RARE COIN MARKET UPDATE
( May, 1999 )

Whether it is attributable to a generally strong U.S. economy or partially the result of financial market participants seeking to diversify with some of their financial market profits, the end result is the same. We have a new bull market in U.S. rare coins, and it is unlikely that after almost 7 years of being in the doldrums that the trend will reverse any time soon. Granted, precious metals prices have not assisted the uptrend in numismatic prices, but the true scarcity of many issues has forced prices higher due to a surge in physical demand from both existing and new participants. This tangible or hard assets area still represents relative value, and collectors and investors are progressively bidding prices higher as the rarest and highest quality material becomes harder and harder to find. There will be some hoards that come onto the market in the immediate future, as in the case of San Francisco mint Twenty Dollar Type 2 Gold coins, but the demand for such coins is still stronger than the subsequent supply. Very top quality collections are now coming to auction, the collectors or heirs having waited many years for the market to regain its current level. However, this material is again leaving the market quickly through astute collectors and anxious dealers with long want lists from clients or a bevy of old and new collectors/investors eager to own a noted rarity.

Probably healthy for the overall numismatic area, the Millennium Bug situation is causing a shortage of circulated silver and gold coinage that is being purchased as a bullion hedge. This approach introduces new investors into the rare coin market, and eventually they become interested in higher grade material starting in the AU55 level and proceeding to uncirculated Mint State 66 or even MS67. Hopefully, few will still be holding the bag, no pun intended, when the premiums for circulated, bullion-like material shrink back to more reasonable levels after the Y2K scare comes and goes. Most, we all hope, will become dedicated long-term numismatic collectors and investors, with a multi-year perspective and an increased knowledge level about true rarity and scarcity of the diverse series of pre-1933 U.S. rare coins.

The silver dollar area continues to be on fire as this immensely popular niche takes its traditional role of leading the market higher. While there was inevitable profit-taking earlier this year after 1998's 25% to 35% gains, the Morgan and Peace Dollar markets have firmed again within the last several weeks, and begun their uptrends anew. Key-date, Proof, and Deep-Mirror Proof-Like examples are seeing very strong bids. With upcoming coin shows and auctions going into summer, we should see continued strong demand for such popular series of coins as more and more of the investing public is made aware of the new bull market in coins and participation through the internet continues to grow rapidly. Whether the internet will prove to be a lasting avenue for sight-unseen rare coin auctions such as through Ebay remains to be seen, but the effect to date of both TeleTrade and Ebay auctions has been impressive to most dealers. There is always the risk of overpaying for average or below-average material in such transactions, so it is unlikely that the old proven method of relying on the sight-seen pre-purchase opinion of a trusted and experienced numismatist will diminish appreciably. The net effect over time for internet sales is more likely to be the introduction to many more collectors/investors of the numismatic arena than would occur otherwise.

While Mint State Gold continues to be weighed down by the trading range for gold bullion itself, the rarest of U.S. gold coins are seeing strong bids, to include most Proof Gold similar to 1998's activity. Dealers are hesitant to readily report increased bids to the reporting publications, so retail prices are likely to be higher than some CDN or CCDN bids would suggest. Since I watch many key dealers inventories on a daily and weekly basis, I can see that most top-grade, truly rare material is not staying in inventory or at the same price very long. These are all signs of a healthy rare coin market without excessive speculation, and these same signs point to a very good 1999 performance picture.