European Central Banks have announced that they have limited sales for the next five years, propelling gold to the $300 level (as of Sept.30, 99). In recent months, sales of gold reserves and the threat of increased dumping of these reserves by European Central Banks have caused the price to tumble to twenty-year lows. These 'fire' sales created a selling panic and many thought gold could fall as low as $200. However, the announcement of these new limits coupled with Y2K fears have been enough to drive the metal markets to the largest one-day rise in nearly two decades. Gold, silver and platinum became under priced in one very short week; demand is quite strong and new speculators are entering the market.
When there are small movements in the metal markets, most analysts recognize an insignificant influence on the rare coin market. Coin dealers agree that the coin market is typically unaffected by small fluctuations in the price of gold and silver. However, when we see an explosion in the price of metals, the psychological effect that it can have on the rare coin market is astounding. What do you think happens to the basal (intrinsic) value of a generic twenty-dollar gold piece when gold rises by $50? Of course, it goes up proportionately. Although, coins valued for rarity and grade are less affected by an increase in the price of gold. The value of dealer inventories may rise considerably depending on their depth in generic gold.
Let's discuss how market psychology works. This is a true domino scenario. When gold prices rise so dramatically, customer demand increases. When a dealer needs a thousand coins for a rather large investor, he puts the word out and other dealers start their pursuit. From coin shows to coin shops, they travel around creating more demand at every stop. Figuring major wholesalers and retailers from across the country into the mix, you wind up with hundreds of potential outlets buying and selling this particular coin.
All of this demand tends to jump-start other coin dealerships, as current available supplies may not be enough to satisfy the new requirements of the market. As the 'dominos fall', the entire coin market begins to strengthen; the smaller retail stores attract new customers and some buyers are diverted into other related areas of the coin market. History of the coin market, including the 'ups and downs' of the bullion market, allows dealers to anticipate future coin cycles. But how long will this demand last? Will it continue to grow?
The last Long Beach Expo of the 1900s proved to be successful in that there were lots of dealers from all over the country and attendance was strong. Retail dealers felt they bought and sold an average amount of coins, however, the wholesale market was lackluster at best. With so many recent auctions adding millions of dollars in fresh coins to inventories, many dealers have yet to replenish their cash flow. In some cases, auction bills are due and dealers were not interested in buying unless it was for want lists.
Bargain hunting was the main theme at Long Beach. Many collectors like to take advantage of the final day's "going home" discounts as dealers are anxious to add to their total sales for the show. However, the best bargains may be found in the dealers' excess inventory of more common coins, not key or better date coins; these coins are usually sought after by the more advanced collector who tries to attend the first days of the show getting "first shot" at dealers' new purchases. As a result of the various auctions and new purchases made by dealers in the last few weeks, there are lots of rare coins available. But, if collectors want any of these special coins, the first day of the show is the time to buy them; once purchased by a collector, they tend to go off the market for a very long time.
The Heritage Signature Sale realized a total of just over $2 million. One of the highlights of the auction was the 1776 Continental Dollar, graded by PCGS as MS65-it closed at $50,600.
Many dealers are looking forward to the Electronic Coin & Collectible Fair at the Columbus Convention Center, October 8-10 (Dealer setup is on the 7th). ICTA, NSDR, Ebay, NGC, PCGS, and Heritage are sponsoring this first-ever event where just about every type of collectible will be represented. Ebay will have numerous computers available for dealers and collectors and will host a cyber auction with Butterfield & Butterfield. Heritage will conduct a Premier Auction, which is a combination of their usual Signature and Bullet Sales. There are approximately 1200 lots with many potential highlights. One of the more interesting coins in this sale is the rare 1844 O $10 Gold in NGC PR64. This is being sold in a special 'no buyer's fee' session where the buyers must either bid by mail or on the Internet.
Skyrocketing Gold Inspires Demand
