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Some coins can be too expensive

This article was originally printed in the latest issue of Numismatic News.
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If you ask any collector or dealer which coins are too expensive, the list more often than not will be the coins they want to buy. That’s certainly historically been my point of view because if I want a coin I certainly want it at a lower price.

In reality it is not normally that easy to even get individuals in the business to talk about coins that they think are too expensive. That is somehow seen as bad. After all, someone must own those coins, even if they seem too expensive, and pointing out the fact in public that their prices seem too high can be seen as being negative.

The fact remains that things happen that can have an influence on price and they simply cannot be ignored.

The best example of something happening that caused a price to drop was the 1903-O Morgan dollar. Until about November of 1962 the 1903-O was a significant rarity priced at around $1,500.

There were basically no business strike Morgan dollars that were viewed by the collectors of the time as a better date than the 1903-O especially in Mint State. Then suddenly the 1903-O started pouring out of the Treasury Building by the bag.

It had not been melted under the provisions of the 1918 Pittman Act as expected, but rather had simply been sitting in the vault in large numbers. To be sure, some probably had been melted, but there were still hundreds of thousands remaining and all of the survivors were in Mint State. Suddenly the $1,500 price was closer to $15. Whoops.

It was simply something that happened. There was no one to blame. You could feel sorry for the owners of the $1,500 variety of 1903-O, but in fact they and everyone else had made assumptions about its availability that had proven to be premature. Having your coin go from $1,500 to $15 is a pretty harsh penalty for that mistaken assumption that they were melted, but such things happen.

If you are looking for coins that might well be priced too high today there is still the equivalent of the Treasury silver dollar hoard situation going on with regard to gold. Actually, the situation with gold coins has been going on for decades and it is something that has been little studied and not even regularly mentioned, but today it is the single biggest factor contributing to overpricing in the market.

The outlines of the situation are known but the details are not widely discussed. What we do know is that sometime starting perhaps in the later 1800s and for many years U.S. coins were exported. The reasons were probably many but basically gold coins at the time were a way of settling international accounts. It was not always government to government as regular commercial transactions could also be settled in gold. What we know is that United States gold coins in large numbers began piling up in banks all over the world. The focus was Europe, although millions of dollars in face value also made their way to Central America. There were never any records of what dates were shipped where.

Sitting in the foreign bank vaults meant that after the Gold Recall Order of 1933, which saw huge numbers of gold coins melted in the United States including over 30 percent of the entire mintages of gold eagles and double eagles, the coins in the foreign vaults were spared because they were out of reach of the U.S. law. With relatively little collecting of gold coins at the time the gold standard was still in force, few hobbyists probably even considered what gold coins might be sitting safely in Europe or other places.

Eventually as the 20th century moved along and the collecting hobby attracted more people, there was greater interest in U.S. gold coins. That inspired a couple of dealers to travel to Europe just to investigate what might be there. It turned out to be a treasure far beyond the expectations of anyone. Previously very rare dates like the 1924-S and 1926-D Saint-Gaudens double eagle were found. There were not enough to make them readily available, but at least their number known was no longer in the single digits.

In reality the flow of coins especially from Europe, but other areas as well has continued for decades. There is no regular accounting of what numbers of what dates have been discovered and for competitive business reasons historically those involved have kept their information basically to themselves.

Those making price guides have been as much in the dark as everyone else in many cases. While gold has never been subject to something as dramatic as hundreds of thousands of Mint State 1903-O dollars suddenly flooding the market, there has been a regular and sometimes surprisingly large increase in the numbers of certain dates in certain grades and those numbers have not really been reflected in pricing.
The general situation in terms of coins recovered is that higher denominations tend to have been found in greater numbers. That stands to reason as settling international accounts the upper denominations would tend to be used.

The surviving dates when found if from before 1880 are usually in circulated grades while dates after 1880 and through the 1900s tend to be lower uncirculated grades. Naturally, there are exceptions as perhaps a group of 25 Mint State coins from the 1870s might be found and certainly dates after the 1880s can have light circulation, but generally speaking at least in terms of grade, 1880 seems to be about right as the dividing line.

Let’s consider some better dates in light of this information.

One of the better dates that might well have a suspect price today because of the European discoveries is the 1861-S Paquet reverse double eagle. The story of the 1861-S is an interesting one as officials had discovered that they were not getting very good die life from the reverse dies used in making double eagles. In fact they were using two or three reverse dies for every one obverse die. It was decided to try to do something to prolong reverse die life and that saw Anthony Paquet modify the design slightly with the letters in the inscriptions being taller.

On Jan. 5, 1861, some examples were struck at Philadelphia but upon examination officials feared that the narrow rim might produce striking and other problems so the production was halted.

The Paquet reverse dies, however, were not only in Philadelphia. They had been shipped to New Orleans and San Francisco as well. Word was quickly sent to not use the Paquet reverse. There was, however, a problem in that the telegraph only went as far as St. Joseph, Mo. and beyond there communication was by overland express. By the time the word to not use the Paquet reverse reached San Francisco, it was a month later and 19,250 of the Paquet reverse double eagles had been produced and released.

There were basically no collectors of double eagles by date and mintmark at the time, so the 19,250 coins simply went into circulation.

A Philadelphia version was discovered and auctioned in the W. Elliot Woodward sale in 1865, but the San Francisco Paquet reverse simply continued to circulate. Eventually the 1861-S with a Paquet reverse was discovered, but there would still be little interest and some even contended it was a pattern. Walter Breen was a leader in the 1950s in explaining the 1861-S Paquet reverse, but even in the 1950s there was limited interest and very few examples. Writing in the Numismatic Scrapbook Magazine in December of 1959 Breen placed the number known at six or seven, but that was about to change dramatically.

In the 1960s Paul Wittlin, who was buying coins in Europe for Ohio dealer James Kelly, reportedly uncovered 25 or more examples and there were others. Q. David Bowers has done a superb job in exposing some of the coins found in Europe in his book “A Guide Book Of Double Eagle Gold Coins” and Bowers observes the growth in supply of the 1861-S Paquet reverse noting, “By the 1970s, more than a hundred had been found, and by now that number has about doubled.”

Throughout this period the 1861-S has retained a reputation as being very tough. It lists for $19,500 in VF-20 today and that is the grade along with XF-40 which most examples would receive as they tend to be bagmarked and as Bowers puts it “scruffy” in appearance. In fact, in Mint State where the 1861-S Paquet reverse is listed at $275,000 the price if anything is cheap as there may be only a couple known and it would surprise few if in reality the 1861-S Paquet reverse is unknown in strict Mint State.

In circulated grades, however, the situation is different. After all, the supply has increased dramatically in the last 50 years and although the number of people collecting double eagles has increased the numbers have almost certainly not kept pace with the supply. In this case, however, unlike the 1903-O, the supply increase has not been dramatic – basically slipping under the pricing radar. The notion that there are over 100 (which is confirmed by grading services) and maybe 200 has to raise questions about the listed $19,500 price as there are lots of double eagles and other gold coins where roughly 100 are known, but they are not priced at $19,500. Of course there is special demand for the 1861-S Paquet reverse, but the fact remains that the supply is good and could possibly even get slightly higher. A truly top quality AU coin might justify a significant premium, but one of the more available lower circulated grade examples has to be seen as a questionable coin at current prices.

The hoards in Europe have also provided sometimes enormous supplies of certain dates in Mint State. The price listings simply put available dates at basically the same price but what they do not tell you is that without special investor interest some of the date would literally drop to their bullion value. That may sound extreme, but consider the fact that just the Professional Coin Grading Service has graded 3,682 examples of the 1901-S eagle in MS-62 and another 3,668 in MS-63, yet the 1901-S actually lists for the same $1,015 price as the 1907 in MS-63, but of course PCGS has seen 4,993 examples of the 1907 just in MS-62. There is no possible support for the current Mint State-63 prices of these dates from collectors. That support comes from mass marketing of these dates to investors.

It is not just gold eagles. The 1904 double eagle is a classic. In MS-62 PCGS reports 39,706 examples of the 1904 and another 34,692 in MS-63. There are even 1,747 in MS-65. Once again, without investment demand, this would be a  bullion coin even in Mint State. It is the non-collector buying that keeps the prices at current levels for as Bowers observes in his book without that buying, “there would be nowhere near enough numismatic demand to absorb the supply.”

Of course, investment demand can come and go, and right now even at common date prices, these dates and a number of others look far too expensive as they could literally be sold at bullion prices someday simply because they are gold investment coins and not coins with any real numismatic value.

Certainly the grading service numbers are not proof of anything. That said, they are perhaps the best information in terms of availability we have seen in recent decades and they do, even with their obvious flaws that some coins are submitted more than once and others not at all, give us some idea as to the availability of certain issues and that can make us question the prices of even some of the most significant rarities.

Another good example of the situation is the Proof-65 price of the 1867 with rays Shield nickel. That price is currently $75,000 and admittedly the 1867 with rays is an interesting coin. In fact, in proof it was probably not supposed to be made as the chief coiner apparently realizing a design change was coming had not wanted to make proofs. Someone, however, made a few proofs with that number generally being put at 35 pieces. In fairness as they were not supposed to be made in the first place, we cannot really be sure of a mintage but today PCGS reports that it has graded 45 examples of the 1867 with rays in proof and of the total 25 coins were Proof-65 or better.

The point here is that the number in Proof-65 is fairly high. Even if some were repeat submission, the 1867 with rays in proof is a famous coin but not a key type coin. Moreover, many could be perfectly content assembling their Shield nickel collection without ever acquiring any proofs. Add to that fact that $75,000 is a lot of money and the fact that there are not all that many Shield nickel collectors in the first place and you have to have some serious doubts if a Proof-65 1867 with rays proof is a coin that can reasonably be considered to be a $75,000 coin or even in that neighborhood going forward.

The question of demand is something we cannot really determine, but we certainly can have doubts. As one dealer once explained to me it is a lot easier for a coin to go from one dollar to two in price than it is to go from $5,000 to $10,000.

That observation along with some grading service totals is why I can at least question a couple recent price increases. In the case of the 1911-D Indian Head quarter eagle you have an admittedly key date coin in a set where an MS-65 is tough to find for any date. That said, since 1998 the 1911-D has posted an MS-65 price gain from $36,000 to $95,000 and then coming back down a bit to $77,500. I can easily understand the $36,000 price, but I am not so sure about the $95,000. Others apparently weren’t comfortable there, either.

Let’s also consider a few numbers. At $77,500 we find that the MS-65 or better total for the 1911-D at NGC and PCGS combined is roughly 38 coins. Right away that seems a bit high for a coin in a not-so-heavily collected set.

Then consider that the MS-65 or better total for the 1921-S Walking Liberty half dollar, which at $130,000 stands with a grading service total of 39, which is just one coin more and you get a coin from a popular set. Others must feel the same way because this coin has been rising while the 1911-D was backing off.

Meanwhile, the $122,000 MS-65 1873-CC Trade dollar, which is the key to that set, has a combined NGC and PCGS total of just two coins. In fairness, the Trade dollar is collected by far fewer but the comparison seems to suggest that the 1911-D seems a little high, but not as high as it once was. Maybe the others will increase more in price over time, but for the moment I would rather have either of the others for my money.

Comparisons can be a dangerous thing, but the 1901-S and 1913-S Barber quarters are one that continues to bother me. I accepted long ago that the 72,664 mintage 1901-S would be more expensive than the 40,000 mintage 1913-S. For some reason the 1901-S just did not survive. It might have been lost in the earthquake of 1906, it might have not been saved by collectors or perhaps there was another reason. What confuses me today is why the 1901-S continued to go up to far higher prices and far faster than the 1913-S when every bit of information suggests the two should be closer in price.

Back in 1998 in G-4 the 1901-S was at $1,750 while the 1913-S was at $415. Today, however, the 1901-S is at $6,250 in G-4 while the 1913-S is at $1,850. In short since 1998 they have gone from a case where the 1901-S was a little over four times more expensive than the 1913-S to one where now it is about 3.3 times more expensive.

That is moving in the right direction, but is it enough?

It might seem like a small matter but consider the numbers we do have. In the “New York Subway Hoard,” which was purchased by the Littleton Coin Company in the 1990s we got a small snapshot of the availability of key dates in circulation in the 1940s. You cannot really base a price on that information, but it showed that the 1901-S was found 8 times and the 1913-S 20 times. Simply put, the 1901-S was about two and one-half times tougher than the 1913-S.

Then consider the grading services totals in all grades. At NGC they show an identical 85-piece total for both the 1901-S and 1913-S. At PCGS there is a difference, but a very small one with the 1901-S having been graded 304 times and the 1913-S a total of 320 times.

It is not a case where the 1913-S should be at a higher price but it is case where the current relationship seems to be out of line with what we have learned about available numbers.

Perhaps that means the 1913-S should go way up in price and not that the 1901-S should go down, but the fact remains I would not be comfortable at the current price of the 1901-S. For my over $6,000 I would rather have three examples of the 1913-S and change left over and take my chances that eventually the prices will be brought even more into line with actual numbers.

There are many other examples in almost every type and every denomination. In every case it does not mean the date about which there are questions will actually decline in price. In fact, that happens but not often. More likely is that other dates will rise while the one might remain stable. That said, there are any number of dates that would seem questionable at their current prices and that is something you will rarely hear mentioned but it is something you need to know before making any purchases.

2011 U.S. Coin Digest
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