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Premiums fall for classic gold coins

There was a golden opportunity in Baltimore. Buyers of classic U.S. gold coins were the beneficiaries.

The June occurrence of the thrice yearly Whitman Coin & Collectibles Expo Baltimore was held June 17-19. Each of these events is among the larger coin shows in the country, though the one held in June is normally the least active of the three.

At coin shows in recurring locations, other dealers and the public get used to looking for dealers in the same place on the bourse floor show after show.  This time, the Baltimore show was moved into a different room at the facility. The standard room was L-shaped while this time the bourse was located in a rectangular room. This change required many visitors to check the directory to locate the dealers they sought rather than automatically going to the usual spot.

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Two weeks earlier, the Long Beach, Calif., show experienced a noticeable decline in returning booth holders, which I attribute to the high volume of business that dealers stayed home to handle at their offices and stores. Although the June Baltimore did have some dealers absent who normally would have a booth at the other two shows each year, there were not so many one-time absences when compared to the Long Beach show.

My chief numismatist, Allan Beegle, walked the floor at this show on behalf of my companies. He checked in with several insights on the state of the numismatic market.

Overall, he thinks dealers were pleasantly surprised with the volume of business they did compared to their reduced expectations for the show. This result is better than the typical Baltimore June show in past years. However, that does not mean that every sector of numismatics was thriving.

Allan found that demand for common-date generic Morgan and Peace dollars in grades below MS-66 was sparse. These coins reached multi-year peaks in late April, about the same time that the silver spot price neared $50, but demand (and prices) fell sharply once the price of silver fell down into the $30s.

It was a different story with better-date Morgan and Peace dollars. Allan experienced unusually strong sales for such coins that he took to the show, though they typically traded at prices below those of a couple of months ago.
Overall, Allan sold about half of the coins he took to the show, which is a higher percentage than typical. However, the certified 1909-S VDB cents that he sold had to be priced at a discount to supposed wholesale levels being quoted in various references.

One area where there was little interest was in the pre-1934 U.S. gold coins.  Premiums on many of these coins have fallen to their lowest levels in the past decade. One possible explanation for the glut of wholesale inventories is that the declining value of the U.S. dollar means that foreign sellers can now get premium prices for these coins in their local currencies.  When the price of gold as measured against the euro hit an all-time high a few weeks ago, it became highly profitable for European banks to disgorge their U.S. gold coins.

U.S. gold coin wholesalers in the United States are being squeezed by increasing supplies coming into the country, especially from Europe, while customer demand has tailed off. As a result of this shift in supply and demand, prices and premiums for these coins have fallen to such low levels that, in some instances, they can be considered almost as bullion-priced treasures.  You can now acquire both types of Mint State-60 $20s as well as both types of $10s and $5 Liberty coins in circulated grades for less than 15 percent above bullion value.

Further,  Allan was able to purchase some lovely Professional Coin Grading Service and Numismatic Guaranty Corporation-certified very choice Mint State-64 $20 Saints for less than $100 more than he would have paid to acquire uncertified Mint State-60 specimens. At that price differential, the higher grade coin is definitely the better value.

For now, supplies are plentiful, so these coins may continue to be available at unusually low premiums over their melt value for at least a few weeks.

The low premiums on classic U.S. gold coins as well as the recent slowdown in demand for physical gold and silver bullion typically purchased by individual buyers has resulted in falling premiums almost across the board.  The most popular 1-ounce gold bullion issues are now available about $3 per ounce less, relative to the spot price, than they would have cost a month ago. Premiums on silver coins and ingots have also declined.

Product is readily available, even with the formerly delayed-delivery U.S. silver American Eagles and 1- and 10-ounce silver ingots. However, don’t be tricked into thinking that it is a reflection of lower demand for gold and silver worldwide.  There continues to be strong demand for the 100- and 400-ounce gold bars and 1,000-ounce silver ingots by the major buyers.

There is a growing fear that the current debt crisis in Greece will eventually lead to a domino effect of defaults by nations and states. In the past week, there have been reports of several nations (with Russia and China leading the pack) becoming more aggressive at unloading their U.S. Treasury debt and dollars. Just because premiums are low today and product is readily available does not mean that these conditions will persist into the later part of 2011.  Even though the U.S. dollar is near record low levels right now, there is still time to move to safe haven assets like gold and silver before the dollar falls further.

More Coin Collecting Resources:

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Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles 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 CoinUpdate (http://www.coinupdate.com. He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly” (http://www.lansingbusinessmonthly.com/articles/department-columns). His 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 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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