Coin Market Fundamentals: Be a Cherry-Picker

During my three-plus decades as a full-time coin dealer, I have personally experienced a wide variety of market conditions. While the coin market is always changing, you, as an individual collector or investor, can employ some tools to maximize the potential for your PCGS-graded coins. This article provides some perspective on coin market fundamentals, including the why behind how the rare coin market works.

The coin market has changed. Unless you are following changes in bullion prices, you might not know how the market for your coins has evolved. Much of the market, as we know it, is fundamentally different because the basal bullion price levels for so many coins have appreciated. For the most part, numismatically related coins have fared quite well since the early days of the COVID pandemic in the spring of 2020, up through and including today.

Dealers Focus on Bullion

Coin dealers are primarily focusing on more bullion-related transactions because of strong business in terms of both buyers and sellers. Unless a numismatic item has something special about it or is immediately saleable, it might fall through the cracks. This type of market has little to do with long-term numismatic value.

Dealers are in cherry-picker mode. With highly active bullion markets, dealers have great cash flow. That being said, dealers are less likely to park their capital in stagnant, albeit great, coins while the bullion market is hot. Interestingly, dealers I’ve spoken with are less interested in the price level of the coins they’re trying to cherry-pick than in the rarity of the item itself. The rationale is that a premium is still justified depending on the rarity and one’s cash flow. Middle-of-the-road and generic items, unless they are bullion related, are softer in price these days. Dealers know they can stock many such items easily.

Here’s a big tip: you should always be in cherry-picker mode. Part of the delight of numismatics itself is the treasure hunt. Because opportunity is fickle, you should keep your eyes open to great coins regardless of market levels. The advantage for so many collectors is not having to sell to keep the lights on, so to speak.

Premiums for Rare Coins

Watch market trends. There is a fine line between a dealer’s statement “these coins are too cheap” and “they’re too cheap because no one cares.” Classic U.S. coins that have experienced strong demand in the past are probably a good value when “no one cares” markets occur, right?  There is no question that this is true of the classic U.S. commemorative coin market in the last five years.

U.S. silver and gold commemoratives have experienced a renaissance. All of a sudden, they’re hot… Not! There were always great commemorative coins out there, but the market was different. The focus was elsewhere, or at the very least not on commemoratives. As with all markets, one of the secrets is buying something when it is undervalued. Great coins are always great coins, but markets are constantly changing.

I personally know of several collectors and a half dozen dealers who have been buying classic PCGS-graded commemorative coins both before and during the last several years with increasing interest. All of these collectors and dealers recognized the fact that while commemorative half dollars were not selling well for several years, the underlying value was still there. Indeed, virtually all of these individuals would have said, “Commemoratives are too cheap.”

These individuals were quietly cherry-picking nice PCGS-holdered classic commemorative coins based on both quality and value.

Note: There are always segments of the U.S. coin market that offer good value regardless of the current market. While you might collect PCGS-graded commemorative half dollars or Peace Dollars, I would recommend you always keep an open mind to other types of PCGS-graded coins, too.

Especially if you recognize something you might not collect is undervalued, don’t let the opportunity pass. Cherry-pick the PCGS-encapsulated coin. Having a great PCGS-holdered coin to trade for something you collect is always an advantage. Remember, you can cherry-pick single coins or an undervalued series of coins.

Premiums for fabulous PCGS-holdered coins are normal! The best coins always bring the most money. While a premium might be steep, it is always a function of quality. For rare coins don’t lose focus on quality.

There is a period of time before the market accepts the new price levels. Gold bullion prices in the $2,300 to $2,400 range isn’t outrageous anymore. Silver above $30 per ounce seems to have legs. While these price levels for gold are at all-time highs and silver is appreciating also, the fear, or lack of confidence, in these new price levels is not. While the acceptance of the new price levels has been pretty broad based, you, as a customer should always be focused on value.

Premiums for Bullion Coins

Some of the more traditional venues for bullion aficionados are suffering from some weakness in demand due to the premiums over the melt value of the items they produce. A reasonable premium over the melt value of a bullion item is a given, but the premiums some of the mints are charging have put a crimp in their sales.

Bullion buyers can easily change their focus and still get great bullion coins. Yet, regardless of what you buy, never lose focus on value. With the readily available spot price of gold/silver, which you can find on PCGS.com and Coinflation.com, you can easily determine the premium over the melt value of most major bullion items because of their known fineness.

Let’s look at a practical example dealing with a one-ounce gold bullion coin. For simplicity's sake, let’s use an example spot price of $2,350 and the dealer’s asking price for a one-ounce gold coin is $2,500. Your premium on that purchase is calculated as $2,500 minus the spot price of gold ($2,350), resulting in a net markup of $150. Dividing the $150 premium by the spot price of $2,350 results in a 6.38% markup for this example.

Mind you, there are currently one-ounce gold bullion coins available on the open market for both more and less than a 6.38% premium. Some are more popular than others, but they still represent one ounce of gold. Premiums make a difference, but some are more a function of hype rather than value. But only you can make that determination as to which is which when it comes to buying. The scarcity and demand for a particular rare coin should drive your numismatic purchase decisions, but the premium over the melt value is more pertinent when making bullion-purchase decisions.

You always need to ask yourself whether you are buying the hype or the value—and always cherry-pick!