The rare coin market has existed for hundreds, if not thousands, of years. It is constantly evolving as contemporary dealers and collectors buy and sell while reacting to external market forces, which often impacts us in ways we cannot control. The past 12 months have been challenging for many dealers who have generally reported lower volume across the board as collector (and dealer) demand softened and it\’s instructive to review these forces to learn about where we are headed in 2016.
HOW DID WE GET HERE?
Factors that have led us to the current market malaise include:
Lower/unpredictable bullion prices: We don\’t think this topic gets enough credit for determining market forces. Frankly, bullion prices are the key indicator of the health of the rare coin market. To understand this, one has to appreciate that the largest segment of the coin-buying public is, in fact, the dealer community. Dealers are the true market makers of the rare coin business. Whether on the front lines at a coin shop, attending 25 coin shows a year, or participating in the major auction sales, dealers typically step in and buy coins at market levels until a collector-buyer can be identified. The sagging bullion market of the past 4 years has eroded dealer cash flows and confidence, especially at the coin-shop level. With bullion down in the dumps, fewer buyers and sellers are walking into coin shops, and dealers are feeling the stagnation. Dealers need an enthusiastic public that is excited about bullion/gold coins, who also turn their attention to rare coins. It must also be noted that successful dealers often become enthusiastic collectors at the same time.
Over-supply of rare coins at the top end of the market: Ever since the first sale of the Newman Collection in 2013, the rare coin market has seen a steady stream of “once in a lifetime” collections come to market. First Newman, then Missouri Cabinet, Pogue, Gardner, Partrick, Reynolds, and so on. Collectors and dealers have been spooked by the volume and are scratching their heads as to when this will slow down. (Our current observation: it has slowed down – finally.)
Collector fatigue: The certified coin market is now officially 30 years old. Along with the wonderful benefits (i.e. liquidity, profits, etc) that third-party grading brought, the Internet enhanced them by allowing us to grow our markets and engage new collectors who previously did not have access to coin shows. Decades later, the honeymoon phase is over, and collectors are feeling a bit tired.
The economy: Not to be ignored here, dealers are reporting to us that their customers are feeling the pinch of a weaker economy. Many coin collectors are business owners, or reliant on small business, and this presents a challenge for discretionary income.
Momentum: Another economic reality is that demand follows demand, and the opposite.
Technology: Many dealers we speak with complain that they cannot
keep up with modern technology. It\’s very expensive to build a great web site. Even with the funding, the expertise needed is beyond most dealers\’ expertise. For a time eBay and Amazon appeared to be the answer for the small dealer to sell their coins, but even these behemoths have faltered in their “rare coin” sales strategy. Sellers report to us that their numbers are way down at eBay, for example.
Grade-flation: A topic that is at once controversial, and yet as much a reality as gravity itself. It\’s only natural that, over time, that the nicest coins will be resubmitted for a higher grade again and again, until that higher grade is achieved. Certified populations increase while the number of collectors remains flat. If we do not grow the rare coin market at the same pace as coins are graded, prices will come down.
IT\’S NOT ALL BAD
Any old-timer in the coin business can regale you with dozens of stories of market vicissitudes. The time from 1986-1990 was a field-day for those playing in the new certified coin market. For example, Barber dimes peaked at $3,000 in MS65 holders. Then the market crashed in late 1990, only to rebound again just a few years later. We\’ve read this script many times before.