The rare coin market is eagerly awaiting its next major boom--and it may not have long to wait.

Actual price increases haven't taken place yet as this is being written in the very early days of 1994, but marketplace insiders see extremely positive signs--and have an intuitive feeling--that a turnaround is near and prices are about to rise dramatically.

A consensus has been forming among the major players that the next big coin boom is just around the corner. Indeed, we could be on threshold of the largest, most active and strongest bull market in history.

Marketplace participants see a number of key factors that point to a tremendous increase in values. These can be summed up in a pithy phrase coined by Maurice H. Rosen, editor and publisher of the award-winning Rosen Numismatic Advisory: economic justification.

We are, in fact, seeing economic justification-- conditions in the general economy which point to a surge in the prices of rare coins. At the same time, we're seeing a historic low in the inventory levels of rare coins in many dealers' stocks, as well as other factors in the coin market itself which would reinforce and magnify such a price increase. Together, these circumstances serve as a perfect launch pad for a numismatic rocket ride to the moon.

The first economic variable pointing in precisely the right direction is the bullion market. Rare coins don't do well in a weak bullion market, but they do exceedingly well when the bullion market is strong--and lately, precious metals have been shining.

In early January, with the price of gold having risen to $394 an ounce, analysts were predicting confidently that the yellow metal soon would pierce the $400 level. There's nothing sacred about $400, to be sure, but it does represent an important psychological barrier--and once the price of gold were to hurtle that barrier, it could be off and running to even greater heights.

Silver has been gathering strength, as well. In fact, it has been doing even better than gold in a relative sense, reaching $5.23 an ounce as of early January--its highest level in many months.

A resilient bull in the precious metals market frequently points to a similarly resilient bull in the rare coin marketplace, and coin traders are enormously encouraged by the trends that have developed in gold and silver.

Another telling factor in predicting a bull market is people's psychological sense of themselves. And here, too, the news is good. People's net worth is increasing. We're seeing more people employed, more people saving money. And real estate is holding its own again, instead of plummeting-- especially in the Northeast, where it had been weak for several years.

When people feel good about themselves, they're far more likely to indulge in pursuits such as coin collecting and investing--pursuits that they might view as being too costly in times of economic hardship. When times are good, they have --and spend--more disposable income for hobbies and investments, including rare coins.

Inflation and deflation are also crucial economic factors. We seem to have moved away from a deflationary cycle, and the likelihood is high that inflation will rear its head before the decade is up. This is another plus for the coin market, since rare coins and precious metals have always been regarded as excellent hedges against inflation.

Economic prosperity may not be here quite yet, but things are picking up in the economy. It seems clear that we've finally pulled out of the nagging recession and-- contrary to what some doomsayers were claiming--there is no depression. This, too, bodes well for the coin market.

All in all, then, economic variables look favorable for the coin market. Bullion prices are up and the gains seem likely to be sustained ... real estate is rebounding, rekindling consumers' confidence ... inflation is on the horizon, creating the need for a hedge ... and the overall economy seems much brighter.

Now, let's look at the coin market itself.

My firm, Scott Travers Rare Coin Galleries of New York City, handles many high-quality coins, but I don't recall a time period in recent memory like the present, when virtually no inventory was available for any desirable coin.

Let's say you're interested in type coins and you decide to buy some premium-quality Proof-66 Shield nickels. You may locate dealers offering Proof-66 examples, but you'll find the selection limited and you'll have a hard time coming up with choice, spot-free examples for the price that is published in the Certified Coin Dealer Newsletter (popularly known as the Bluesheet).

Simply stated, many dealers' stock is low or depleted altogether, and they've had no incentive--and possibly no capital, either--to replenish their supplies because of the prolonged inactivity in the marketplace.

With inventory levels at such a historic low, it wouldn't take much--just a small amount of money--to push prices higher across the board. If we were to see $5 million or $10 million come into our marketplace over a period of just a couple of weeks, focusing on the area that investors are most interested in--type coins, both proof and business- strike, in grade levels of 65 and above--it's my considered opinion that the type market would rise in value anywhere from 20 to 40 percent.

There are many opportunities, many bargain areas, that shrewd buyers can focus on right now, but they need to act quickly; the turnaround is at hand. Of course, a quick turnaround would give them the chance to go to the cash window and pick up their profits quickly, too.

Obviously, price levels are low; the marketplace was decimated after the last big high in May 1989, and many coins are selling for just a small fraction of what they were bringing five years ago.

But other factors also give buyers an unprecedented edge in the current market. For one thing, there's an increased level of knowledge; disclosure is an all-time high, enhancing consumer protection. Then, too, commissions are razor-thin and premiums are at a historic low for premium-quality coins.

Back in 1989, a premium-quality coin generally commanded 20 to 40 percent more than a typical, non-premium-quality example of the same coin in the same grade. Thus, a coin that normally cost $1,000 might have cost $1,200 to $1,400 if it was perceived as a PQ (premium-quality) piece--that is, if it appeared to be in the next higher grade (and thus appeared to be undergraded), or it appeared to be very high-end for the grade that it was assigned.

In the still-depressed marketplace of early 1994, the PQ differential for this same coin might be only $50. Yet, when the market turns around, it's altogether possible--even probable--that the differential will revert to its previous higher level.

It's quite clear to me that when the market picks up, the premium-quality coins are going to be among the biggest winners.

Let's say a particular certified coin is valued in the Bluesheet today at $1,000. If you buy a super premium-quality example of that coin, it might cost you $1,050. But when the market bounces back and the Bluesheet price goes up--let's say 20 percent, from $1,000 to $1,200--you may be able to sell your PQ example for $1,600, which is a 60-percent increase.

This won't help the person who paid $6,000 or $7,000 for that same coin in 1989, but it could be a real bonanza for the person who buys the coin today. A profit of this magnitude can't be taken lightly.

As this illustration suggests, many of the gains we're likely to see in the new bull marketplace probably won't be reflected to the fullest extent by price guides. Here, as always, knowledge is the key to achieving maximum benefit.

The new bull marketplace no doubt will be accompanied by the same characteristics to which we became accustomed in 1989--notably, great volatility. Price fluctuations will be far more dramatic than those we have witnessed during the protracted market slump, but they'll also come more quickly and sometimes unexpectedly.

With bullion prices rising, it's logical to anticipate considerable activity in generic gold coins--those that are traded as fungible, interchangeable units, almost like commodities. If the upward trend continues in the precious metals markets, I would expect to see generic gold coins helping to blaze a comeback trail for the rare coin market as a whole.

Type coins, high-grade coins (those certified in grades of Mint State- and Proof-65 and above) and rare-date coins figure to follow suit, as collectors catch the fever and accelerate their purchases. That, in turn, will feed the frenzy and produce still more plus-signs in price guides. And, before you know it, we'll find ourselves in the midst of a full-fledged bull market.

Some of us may have forgotten the downside of volatility. For those who have, a word of caution is in order: Highly active markets, very much like roller coasters, go down just as sharply as they go up, and now and then we have to hang on for dear life.

If the bullion market were to suffer a sudden downturn, we could see a similar sharp decline in the prices of generic gold coins, at least in the short term. Indeed, that's just what happened a year ago, when gold enjoyed a spurt and then subsided. In such a situation, flexibility is a must: You have to be willing and able to adjust your buy-and-sell strategy to accommodate changes in the marketplace.

Let's say a given generic gold coin is listed in the Bluesheet at $1,000 in Mint State-64 and you pay $1,050 for a beautiful, premium-quality example. And let's say the bullion and coin markets both heat up and the Bluesheet price jumps to $1,500. At that point, your PQ coin may well be worth $1,600.

However, that surge in value could prove to be not only sharp but fleeting. The underlying markets could plunge overnight, sending the price of the basic (typical-quality) coin all the way back to $1,000 or even lower.

The moral of the story is, you can make a lot of money with beautiful, premium-quality coins--and you SHOULD focus on beautiful, premium-quality coins--but you should be ready to part with such coins, if necessary, at non-premium-quality prices to realize a profit and keep from sustaining a loss.

If you've made a paper profit and you sense that the market is peaking, or starting to lose ground, don't hesitate to sell your coins and transfer that profit from paper to good, hard cash, no matter how beautiful those coins may be or how much you may be attached to them.

Here's one more caveat: Many coins are thinly traded and subject to market manipulation, so be careful to avoid coins whose price levels may have been inflated artificially. This is less of a problem when the overall marketplace is sluggish, but it could become a major concern again when the bull market returns.

You should keep back-copies of the Certified Coin Dealer Newsletter and monitor the prices of coins you may be interested in buying. If you see a coin rise in value from $1,500 to $15,000 within a relatively short period of time, stay away from it: A dealer who possesses examples of this coin may have pushed up its price by massaging his bids.

Another pitfall in the new bull market will be excessive reliance on economic justification. DO keep track of key indicators, such as those that I've mentioned in this article, and weigh them carefully when making purchase decisions--but DON'T make the mistake of treating them as infallible.

If the price of gold were to drop $20 an ounce, for example, some people would be frightened and might conclude that the bull market was over. But that wouldn't necessarily be true. The gold bull market of 1992 did turn out to be short-lived, but analysts believe that the next bull market could last significantly longer.

I strongly recommend that you limit you purchases to certified coins--those that have been graded and encapsulated by the Professional Coin Grading Service (PCGS) of Newport Beach, California; the Numismatic Guaranty Corporation of America (NGC) of Parsippany, New Jersey; or ANACS of Columbus, Ohio.

There ARE a few clouds on the horizon. Higher-income Americans face higher taxes, for instance, in 1994--and since this group includes some professionals, such as doctors and lawyers, who have invested heavily in rare coins in the past, this could have a negative impact on the coin market's turnaround. Also, the pending changes in health-care coverage could tend to make physicians more cautious in their expenditures.

But, on the whole, the omens are propitious and the outlook is exceptionally positive.

Everything's on track for the coin market's next big boom, and the locomotive's poised to leave the station.

So don't get left behind. Climb aboard!