Bull Markets

The rare coin market moves in cycles. Bull markets usually last 4 to 6 years and Bear markets usually last 2 to 3 years. Sometimes, as was the case in the 1990s, the market can just drift. The Bull markets of the past 40 years have been 1961 to 1964, 1971 to 1974, 1977 to 1980, and 1983 to 1989. Let's take a look at the last four Bull markets to get an overview of the reasons for Bull markets, the coins involved, and the results. This quick history of Bull markets will give you a good idea of where we've been and where we might be going.

1961-1964 - During the early 1960s, there was a coin collecting mania in our country. It seemed like every city in America of any size had a corner coin store. Santa Ana, California had three coin shops… and that's where I got my start.

The 1961/64 Bull market was driven internally by a tremendous increase in collector demand and externally by the increase in discretionary income and leisure time that had begun after the end of World War II. The focus of the Bull market was on the popularly collected coin series, such as Indian cents, Lincoln cents Buffalo nickels, Jefferson nickels, Mercury dimes, Roosevelt dimes, Washington quarters, Walking Liberty halves and Franklin halves. The focus was on completing collections and quality was a secondary issue. The hot coins were key dates such as the 1909-S VDB Lincoln cent, 1916-D Mercury dime, and 1932-D and 1932-S Washington quarters.

Government issue proof sets were also very popular. And this was also the era of "coins by the carload," as buyers speculated on uncirculated rolls of 1934 to 1964 issues and large quantities of proof sets. There were also "coin investment advisors" and the SEC even took a mild look at the coin market. Really rare coins, i.e. 19th century issues, and gold coins, though they performed well price-wise, were not the subject of much buyer demand.

The Bull market ended when the coin shortage and rising world silver prices caused the government to remove silver from coins and also to remove mintmarks for three years (1965-1967) in an effort to stop "coin hoarders." This caused silver coins to disappear from circulation and people to be unable to continue collecting circulated coins. In addition, prices had risen considerably and had altered the demand side of the equation, as natural market forces topped out the Bull market. When the smoke cleared, most coin prices had increased 300% to 400% and some had increased a lot more.

The 1971-1974 Bull Market - The first round of inflation and explosive gold and silver prices drove coin prices skyward in the early 1970s. This was a huge Bull market with prices going up in every area of the coin market.

The 1971/74 Bull market was driven by the first real major increase in gold and silver prices and the biggest increase in inflation (up to that time) of the 20th Century. This was a time when it was illegal for U.S. citizens to own gold bullion. But, internationally, our paper dollar could be redeemed by gold from the U.S. gold reserves. In 1971, President Nixon "closed the gold window" and stopped the redemption of U.S. dollars with gold, effectively devaluing the dollar. From 1933 until 1971 gold had been priced at a constant $35 per ounce. After Nixon closed the international gold window in 1971, the price of gold immediately soared to over $50 dollars an ounce (it would reach $200 per ounce by 1974). Silver bullion prices also went up dramatically.

The other factor driving the 1971/74 Bull market was the increase in inflation. Lyndon Johnson's "guns and butter"/war and welfare programs of the 1960s were financed by deficit spending and inflation. Added to the mix was trouble in the Middle East and rapidly rising oil and gas prices. President Nixon even tried ill-advised "wage and price controls" in a failed attempt to turn back the then unacceptable inflation rate of 4%.

With gold and silver prices soaring and inflation rising, people became very interested in buying gold and silver coins. This fueled a major Bull market in all coins. The focus of the 1971/74 Bull market was rare gold coins, Morgan and Peace dollars, Silver commemoratives, 20th Century series, and , for the first time, very high quality type coins. Buyers also focused on quality, some obsessively so, much more than in the past. This was the first time that Gem quality coins sold for what were then huge premiums.

The 1971/74 Bull market ended when gold topped out at $200 an ounce and silver topped out at $6. Prices had soared, so internal market cycle factors also came into play as many collectors could now take huge profits, and many did. By mid-1974 most coin prices had risen 300% to 400% in just a four year period. The rare coin market then entered into a short, but sharp, Bear market.

The 1977-1980 Bull Market - The 1977/80 Bull market was the greatest Bull market in numismatic history. For four years the coin market absolutely smoked!

The 1977/80 Bull market was driven by the same factors that had been in play during the 1971/74 Bull market, soaring gold and silver prices and dramatically increasing inflation. The price of gold rose from $103 an ounce in August, 1976 to $850 by January, 1980. The price of silver rose from $4 to nearly $20, and then soared to $50 for a few months during the Hunt family attempt to corner the world silver market. Inflation rates also went through the roof as our country had its first dose of double-digit inflation and double-digit interest rates.

The focus of the 1977/80 Bull market was similar to the 1971/74 Bull market, though the 1977/80 market was so hot that virtually all coins performed spectacularly. Rare gold, Morgan and Peace dollars, Silver commemoratives, 20th Century series, and Gem quality type coins all soared to phenomenal new price levels. By 1980 most coin prices had increased by about 1000%.

The 1977/80 Bull market ended as gold and silver prices came down and ultra high interest rates tightened everyone's discretionary spending. Internal forces also came into play as nearly everyone could take huge profits on their coins. With modest investment in the right coins in the early 1970s you could cash out and buy a house by 1980, and many did. The rare coin market once again entered a short, but sharp, Bear market.

The 1983-1989 Bull Market - Amid major market changes and with no help from outside influences, the coin market performed really well for 7 straight years in the mid-to-late 1980s. This was a market that was driven almost entirely by internal forces. A Bear market correction followed the massive 1977/80 Bull market and by 1982 rare coin prices were relatively very cheap. Buyers liked the idea of buying great coins for 30% of their 1980 highs and the cycle was renewed as collectors and dealers once again stepped up their buying.

The 1983/89 Bull market was driven by internal forces. Most of the external forces were actually bearish during this time period. While gold prices had their ups and downs, gold mostly drifted lower during the 1980s. Inflation came down considerably, at least according to government figures. And the stock market did well, diverting funds from the coin market.

The internal forces responsible for the 1983/89 Bull market included the normal cyclical buying and selling patterns of coin market participants and a tremendous amount of marketing to outside "investors." This was the era of rare coin investment newsletters, telemarketers, and lots of charts and graphs showing how well coin prices had performed during the 1970s

The focus of the 1983/89 Bull market was on top quality coins. Condition became the primary concern and the prices for MS65 and PR65 Gem quality coins soared. Morgan and Peace dollars, Silver commemoratives, 20th Century series, Type coins, and Gem quality gold, both Mint State and Proof, were all hot.

In 1986, third party certification came into being in a big way with the launch of Professional Coin Grading Service (PCGS). Besides increasing liquidity and buyer comfort level, thus adding to the market demand, PCGS grading increased the market focus on the top end of the grading scale.

Unfortunately, "investor" demand can be quite fickle. By 1989, prices for top quality coins had risen 300% to 400% and investors started taking profits and putting their money into the stock market. The coin market peaked in mid-1989, corrected down, recovered briefly in early 1990, then prices came down sharply in late 1990 through 1992. Then from 1993 to 2001, the rare coin market drifted, mostly sideways.

The Bull Market

The coin market started picking up in the last few months of 2001. Coins were very hot throughout 2002 and even hotter in 2003. We are definitely in another Bull market. How long it will last and how far it will go will be determined by many factors, but one could make the argument that a combination of factors that were evident in the past four Bull markets are now all evident in this new Bull market. The next few years should be very exciting for all coin market participants.