanding the listings for early commemoratives, including listing pieces separately that previously were listed in sets. Since these coins have been issued, all major U.S. coin price guides have continued to list certain issues only as P-D-S sets (an example of each from the Philadelphia, Denver and San Francisco Mints). Many of these sets were issued with coins from all three Mints inserted in one cardboard holder. Since the advent of third-party grading, these coins have been trading more commonly as individual coins, rather than as sets.

In general, the sentiment in the coin market is that momentum will more easily resume its bullish trend than turn the other way.

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Prices for high-grade modern coins can vary

While demand for a few of the earlier series has slowed a bit during recent months, collector demand for high-grade modern coins is still booming four years into a bull market.

Before discussing the marketplace, let's acknowledge that the term "modern coins" means different things to different people.

In classical numismatic studies, "modern coins" are considered anything struck after about A.D. 1500. More recently, however, the marketplace has adopted different definitions for "modern" U.S. coinage.

Some in the marketplace may consider modern U.S. coins those pieces struck after silver was removed from U.S. coinage from 1965 to 1970. Others may consider modern coins to be those struck beginning with another year, such as 1982, when the minting of commemorative coins resumed after a long pause since 1954. Still others consider any coin design in current use to be "modern" coinage no matter its date, like a 1909 Lincoln cent, a 1938 Jefferson 5-cent coin or a 1932 Washington quarter dollar.

Many of these coin issues were struck in quantities of hundreds of millions into the billions. However, a few issues have been struck in quantities of just tens of thousands of pieces, including several commemorative and bullion coin issues.

The commonality of many modern coin issues makes them very affordable for most people in perfect or near perfect grades. However, not all so-called perfect Mint State 70 and Proof 70 grade coins sell for the same prices. Grading services that grade these coins are not all the same. Each is a private business entity with its own grading standards.

However, these services must at least come close to grading coins within the generally accepted standards of what collectors expect, or the coins graded by companies with loose standards will sell for much less than those graded by other companies with more strict standards. In addition, coins graded by the oldest, largest and most well-known grading services sell for more money than those graded by newer, smaller grading services.

Whether a grading service publishes a report of the total numbers of coins graded per coin issue and by grade seems to make a difference in the prices they realize as well. However, it's the registry programs operated by Professional Coin Grading Service and Numismatic Guaranty Corp. that really seem to be driving the market for modern coins.

One example of price differences between coins graded the same by different grading services routinely has been showing itself as about a $200 difference in prices for MS-70 2006 American Buffalo gold $50 coins. Other examples of less expensive coins may vary by multiples for coins graded the same by different firms.

A few collections or date runs of different series are showing up in auctions, but most of the modern coins offered are from the most recent years. This indicates that dealers are submitting recent issue coins in bulk, after prescreening them. Their profits come from the few coins they get back that make the coveted Proof 70 or MS-70.

Collectors should know that the secondary market for these coins is thin. Many dealers are not buying back what they originally sold to collectors. The best places to resell them may be through known auction firms.

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Long-term approach helps collectors with price swings

The broad-based, four-year-old bull market in collectible coins has normalized in some segments, with values stabilizing or even softening.

For example, some pre-1934 gold coins have fallen in value during the past year, partly because of lower gold prices and partly because some of the series had become over promoted, resulting in price resistance and dealer overstocks.

Other series, such as the Indian Head 5-cent coins, have gone through a couple of cycles during the past few years, particularly for the high-end examples, whose most recent period of rapidly rising values has stabilized, although prices are being discounted. However, circulated examples from this same series have continued rising in values without the fits and starts experienced by their higher-grade counterparts.

The designs from the Indian Head 5-cent coin have proven to be extremely popular among collectors, many of whom are beginning sets of the various denominations that now bear them, which also include the 2001 American Buffalo commemorative silver dollar and the American Buffalo 1-ounce gold bullion coin, which this year will be joined by smaller denominations, the tenth-, quarter- and half-ounce gold coins, for the collector versions.

Many collectors are in it for the money as much as they are enjoying their collecting endeavors. Some jump from series to series, building and selling them off when the market seems ripe or their personal circumstances change. However, veteran dealer Julian Leidman of Silver Spring, Md., who has probably handled just about every type of coin, says: “Don’t be concerned with the money. Collect over the long-term and the money will shake out.”

In building collections over a lifetime, collectors buy in all sorts of markets – rising, falling and stable. This overcomes short-term price fluctuations and allows collectors to average out costs over various market conditions. One also gets to know a series more intimately over the long-term, making wiser buys as time goes on. Also, long-term collecting allows for upgrading individual issues and expansion into varieties, patterns or exonumia associated with the series. These aspects all enhance collections, boosting interest in them and often resulting in much higher prices when such collections are finally sold.

A high registry ranking from the grading service programs and a collector’s story and photograph in an auction catalog upon selling are also helpful in garnering higher prices. A few years ago Heritage Auction Galleries produced a specialized catalog for a high-grade Indian Head cent collection. Steve Ivy, a principal in the firm, remarked that he never thought they would produce a specialized catalog for such a commonly collected series.

There are ways to promote a collection formed over the long term with extra care. A great example is the marketing of the collection of John J. Pittman Jr., which was sold after his death in three auctions from 1997 to 1999 by David Akers. The catalogs contain a wealth of information, including details about the costs and sellers of many of the items, enhanced by high-quality photographs. The catalogs also feature a personal remembrance from Pittman’s daughter and a biographical sketch by Akers detailing Pittman’s collecting strategy and experiences. Each of the auctions was extensively previewed in the coin collecting press, which also covered the results of each sale, generally with analysis of the remarkable price appreciation.

Pittman had begun collecting in the 1940s, reportedly spending no more than about $100,000 on his collection in total. His family has been able to enjoy fruits of his efforts; the collection brought nearly $29.6 million when it was sold.

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Posted March 02, 2007

As we've reported for months, demand for the very rare gold coins has continued unabated, although demand for other gold coins languished for much of 2006 and early 2007. However, after the pause in the action for several months, an across-the-board revival in demand for all gold coins has begun.

Common-date pre-1934 gold coins, often referred to as "generic gold" by dealers, took a substantial hit in values last year but are now very much sought after again at today's lower value levels.

Generic gold was hit hard last year with a double whammy. The spot price of gold on the world market, after starting off 2006 hovering around the $550 per ounce level, took off in the spring of 2006, quickly advancing to about $725 in May. It then fell to approximately $575 at the beginning of summer 2006 and continued to bounce between that level and about $650 for the rest of 2006.

In addition, the American Buffalo gold coin, introduced in June 2006, drained away most of the demand for generic gold.

The spot price of gold on the world markets began 2007 with a precipitous fall during the first week of January, from about $640 per ounce to about $610. Since then, however, it has been on a very steady rise, approaching the $680 per ounce level as this analysis was being written.

The rapidly rising gold price this year has again pumped up demand for common-date gold coins and has further strengthened demand for all the rest of the rare gold market. Gold $2.50 quarter eagles through the $20 double eagles are regularly collected and purchased for investment, with the gold dollars following on their coattails, except for the scarcer design Indian Head, Small Head of 1854 to 1856, which are popular based on their own attributes of scarcity and condition.

A great example of what's been happening in the rare gold market is the recent sale of one of 12 known 1854-S Coronet quarter eagles, offered in Heritage Auction Galleries' Long Beach Signature Sale during mid-February. Graded Extremely Fine 45 by Professional Coin Grading Service, the coin sold "on the floor" to Laura Sperber of Legend Numismatics for a "hammer" price of $300,000 plus the usual 15 percent buyer's fee, totaling $345,000.

The piece sold in the Heritage auction compares to a similar example, billed as the "second finest known" by American Numismatic Rarities and sold in September 2005 for $253,000 to coin dealer Douglas Winter, a renowned specialist in rare gold coins. That coin had been graded Extremely Fine 45 by Numismatic Guaranty Corp. But some of those who examined both pieces agree the NGC-graded coin is a trifle finer than the PCGS-graded example sold in February.

The market value increase for this rare date by more than a third in approximately a year and a half is indicative of the market for rare gold during that time. It should be noted, however, that this quarter eagle carries a little more fame and popularity among specialists than many other rare gold issues, which probably helped its appreciation in value.

In contrast, generic gold coins lost about 40 percent of their premiums over their gold content last year, although they have advanced noticeably in their values since then.

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U.S. Mint plans to buck skeptics in 2007

Posted January 26, 2007

Given the pending release of the new Presidential Golden Dollars, 2007 could be one of the most exciting years for collectors. Others, however, already have resolved to dislike the coins.

This will be the third effort by the U.S. Mint to create and promote dollar coins as part of everyday circulating currency. The Sacagawea golden dollar was released with much fanfare in 2000. It came on the heels of the Susan B. Anthony dollar released between 1979 and 1990. The Anthony was reviled because it bore too much resemblance to the standard quarter.

The optimism behind the new presidential dollars rests heavily on the unbridled success of the 50 State Quarter Series. Since their inception in 1999, billions of the quarters have been collected. The Mint has established that more than 130 million people in the U.S. now collect coins, and much of that interest is attributed to the quarters.

The first four presidential dollars will be released beginning in February. The first dollar out of the chute will feature a portrait of George Washington on the front. It will be followed throughout the year with dollars honoring John Adams, Thomas Jefferson and James Madison. The reverse of each coin depicts the Statue of Liberty, "$1" and the words "United States of America." Four presidential dollars will be issued each year until all dead presidents have been honored.

One of the impressive and unique aspects of the presidential dollars is the creative inclusion of lettering on the edges. Around the circumference of each coin will be the words, "In God We Trust," "E Pluribus Unum," the date and mintmark.

In conjunction with the release of each circulating dollar, collectors will be able to acquire pure gold half-ounce coins commemorating the first spouses. Naturally Martha Washington will appear on the first followed by Abigail Adams and Dolley Madison. In a somewhat peculiar move, because President Thomas Jefferson's wife died before he was elected in 1801, an allegorical rendition of Lady Liberty used on the half-cent coin issued during of Jefferson's administration will be featured on the third First Spouse Coin.

The new dollar coins are obviously exciting for collectors. Several hobby companies already have begun selling albums with spaces for each of the dollar coins minted in Philadelphia and Denver. With the introduction of new technology - edge lettering - it also offers the very real opportunity for collectors to find errors that will invariably command a premium in the aftermarket.

As attractive and shiny as the new dollars will be, without the public giving them a fair shot their future may not be bright. Judging from some mail I've received, many don't plan to use them. Most of the naysayers complain that the coins are too heavy. That's curious considering four quarters weigh almost three times as much as one golden dollar.

Some contend that, like Canada, the U.S. government will need to eliminate paper dollars before dollar coins are widely used. I disagree. The key isn't the government but vending machine companies. Without question I'd much prefer to drop one or two dollar coins in a slot rather than a handful of quarters.
 

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Forecasting the Future
 Posted: January 25, 2007

This may be the year that dealers truly identify what is a rare coin. The past year saw many rarities sell at auctions and through private treaties. Some rarities may prove to be a steal at high prices realized while some of the less expensive rarities may increase in a mega impressive fashion. What dealers and collectors are finding is that when you take a combination of low mintage coins, along with grade rarity and look at the perceived numbers in the census reports of NGC and PCGS, you find that the possibilities of locating additional specimens of many of these rarities is not very likely. When you add to this mix the increasing numbers of wealthy collectors searching for the best and rarest that their money can acquire, the future for these rarities may seem unlimited. We have reported price advances over the last year for this category of coins to the point that it is almost not believable. What many numismatists don’t realize is that the only reason many of these coins did not advance at this rate in prior years was a lack of depth and true collector demand.

Many of the coins that fit into this category come from Early Coinage, especially Gold. Numerous issues come from the group of $2 1/2, $5, and $10 Gold; they originated with low mintages, have a high attrition rate, and the higher you step up in quality the fewer coins can be found. Advanced numismatists have been studying the differences in the FMV from one grade to the next highest and comparing the values. When they see that the census numbers fall severely in the next grade and the FMV is barely above the lower grade then they have identified a coin that is on their watch list. We have seen an increase in this type of numismatic analysis over the last few years and even more so in the last year. We fully expect this to exacerbate over the next several years.

A myriad of Early Gold coins have not only increased in FMV over this past year, they have made exorbitant gains. The 1796 No Stars $2 ½ Capped Bust has spearheaded this massive increase. This is an extremely popular issue with several major dealers and advanced collectors. When you attract new serious collectors to this mix it is no wonder these coins have moved so magnificently. In MS60 all the way through to MS65, this issue has resulted in the FMV increasing at least 15% and in at least one grade 50%. The MS61 moved from an FMV of $200,000 in January of 2006 to a current $300,000. In MS62 it climbed from $275,000 to an FMV of $337,500. You must remember that this is a very low mintage coin and the higher the grade the less likely you are to find one at any price. The way the FMV has moved it almost seems like advanced wealthy collectors do not care how much the coin cost as long as they can acquire an accurately graded one.

Another true rarity within this series is the 1808 $2 ½ Capped Bust Left; this has advanced across most grades at 20% and more. The FMV for MS60 was reported at $135,000 in January last year and is currently listed at $162,500. In MS62 it rose from $173,550 to the current $230,750. These are the kinds of coins where a dealer bid price or a listed FMV may not have as much relevance as we would like to think. When two or more potential buyers face each other in a major auction, we have been finding that the final prices realized have been significant premiums to our FMV when the coins match the grade on the holder. This simply indicates that the demand is much stronger than the perceived values might indicate. And it does not seem like the demand has slipped at all for these types of coins. We not only have some very strong collectors, there are numerous major dealers dedicated to the rarity factor and can change the way these coins are marketed.

While this past year saw a strong run for the $3, $5 Indian, and $10 Indian Gold, it was nothing compared to the Early $5 Half Eagles. The 1795 Small Eagle moved from $57,500 in January last year to today’s FMV of $75,000; the MS62 advanced from $69,440 to $121,880; and the MS63 from $140,000 to a current FMV of $165,630. Additional significant increases came about for the 1829-1834 Capped Bust issues. The AU50 had a FMV listed of $29,380 last year compared to the current FMV of $54,060; MS60s moved from $43,130 to $65,940. The coins in this series, all grades, moved up at a dramatic pace. Not so amazing but still impressive was the Classic $5 Gold (1834-1838); nearly every date increased in all grades despite the fact there are more coins available in the marketplace than previously mentioned series. It is notable that numismatists are doing their homework and comparing one series and their FMV prices to other series and noticing where there are significant differences that may make the future rosier for one than the other.

Early $10 Gold also showed some sizable progress this past year. Most grades for the 1795 through 1804 dates rose from 15% to 30%. There are very strong buyers for this material and we have not noticed any let up in demand. For example, the 1795 13 Leaves in MS62 moved from $110,630 to $156,000 FMV in just one year. The 1804 Crosslet 4 in MS60 jumped very significantly from $53,150 to today’s $74,750. Like the previously mentioned gold coins this series seems quite capable of handling momentous increases based on the fact that demand is constant and availability is sparse.

This last year we have observed a reawakening of Deep Mirror Prooflike Dollars. There are a substantial number of serious collectors wanting the best there is and they have the means. These collectors want the highest graded, deepest coin they can locate. When these coins become available in a competitive venue (a major auction for instance), prices can go for multiples of our listed FMV. We have reported a plethora of FMV increases during the year. Here are just a few. The 1878 8 T/F in MS65 DMPL began 2006 at an FMV of $7,810 and begins 2007 at $17,500. What we find most interesting about DMPL Dollars and many other series alike is the fact that many specific rare coins are always searching for the so-called “correct” value. What appears to be a high price today may just be tomorrow’s bargain. Another significant change was registered by the 1881 in MS65 DMPL; it rose from $13,130 to a current FMV of $18,130. In many cases, if you can find higher grades of these rarities, the prices collectors are willing to pay could be astronomical.

We have mentioned many high valued coins in this comparison of last year’s big gainers. What we have learned from the past is that whenever there are major gains in high valued coins there is usually a trickle-down effect for lower value coins. Collectors who cannot afford these high priced rarities still are in the hunt for coins that fall into their collecting price range. This is what most dealers and collectors love about numismatics; the never-ending search for the right coins for their collections. Good hunting!

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Bull market for gold is set to continue in 2007: analysts

Posted: January 09, 2007

The price of gold could hit $850/oz in 2007, as investors will continue to increase their holdings in gold and other commodities, according to TheBullionDesk.com analyst Ross Norman.

Gold is now in the longest bull market since the Midas metal was released from its ties to the world's monetary system in the early 1970s and became available for trading as a commodity, and most analysts believe this trend will continue through 2007. One analyst is even forecasting a spike to $850/oz (basis the London PM Fix), the all-time-high recorded in 1980 during the 1977-1980 bull market for gold.

So far, gold has benefited from an influx of investor dollars - particularly by hedge funds - in reaction to weakness of the dollar and deteriorating political conditions in most parts of the world. In addition, there has been growing physical demand for gold worldwide, while mine production has not kept pace. Indeed, global mine production has reached its peak and will start declining, according to statistics compiled by some of the leading analysts.

After experiencing a bear trend from 1997 to 2001, during which the gold price plummeted to a low of $252.80/oz - the lowest in 20 years gold started an uptrend in earnest in 2002. Each year the market has been making higher lows and higher highs, touching a high of $725/oz in 2006 - the highest level since 1980. And gold seems poised to move even higher this year.

"I think gold could hit $850 this year," said Norman. "We are predicting an average price of $700/oz with a spike to $850/oz. In four of the last five years, gold gained more than 20% per year, with a 23% rise in 2006. We are forecasting a further 20% rise in 2007."

This optimistic outlook for gold is shared by Philip Klapwijk, executive chairman of UK-based research firm GFMS. "I will be very surprised if the average this year is not substantially higher than last year's level," said Klapwijk. "The market has been reacting strongly to the dollar and I am pretty bearish on the dollar."

Indeed the dollar has fallen sharply against other major currencies. "Since the greenback's peak in early 2002, it has dropped 35% against the euro, 28% versus a trade-weighted basket of major currencies, and 18% versus the currencies of all countries the US does business with," according to the January 15 issue of BusinessWeek online.

Those analysts who are predicting a further deterioration of the dollar cite a widening US trade deficit, an expanding budget deficit and a weakening US economy. In addition, the US seems to be bogged down in a protracted war in Iraq that is likely to bleed the country's financial resources further.

Besides further depreciation of the dollar, Klapwijk believes investors will continue to pour money into the gold market. "It does not require that much money into gold to make a difference in the gold price," he noted. Other positives for gold, according to Klapwijk, include declining sales by central banks and a reduction in the hedge books of major mining companies.

According to Norman, the prospects for higher gold prices are "very positive" because of strong market fundamentals and "particularly because of the huge amount of cash coming into commodities, which have taken metals across the board to record highs." He sees investor dollars as a solid base for gold. Norman noted that approximately $120 billion was invested in commodities in the past few years, with "almost every pension fund moving a percentage of their assets into gold."

Demand for gold is expected to increase further with the Chinese now being able to buy gold legally. "For the first time in a generation the gold market is opened up in China; in Pakistan, people will soon enter the gold market" and other countries are liberalizing their policies on gold purchases by the public, said Norman. "In addition to that, there are new products in gold, such as ETFs, bringing an entirely new audience into the market." He added: "Central banks seem less willing to sell gold than in the past, and the truth is that some central banks are buying gold."

Besides the potential for a further increase in demand for physical gold, the metal's popularity has been greatly enhanced by the strong performance of gold stocks and other forms of investment based on gold. With the American Stock Exchange's Gold Bugs Index (HUI) and the Philadelphia Stock Exchange's (XAU) outperforming major stock indices recently, the allure of investment in gold has been further advanced, analysts believe.

Consequently, while there is statistical evidence that demand for gold is on the rise while production is likely to decline, the basic laws of supply and demand suggest a continuation of the bull market.

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Forecast remains bullish for 2007 coin market
Posted 12/26/06

While a few segments of the economy may be struggling, like the housing sector, the Federal Reserve is keeping its eye on inflation, which it reports to be the greatest concern at present. Comparatively lower energy prices are now helping to quell the inflation risk, but it's nevertheless a concern that's underlying the economy.

Because of this continuing risk, many investors are again turning to precious metals and rare coins as inflationary hedges, as these items tend to increase in value as inflation heightens. Many professional gold analysts say that central banks of several countries are working in coordination with each other to artificially keep the price of gold stable or to try to cap the price. Some believe the price will soar in the near future as natural market forces overtake planned economic controls.

2006's volatile gold market resulted in a price correction that forced many pre-1934 gold coin values significantly lower as the premiums over their melt values dropped. So this may be a good time to purchase common numismatic gold coin issues.

Coin dealers are reporting the market to be very active again at this time. Those who handle the high-powered coins report that market segment has not slowed down in several years. People who purchase coins in the tens and hundreds of thousands of dollars are usually quite sophisticated in money matters and wouldn't spend this kind of money if they perceived a serious risk of falling coin values.

However, on the other end of the population spectrum, television news programs report that about two-thirds of Americans are living from paycheck to paycheck. Most people just can't seem to get into a savings mode.

By building coin collections people are able to have fun and build equity in their collections that's reasonably liquid.

We see this happening as values for circulated coins continue to grow, and as high-end coins and circulated coins have continued to experience strong demand. It's the coins in the middle - the low to mid-grade Uncirculated coins, those grading from Mint State 60 to MS-65 - that haven't shown much action for a while in general.

These days, collectors generally want coins that grade higher than MS-65, except for modern issue coins, for which people want the MS-69 and MS-70 grades. Registry collecting is still a strong influence in this collecting arena. The Wall Street Journal reports "online registries of graded coins tap into collectors' competitive sides and help drive prices higher."

The Internet has also been credited with helping to greatly expand the coin market by allowing traders to more easily buy and sell coins and to study them. However, it's also publicity from outside the market, like the recent Wall Street Journal article, that's helped to attract new buyers and collectors.

The United States Mint has also been a huge factor in helping to create new collectors. The State quarter dollars program, which began in 1999 and runs through 2008, and the new designs for the Jefferson 5-cent coins, introduced from 2004 to 2006, have greatly stimulated collector purchases. Now the market is poised for the introduction of the Presidential dollar coins beginning in February. Mint officials are hoping they, too, will attract strong demand from the public.

NEW COIN DESIGNS like the State quarter dollars and the Westward Journey 5-cent coins, like that above, have helped promote collecting among a larger population. The impending start of the Presidential dollars program may have similar results.

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Market remains strong in 2006, but 'choppy'
Posted 12-19-06

For a buyer or seller of coins, it's often helpful to know where the market has been to be able to form some expectations of where it may be headed. So here's a recap of the 2006 coin market.

We're now about four years into a bullish trend with signs of continued growth in the collector base, resulting in even more capital entering the market. This is exhibiting itself in the form of collectors, en masse, moving into buying coins from earlier series than what they've been collecting.

We are also seeing increased attention being given to coins and precious metals by the mainstream media, which is helping to attract more collectors to the hobby. This is especially true for people who have been introduced to precious metals as an investment and then move into buying and collecting coins. Increased capital and additional collectors coming into the market means prices should continue rising.

During 2004 and 2005, coins from all grade levels and price ranges generally rose in unison, with some segments soaring while others increased more slowly. But during 2006, we experienced a greater divergence in market activity between various series and market segments. During the past year, some series took a breather from continuing price rises while others continued to advance.

Common-date, pre-1934 gold coins dropped significantly in their values (about 40 percent) after their premiums over their melt values had ballooned too large.

Values for circulated coins in general rose steadily during 2006. Coin Values' Key Date Index for coins grading Extremely Fine 40 rose by a little more than 18 percent. But many circulated values rose by much greater percentages than that, as demand for key dates was stronger during 2004 and 2005 than during 2006. High-end rarities and condition rarities, trading for tens and hundreds of thousands of dollars or even millions, have also continued to soar in value, while values for mid-range coins almost stood still.

Coin Values' Mint State 65 Key Date Index budged just over 3 percent. However, this grade has lost its allure and is not as indicative of the investment aspect of coins as it once was. Now people want modern coinage grading MS-69 and MS-70, and for earlier coinage, if they are available, pieces grading MS-66, MS-67 and even MS-68. This demand for higher grades derives from "registry" collecting, which is having an immense impact today.

Early U.S. coinage, struck prior to 1836, has soared in value in both circulated and Mint State grades.

Additionally, coins that solidly meet their grades are continuing to become more difficult to find. A greater disparity is emerging between values for "premium quality" coins and those just making the grade or those with problems. Because of the significant rises in values during this bull run, many collectors have lowered their standards to more affordable coins than what they've been collecting. Some collectors have just sold their collections.

To sum up 2006, a greater divergence in demand and activity in various market segments has developed, with one dealer characterizing the 2006 coin market as "choppy." A change in the market grading system may also be shaping up, as huge gaps in values have once again developed between Mint State grades for many coins/

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The rare-coin market is hot, thanks to the Internet and soaring gold prices
Posted 12-18-06
 

Six years ago, New York investment adviser Robert Beckwitt was looking for an alternative to the increasingly expensive equity market. While other investors were busy scooping up real estate, Mr. Beckwitt returned to an old love -- rare coins.

One of his first big purchases: a red 1909 Lincoln penny, part of the first issue of U.S. coins to include a portrait. Also featured on this particular coin was a feature that the mint removed from subsequent issues: the initials of the portrait's sculptor.

Mr. Beckwitt paid a New Jersey coin dealer $10,000 for his pretty penny five years ago. His investment today has grown tenfold, thanks to a hot rare-coin market fueled by hungry collectors, greater transparency in the market on the Web, and the surging price of precious metals, especially gold, which earlier this year hit a 26-year high.

Indeed, the 48-year-old Mr. Beckwitt reflects growing ranks of wealthy baby boomers whose desire for alternative assets has led them to invest in a hobby they discovered as a child. Mr. Beckwitt, who started collecting coins at the age of 8, sorting for old pennies in bowls of spare change, says he owes his interest in coin collecting to his "love for the history and the idea of finding something rare."

Among collectors and investors at large, rising gold prices and publicity generated by record-breaking coin sales have piqued interest as well. In a 2002 auction, a 1933 double-eagle gold coin sold for $7.6 million -- a price widely acknowledged by people familiar with the market as the highest ever paid for a coin in a public auction. The 1933 double-eagle coins were never issued, and nearly all of them were melted down during the Great Depression, after President Roosevelt discontinued the gold standard.

Perhaps the biggest boost to coin investing, though, has come from the market's greater transparency -- a state owed largely to the rise of Web sites that display price histories and sell rare coins inspected and rated by coin-grading services. The two major services, the Professional Coin Grading Service of Newport Beach, Calif., a unit of Collectors Universe Inc., also of Newport Beach, and Numismatic Guaranty Corp. of Sarasota, Fla., were established in the 1980s to reduce counterfeit coins and make the trading of coins more liquid by establishing uniform standards for grading. Collectors bring their coins to the services, which rate them on a scale representing poor to mint conditions, then seal them in see-through cases that state their grade.

What the collectors do with their coins after that is up to them. But many post them on various Web sites, some run by the grading services themselves, others run by hobbyist associations and coin dealers, where collectors and investors can admire, evaluate, buy and sell the coins online.

"There's more interest in coins now than there has ever been, and it's across the board," says Jeff Garrett, president of the Professional Numismatists Guild, Fallbrook, Calif., which is composed of various coin dealers, sets standards for coin trading and works as a kind of peer-review organization.

Heritage Auction Galleries of Dallas, the largest coin-auction house in the country based on revenue, expects its sales to double to $575 million this year from $225 million five years ago. And nearly one-third of its sales this year will come from the Internet, President Greg Rohan says.

Online registries of graded coins -- which aren't always for sale -- tap into collectors' competitive sides and help drive prices higher for coins that are for sale. There are online contests, for example, in which grading services recognize, say, the most-complete collections of certain kinds of coins. The finest collection of late-19th-century Seated Liberty and Trade Dollars on the registry maintained by Professional Coin Grading Service, for instance, belongs to Bruce Morelan, owner of an electrical contracting business in Spokane, Wash. Seated Liberty dollars depict Lady Liberty sitting; Trade Dollars were used in trade.

The 45-year-old Mr. Morelan says that posting his coins in the PCGS registry, at www.pcgs.com, is like pushing his pennies into their cardboard display cases when he was a kid. "It gives you that same great feeling of accomplishment," he says.

Mr. Morelan is perhaps better known among rare-coin collectors as the purchaser last year of a 1913 Liberty nickel, of which only five are known to exist. The Philadelphia mint is believed to have coined only five before the design changed from the Liberty Head to the Indian Head, used from 1913 until 1938.

The price to Mr. Morelan: $4.15 million, an amount considered by market experts to be the second-highest ever paid for a coin.

A word to the wise for newcomers: Rare coins can hold dangers for novice collectors and investors. One can run into counterfeit coins, as well as disreputable dealers pushing low-quality coins that have little resale value, warns Scott Travers, a collector and president of Scott Travers Rare Coin Galleries LLC, New York.

Mr. Travers says collectors can protect themselves by buying from dealers who are members of the Professional Numismatists Guild or the American Numismatic Association and by buying coins that have been certified by one of the two professional grading services. Experts also warn that grading and pricing are separate issues. Just because a coin has been certified doesn't guarantee the seller is asking a fair price.

The market presents other risks, as well, for those who don't do their homework. According to the CU3000 Rare Coin Index, which tracks the 3,000 most actively traded coins, prices are up 1.3 percent year to date to Dec. 1 and about 11 percent for the past three years. But while many coins have produced strong returns, experts warn that, like stocks -- not every coin is a buy.

Gold prices, too, have fallen since reaching a 26-year high in May of $719.80 an ounce. But many analysts believe those prices have room to rise, based on a weakening U.S. dollar and an uncertain global political outlook; gold is regarded as a safe haven in times of economic and political uncertainty. Goldman Sachs Group Inc. forecasts an average 2007 gold price of $785; J.P. Morgan Chase & Co. estimates next year's average price at $655.

All bets aside, experienced collectors say that newcomers who put together collections because they have a genuine interest in coins will be more successful than those who simply seek coins for investment profits. "If I don't make a dime, I still get all the enjoyment from my sets," Mr. Morelan says.

Some collectors compare their rarest coins with expensive works of art: Both have a value that transcends market worth.

"You can't sit in the bank with a stock certificate and a magnifier and go, 'Oh, wow,'" says Jay Brahin, 52, a Chicago stockbroker who since 2002 has assembled collections of early-20th-century $20 gold pieces. Says Mr. Brahin: "The 'coin geek' has turned into 'coin chic.'"

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Lincoln Cent Values Climb

Posted 11-01-06

Market activity indicates that a huge number of collectors are working diligently at collecting Lincoln cents, as demonstrated by the increases in values for these coins.

This series has a lot going for it these days. The Lincoln cent is the longest running contemporary series, dating to 1909 (so we will soon be celebrating its 100th anniversary). Furthermore, it has been nearly 50 years since the original reverse design of a pair of wheat heads was last used (in 1958) and replaced the next year by the Lincoln Memorial design.

Also adding to the interest in the series is the current, well-known public and political debate about whether to continue producing the cent or end its manufacture because of rising production costs and the dwindling usefulness of this denomination.

With public focus increasing on the Lincoln cent series, undoubtedly many new collectors are being created, or soon will be, as their interest is piqued.

When the reverse design change was made, most of the Lincoln, Wheat cents quickly disappeared from circulation, leaving few issues to collect. That meant baby boomers missed being able to collect many of the earlier cents from change. Now the children of baby boomers appear interested in Lincoln cents, as do their parents.

Demand remains strong for very high-grade, certified Lincoln cents, and the high prices they have been bringing are being sustained. However, it is the lower grade Mint State Lincoln cent values that have been rising the fastest. Dealers need these coins for their customers and have been raising their wholesale bids to buy these coins, especially by the roll, both in circulated and Uncirculated conditions.

As a result, we have seen values for many Lincoln cents grading Mint State 60 through 64 leap very high in comparison with their previous levels. A few extreme examples are among those grading MS-60 brown: the 1934-D Lincoln cent, rising from $12 to $35; the 1935-S, up from $6.50 to $35; and the 1942-S, rising from $2.50 to $12. Examples in MS-64 red include the 1947 Lincoln cent, rising from $2.50 to $7.50, and the 1951-S cent, up from $1.50 to $10.

These values haven't all of a sudden shot up because there's a run on these coins. Values have been gradually rising in the wholesale market, now requiring a meaningful retail adjustment in their values. (It should be noted again that the examples cited are extreme, not the norm. But they illustrate signs of the very strong demand for the Lincoln cent series.)

These increases in values are also having

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Rare Coins

Posted October 11, 2006

As we enter the last quarter of 2006, many numismatists are asking, “What in the world has happened to the coin business?” This has to be one of the strangest markets we have ever encountered. As seasoned veterans of 50 years or more of numismatic involvement, many dealers are questioning what are rare coins? We always thought rare coins were either low mintage issues, or coins that may have had higher mintages but then were melted or lost to attrition, or simply key dates within a specific series that gained recognition and were hoarded. Of course, the highest grades with low populations make natural rarities even rarer.

Now we are finding out that modern issue coinage without these attributes can be rare and very expensive. Oh sure, some of the modern issue coins have a low mintage of say, 1,000,000. That makes it rare compared to the rest of the series. But remember, all of these coins are new. Attrition now means they did not make the “70” grade. Some of the lower graded coins wind up selling for less than what you would expect a raw circulated coin of the exact same date and denomination. When you consider the time it takes to send in a coin for grading and the expense, some of these modern coins that do not make the intended grade should have been thrown in the street instead of sent for certification. But that is the ultimate answer to the unasked question. How can a graded coin sell for less than its original cost in the government packaging? Once these coins are certified and did not make the required grade, the owner just wants to recoup some of the expense; so these coins are sold at discounts.

Over the last few months we have seen a shift in demand from what we call traditional rare coins to modern bullion related coins. We have seen the FMV fall for MS65 Morgan Dollars from $220 in August to a current FMV of $190. Not that these are especially rare, but they did seem like that as they raced across the $200 level from about $140 earlier in the year. Demand had dried up the large quantities and there were few large hoards around. Now, many numismatists are taking the attitude that they want to make a quick buck by having modern issues certified and collecting the profits before the large masses of coins are available at lower levels. With gold bullion drifting downward, these coins have headed down as well; this is bound to happen in the short term if they did not make the 70 grade.

In fact, even the 70s are worth less as the populations increase. Many of the PR70 $50 Gold Buffalo coins sold for $5,000 or more are now retailing at under $3000. The strongest buyers of these high grade rarities have already purchased the coins they want so the secondary market for these coins is at a lower cost. Eventually, if the populations are high enough, all the coins simply become bullion related and will follow the ups and downs of the metals. On a positive note, there are still many analysts that feel the metals will turn around and head back to much higher levels in the future.

What has transpired recently is that much of the money that had been spent on traditional rarities has been channeled into the modern bullion coins. This has not necessarily hurt the market for expensive rare coins because as we all know, the prices realized in most major auctions exhibits many millions of dollars and the true rarities are still bringing premiums of our listed FMV. That tells us that knowledgeable numismatists continue to search for these rarities and have the ability to put them away for the future. In the meantime, the market for average coins or common coins has softened considerably. If you go to a coin show and see quantities of the same coin in every showcase, you can be sure that some of the dealers are willing to discount certain coins in order to create sales. This is the market that has been hurt during the rush for modern bullion coins.

As a numismatist, what do you do in today’s market? It really depends on where you are in your collecting stage. If you are advanced and are looking for those difficult coins, you are going to have to search and pay the premiums if you are serious about staying ahead of the others desiring the same rarities. If you are just starting out, then this is a good time for you because you can find bargains out there. When the market is soft for common coins it is much easier to be selective and price conscious. If you are looking for bullion related coins it is a good time to watch for those peaks and valleys and jump in when the market appears to be down. As we mentioned last month, the premiums for U.S. Gold coins are at minimal levels. If you feel that gold will eventually rise in dramatic fashion, then it may be a very good opportunity to buy while there are lots of coins for sale at reasonable levels.

Despite the fact that we are finding a lot of discounted prices across the coin market, we see much to be positive about these days. When you can go out and purchase coins at $25, $50, even $100 cheaper than you could a few months ago, it offers lots of dramatic opportunities for collectors interested in acquiring coins. It affords the collector to acquire more coins than previously for a fixed amount of money. Adding more coins to your collections is what numismatics is all about. We have not seen anything to indicate that the coin market is less popular in the last few months. In fact, we have seen more coins trading on a wholesale basis than in previous months. If dealers were not selling coins in large quantities, they would not be buying as much as they are doing. On the dealer trading networks, we constantly observe offers to buy and sell massive amounts of coins along with bullion. Much of it does not last long as buyers and sellers get together. Again, if coins were not selling to the public, dealers would not be able to buy as much as they are.

Most dealers made a lot of money as the metals made the long run from where they were in December of last year to the highs for this year. Where they are now does not matter to the coin business. What does matter is how much of the available supply of surplus income goes into modern issue coins versus traditional coinage. In the long run all U.S. coins will become traditional and collectable as such. It is just a matter of time.

So what are rare coins? The truth is they are what demand dictates.

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Price premiums fall greatly for common gold coins
Posted 9-14-06
 

Most rare coin companies buy and sell precious metals-related items, like gold, silver and platinum bullion coins, silver bars and bulk silver coins, for example. There are a few purist dealers who generally only handle rare coins, but they can usually help a person out who wants to trade from bullion-related items to rare coins and vice versa.

While some companies that make markets in bullion-related coins trade with the public, some firms that conduct business in bullion-related items mainly limit that aspect of their business to large wholesale deals with other dealers. In conducting their wholesale business, many of these larger bullion dealers publish their buy/sell spreads, sending them to other dealers by e-mail or fax, either daily or more often.

One such company is Heritage Auction Galleries. That firm's place in the bullion-related market gives it insight into the current state of the market. Heritage's Doug Baliko, who heads up the Dallas firm's bullion trading, recently did an extensive study on variations of price premiums over the metal content of common-date gold coins.

It turns out that during the period covered by his analysis, the price of gold bullion dropped approximately $100 per ounce, from $720 to $617.70, representing a 14.2 percent drop. During the same period, prices for common-date gold coins dropped, on a wholesale basis, in a range from about 10 percent to nearly 40 percent, with the range of about 20 percent to around 35 percent being the most common for these coins.

The differences between these percentages point out that investing in older common-date pre-1933 gold coins can be advantageous for the investor. Investors understand that prices for the coins will rise and fall with the price of gold bullion, even in a market on a generally upward trend.

Prudent investors will watch the fluctuations in the rates at which the premiums rise and fall to determine when might be a good time to buy.

You might hear dealers referring to these common-date gold coins as "generic gold." Included in this category are most denominations of U.S. gold coins in circulated grades from Very Fine to About Uncirculated 58.

Also considered generic gold coins are common-date Uncirculated coins, like Mint State 60 to 66 Saint-Gaudens gold $20 double eagle coins, or Indian Head gold $2.50 quarter eagles, $5 half eagles and $10 eagles in Mint State.

The new American Buffalo .9999 fine gold $50 bullion coins, however, do not qualify as generic gold.

Precious metals temporarily bottomed out, but the gold price is a little higher now than when Baliko did his analysis.

The price of silver followed a similar path. It hit a short-term high of more than $14 per ounce during April and early May, dropping back to around $10 in June. Now it's about $13.

At silver's high this year, pre-1965 circulated silver coins were trading for just over their melt value. Now they are trading for just below their melt value, because of the fluctuating premiums they carry over their bullion value.

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Where Does Gold Go in a U.S. Recession
 Poster 9-6-06
 

“If the U.S. citizen has been the global engine buying up all the Chinese goods then doesn't it make sense that if a recession occurs in America then it would affect all commodities including precious metals.”

On the surface it appears to make good sense. To answer it one has to look at the sense of proportion on the global economy as well as on that of the U.S.

A recession technically is two declining quarters of lower or zero and minus growth. A Depression is anything beyond this. The potential recession that lies ahead is as a result of not only the interest rate rise, but the rising oil prices, together with manufacturing moving to Asia. I am of the belief that interest rates will fall far quicker than they rose if a recession were to impact. I have no doubt whatsoever that the Fed places growth continuation well above inflation fighting. Once an economy starts to deflate and confidence slides away, it may well be beyond the Fed to turn it around even if they drop interest rates dramatically. If oil prices continue to rise, then growth will have to be saved through tumbling interest rates and more. This will encourage inflation and place tremendous pressure on the $ in global foreign exchanges. The Fed will struggle to keep it high.
The cheap imports from China actually contribute to lower inflation within the States, undercutting local prices as they do. This is one of the reasons why inflation has been low.
China and India are growing at an 8 to 10% growth rate per annum. In the case of China, I would see within 5 to 10 years it gaining sufficient momentum to be a main global economic driver in itself. Already it is providing additional growth to the countries around it in Asia, such as Japan and Korea. It is this growth, on top of the usual demand from developed countries that is placing such pressure on the limited commodities available on the world market. After all these resources were projected on a future, without growth in either China or India. The newcomers are two more at a table already full.
It is easy to think that because the U.S. is the main driver of the global economy it is the only one. This is not so. Europe is developed with over 400 million citizens to which, one has to add every other economies of the world, all buying from China and oil from OPEC. They are interlinked and interdependent. The U.S. with 300 million people is the main pivotal driver at the moment but only in terms of leading the way, not being the army itself. Therefore the impact of a recession in the States, whilst Europe is still expanding [which is today's reality] will not have the global impact expected, unless the sliding of confidence in global growth and global currencies follows.
Consequently, even with a mild recession [and I see no more than that now provided the oil price does not hold over $85], the demand for these commodities on the world markets will remain high. Now stack that against a commodities market that has neglected exploration for so many years and you see that one of the main problems facing the global economy is that it does not have sufficient resources to supply this burgeoning global economy for years to come. Certainly a recession in the States will not lead to a significant enough drop in demand to rectify this shortage to the extent prices come down.
Turning to precious metals one finds in Silver a market that has been supplied to a great extent government sales of stockpiled silver, once used in coins. The there was and is the change to digital camera from silver based photography, which led to dropping demand as we are now seeing. The silver market has largely absorbed this so far producing dropping supplies [as government sales in China and India have now ceased] and rising demand [as new industrial uses have to some extent supplanted photography demand drops]. Now add to this the amazing demand from Exchange Traded Fund, which to date have accounted for just under 100 million ounces, and you have a situation which despite any recession will continue to see higher prices. The monetary aspect of silver, still not a feature in the silver market, of consequence, is yet to come, sometime in the future.
Gold too is experiencing a rise of demand over supply in total. Not only is it rising as a metal, but the investment/monetary aspect of gold are a feature of that market and likely to remain so even in a depression. Gold after all is a place to keep your asset in uncertain times, when other assets face dropping prices. Those who invest in gold do so with surplus cash and are of the sort not so badly affected by a recession per se. So its value has broadened far beyond simply being a commodity.
But gold's real value lies in uncertain times, when doubts about currency values persist, when doubts about other asset values appear, doubts about the future not just of the U.S. economy, but about the global economy disturb investors to the extent they seek a refuge in the one asset that holds or increases it value in extreme times, gold!
So we believe that gold is an asset that will hold steady or rise in value 'in extremis', as Greenspan wrote. The value of gold is that it is an instrument of value where no other one is. It is not a 'promise' to pay the bearer', which currencies are, but an asset that can be treated with value in the darkest days of war, even in enemy territory. It is the knowledge that increasingly uncertain days lie ahead that is attracting responsible investor to the gold market. These could well include national governments as well as large institutions. The sight of Central Banks slowing down their own sales of gold stands testimony to this.

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