Bargains in old gold $5s

The activity level at the massive Florida United Numismatists show in early January each year is considered a bellwether indicator of the state of the numismatic markets. The show last week in Orlando revealed some shining spots and some weak points.

The jump in precious metals prices resulting from weak global stock markets helped some dealers feel upbeat going into the show. Sad to say, that sensation didn’t last.

When a coin show market is active, you can detect a kind of “buzz” on the floor. The overall noise level increases as dealers are making sales and scurrying to find replacement inventory. Unfortunately, from Wednesday dealer set-up through Friday morning when I left, I never sensed any buzz. Neither did any of the dealers I checked with on their assessment of the show.

Vic Bozarth of Bozarth Numismatics, Inc., in Brenham, Texas, staffed two tables at FUN. His evaluation was that it wasn’t a wonderful show compared to either the dozens of past FUN shows he has attended, or to his own expectations for this show. He agreed with me that this time dealers had to work for a living rather than just sit at their booths while customers threw money and inventory at them. However, Vic did say, “If you [a coin dealer] can’t make money at the FUN show, you probably shouldn’t be in the business.”
As with any show, there were highs and lows, depending on the niches. I did not do a comprehensive review of everything, but here are some of my observations.

Trophy coins, the high quality major rarities, continued to do just fine in the auctions (see my comments in last week’s column at http://www.numismaticnews.net/article/trophy-coins-rise-with-economy).

Multiple wholesalers of pre-1934 U.S. gold coins also told me that sales were picking up, which they generally attributed to low prices in absolute terms and in terms related to gold. With prices almost across the board having declined for much of 2014, my own company had seen an increase of demand for these coins in MS-63 or higher quality in the last few months of last year.

As one example at FUN, I scooped up a number of very choice Mint State-64 $5 Liberties. These coins are now selling at their lowest price in more than a quarter century. Back then, the gold spot prices were in the $300s and $400s. At a market peak at the June 1989 Long Beach show, these coins would have retailed at prices getting close to 90 times gold value. Today you can own them for less than three times melt.

At today’s relative prices (these MS-64 $5 coins sell for less than a $100 premium to MS-63 specimens instead of at least double the price as occurred in 1989), there doesn’t seem to be much downside and significant appreciation potential. I’m not saying that they are going to return to mid-1989 levels at all, especially not anytime soon, but this is just one example of coins that numismatists seem to find desirable at current levels.

Many higher grade, better date U.S. Morgan and Peace dollars have appreciated over the past several years. Although demand seems to have backed off slightly (which I partly attribute to the spot price of silver being down about 45 percent over the past two years), the prices for these coins have mostly stayed up where they have climbed.

For the negatives, several dealers complained to me that they had too much inventory. In the rare coin industry, inventory and cash are pretty much interchangeable. Inventory is liquid at some price level if a dealer absolutely needs to improve cash flow. So, I interpret the complaints about too much inventory to reflect a need for cash flow. Dealers who focus on the cost basis of their current inventory rather than the replacement cost often fail to price their holdings at current levels after prices drop. As a result, their sales volume declines and cash flow gets tight. Other dealers who adjust to current markets tend to do more business and ultimately be more profitable than such cost basis-sensitive dealers.

As a reflection of the slowdown in several numismatic niches during 2014, my shopping list at FUN was shorter than usual. Still, I made a number of purchases. It seemed like almost all prices were lower than I have paid in a long time. Unfortunately, the pickings of attractive coins were less than normal. I had few instances where I turned down coins because the dealer wanted too much for them. Instead, there were a lot less attractive coins than I would normally try to purchase.

In my judgment, I was able to acquire coins at lower prices because other dealers were less aggressive at purchasing them.

My takeaway from the FUN show is that finding many U.S. coins, if you can find nice specimens, are mostly at more attractive prices today than in years past. If you step up to purchase, though, you will find the hunt a bit more difficult now than in former times.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He is the owner emeritus and communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com and http://www.coininfo.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly” (http://www.lansingbusinessmonthly.com/articles/department-columns). His Numismatic Literary Guild award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).

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