When hot market premium disappears

Gold coin prices only go up, right?

This is a good day for a timely reminder that they can and do go down.

I had an exchange of e-mails from a longtime reader of Numismatic News yesterday.

He wrote: “What is happening w/the price of gold at the coin shows? It shows that the price is up but the dealers don’t want to pay those prices. I took a $1,200 loss on a double eagle I recently sold at the Florence show here in Oregon over the price I was offered last year at this time when gold was down.

I responded: “Supplies of gold coins were so tight last year because of investor demand that premiums on common date collector gold coins were bid up. You did not tell me the date, but I surmise by the price action that it must be a common date.”

The reader was philosophical about it, which shows a long-term outlook on things.

He wrote back to me: “The double eagle was a 1909-S, MS-63 grade. It was graded by a local dealer whom everyone knows and trusts. Last September I turned down an offer of $1,850 for it as I wanted $2,000. Before this last show I noticed that the price had skyrocketed to $2,200 for that coin and I was certain I would get the $2,000 this time, but to no avail. I guess the adage ‘you snooze, you lose’ is more than true in this case.”

It is important to remember that premiums on gold coins are not fixed. They rise and fall with the market. When buyers can’t get enough of the coins, they rise. When the numbers of sellers increases, premiums fall.

The 1909-S Saint-Gaudens $20 is one of the most common dates out there. Its price except at the ultra high grade end always returns to a smidge above melt value.

Fortunately for the writer, one coin is a lesson. I would hate to think of the outcome had this involved multiple coins representing his retirement funds.