Today

>> (From the November 20th special State of the Industry Issue of Numismatic News)

It’s hard to believe, but this is my 40th year in the coin business and my 50th year as a collector. I began collecting coins at age 6 when the Lincoln cent was first issued and then started dealing in coins in high school. In junior high I flipped coins in homeroom with other friends. Our teacher gave us his blessings if he could keep the silver coins and replace them with clad coins. It was a good lesson at that age about why he was saving the silver coins. He also gave us lectures about why. We thought he was nuts.

I grew up with Numismatic News, as Chet Krause started it the year before I was born and we were both from the central Wisconsin area. Over the years I have met up with KP staff while travelling to and from shows and have advertised in Numismatic News. Most numismatists in Wisconsin appreciate the work that Chet and the staff of KP have done over the years and show our loyalty to Krause Publications, just like we do for the Green Bay Packers.

However, seven years ago I was recruited by another numismatic publication as its market analyst. I regularly attended major shows and auctions during that time and valued all coins minted by the U.S. I wrote weekly commentaries about the U.S. coin market and after actively getting back into dealing in coins this summer, I have retained my habit of observing overall market trends.

We have seen a significant pullback in demand for coins during the past year and overall prices have fallen by about 20 to 30 percent. It is now a buyers’ market, rather than the other way around, as it had been during the previous five-year bull market. However, there are many dealers who have brisk businesses these days and many collectors are still in hot pursuit of their collecting goals, although some goals have changed.

In response to questions asked by Numismatic News its “State of the Industry” update, here are my answers:

Q. What were your successes in 2009? I have found that there are a lot of collectors who are still eager to buy coins in spite of the recent financial meltdown and recession. Many collectors have given me their want lists and are eager to purchase when I call them about a coin I’ve found. I have also received generous consignments for my 42nd and 43rd traditional Internet/mail bid sales, as I have aimed at tapping into favorable consignment terms that are liked by the market these days. I have also found numerous active and serious bidders in these sales when displaying the coins at major shows, through large ads and with a Web site.

Q. Where do you expect to find your opportunities in 2010? In bullion and older rare coins.

Q. How do you expect the overall 2010 market to compare to 2009? I expect it to be much better. The general consensus of our population seems to be that higher inflation is around the corner. Indeed the record high gold prices we’ve recently seen reflect this expectation as the value of the dollar goes the other way. It is times like these that are very good for the coin market.

Q. What would give you the biggest boost in 2010? Higher inflation, which will increase demand for our market.

Q. What is your biggest concern for 2010? Deflation, in which prices keep falling because people put off buying until some future time when prices will likely be lower. Several experienced financial gurus are touting this possibility as also being just around the corner. Certainly other markets are experiencing this, such as the real estate market which is in the beginning stages of a collapse in the commercial segment.

Q. Has the hot bullion market helped or hurt you? It has helped. It has increased business for most coin dealers as people are selling unwanted gold jewelry to coin dealers who profit from that business and other people are investing in precious metals as insurance against inflation and a financial collapse. Increased cash coming into our market helps us all, especially in that a large portion of the money coming into the coin market circulates through nearly the whole industry because most dealers transact wholesale business with one another.

Q. Will your clients be in a buying mood in 2010? I hope so! Seriously, I expect they will be in a buying mood because around 90 percent of our population is employed, with probably most expecting to keep their jobs, and many people will always collect coins. There is also an increased attraction to coins at this time because greater numbers of people than usual are purchasing physical bullion. The most convenient places to buy bullion from are coin dealerships where coin types these people probably have never seen before are on display. Some of these bullion buyers will become collectors, as we’ve routinely seen in the past. Seasoned collectors are also savvy enough to know that higher inflation brings higher demand which results in higher coin prices so the sooner they buy in such a market the less expensive coins will be.

Q. What will your clients be most interested in buying in 2010? I think 2010 will start off pretty much like it is now. Currently I see most buyers liking earlier type coins and gold, but of course there are some buyers for everything. Demand is much lower this year for many other segments of the coin market and prices are also lower as a result. These lower prices are ttractive to most active collectors.

Q. What are the effects of tight credit? Credit doesn’t affect the coin market all that much in a direct way. Some people get loans on coins, but that is small in the overall impact to the coin market. However, in an indirect way tight credit has had a devastating effect on the overall economy, reducing demand which results in less money flowing into our market.

Q. What action can hobby papers take to give you a boost? Hobby papers can act as ambassadors for the coin market by assisting newcomers in attaining comfort in collecting coins and by assisting seasoned collectors in keeping up with broad “indepth” news coverage and developments in the hobby and industry.
Right now the coin market has a lot going for it. The national parks quarters are coming out and will help to sustain interest in coins, but will not impact the coin market to the extent that the state quarters program did. People’s expectations of much higher inflation are bringing buyers into coin dealerships for gold and other precious metals, as is bullion purchasing for insurance against a financial collapse.
Coin grading has also been given a boost by Certified Acceptance Corporation verification and its green stickers. CAC has helped consumer protection in grading and it is has been exercising its financial clout in the market, recently announcing that it has purchased more than $100 million in CAC verified coins.
Record gold prices have also recently cast a spotlight on precious metals, spilling over into the coin market. Increasingly, buyers are coming to coin dealers to invest retirement account assets in gold. Those dealers who are set up to sell into these accounts will reap greater profits. Many buyers have been sitting on the sidelines since 1980 when gold reached its last record high price of about $850 per ounce and are now thinking of getting back in.
Slower areas of the coin market are ripe for picking. These include Morgan and Peace silver dollars in which people think there are too many. VAMs are slower except for the very scarce ones. Even specialty areas, like early copper, are experiencing a temporary slowdown because major auction sales this year have undoubtedly used up resources for many collectors. Prices are softer for some rare gold, but this area remains popular, especially in light of a rising gold bullion price. I don’t specialize in modern coins, but I sense from the few I’ve handled this year and from general market observations that the market has reached the saturation level.
The pullback we’ve seen in the coin market during the past year may affect specialty dealers and the very large dealerships more than the small ones. Slower business can be countered by expanding the market a dealership serves, such as by learning how to sell gold into retirement accounts. Dealers did this during the early 1980s when business slowed. Some went into other lines such as jewelry and baseball cards.
All in all, this is an excellent time for collectors to acquire the coins they’ve seen rise in price during the past several years. Much more favorable prices are now a reality. However, some of the trophy coins may still require “all the money.”

Mark Ferguson heads Reliance Numismatic Services, LLC Oshkosh, Wis. mark.f@earthlink.net

** More “State of the Industry” submissions will be printed in coming weeks.