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Buy Graded
Coins for Safe Investments
By Louis Golino I’ve been
intrigued by coins and the market for them since
I was a child. I grew up overseas and was
exposed to world coins at a young age. I soon
became interested in American issues, too. By
age 10 I was a member of the American Numismatic
Association, subscribed to hobby periodicals and
was reading books by Q. David Bowers on the coin
market. After metal prices exploded in 1980 and
then declined rapidly, I began a long hiatus
from collecting for reasons that had nothing to
do with the price of gold or silver. I was a
teen-ager and had other priorities.
About six years ago I began collecting again.
When I first got back into it, I read as much as
I could about how the hobby and market developed
in the intervening years. On the one hand, I
missed out on a lot of price appreciation over
the years for coins like high-grade 19th century
silver type coins or key dates. On the other
hand, I avoided the market crash of the late
1980s when a lot of money was lost.
Even today after the incredible bull market of
the past few years, many coins sell for a
fraction of what they cost in the late 1980s. I
think it is useful to study these trends and to
try to discern which type of coins have fared
best over time. Those are the coins worth
collecting, or at least the ones most likely to
continue appreciating.
A couple of years ago I had to sell part of my
collection. I thought I had bought carefully and
always researched a company’s reputation before
doing business. When it was time to sell, I
discovered that many of the classic collector
coins I had purchased (Walkers, Morgans, Peace
dollars, etc.) were overgraded, and I lost a
substantial amount of money on those items. If
the price of gold had not more than doubled
during this period, I would have really been in
trouble.
Bear in mind that I had purchased the key
grading guides and thought I knew how to grade,
but the guides don’t provide very good guidance
on how to grade uncirculated coins. It is much
easier to grade circulated coins, which tend to
have more clearly defined criteria.
For a little while I stopped buying after this
chastening experience. But the collector bug in
me brought me back. I decided to be even more
careful this time about who I did business with,
the price I paid and what coins I bought. I
decided to buy more slabbed coins and fewer raw
ones and to better focus my interests. I think
it is very important to have a goal in mind when
you collect and work towardsthat goal (such as
having a complete type set). Otherwise, you end
up with a hoard, not a collection.
More recently, I started submitting coins to the
grading services. I’ve had a couple of pleasant
surprises such as getting an MS-62 designation
on a coin that was sold to me as an MS-60 (with
a difference of about $200). However, a number
of coins that I bought from reputable dealers
that were sold to me as uncirculated or even as
Gem BU came back as AU-55s or AU-58s. In one
case I had a Morgan dollar that was supposed to
be a DMPL that came back as genuine with altered
surface. Presumably this coin was cleaned to
make it look like a DMPL. I purchased it from a
Midwest dealer with decades of experience that
usually sends me fairly graded and priced coins.
Fortunately, that dealer was willing to let me
send the coin back for a full refund even though
it was long past the return period.
I contacted the dealers who sold me the sliders
and had similar conversations with both of them
in which they told me grading is subjective,
etc. One agreed to reimburse me for the cost of
slabbing the coin, while the other offered to
buy the overgraded coin back if I sent it back
to him. I decided to keep the coin and do no
more business with that company. I have also had
to return quite a few coins over the years.
I have bought coins from many different
companies and dealers through the mail and in
person. From my experience even otherwise honest
dealers try to slip overgraded coins in from
time to time, and we collectors need to watch
coin dealers like hawks. I have rarely had to
return a slabbed coin and have had very good
experiences on eBay, where I am very careful
about whom I buy from. I also only buy slabbed
coins on eBay and carefully study the coin
photos, the dealer’s background and feedback and
I verify the certification numbers. These are
not fool-proof methods, but they help a lot. You
would be amazed at the number of times I have
found that a simple check of the certification
number showed that the coin for sale is not what
it was purported to be.
I realize that publications like this one need
lots of advertising to stay in business, but
quite frankly I am appalled by the fact that
they seem to allow virtually anyone to run an
advertisement. I think that is a huge problem
for the collecting community.
Many cleaned and slider coins have virtually no
resale value. If you have collected for years
and haven’t sold anything, you really should try
selling a few pieces. It’s the only way to learn
how the coin market really works.
Overall, I prefer older, classic American coins
to modern ones, although the Mint has produced
some interesting issues in recent years such as
the 20th anniversary silver and gold Eagles and
the Lincoln anniversary pennies. But older
American type coins in slabs are generally very
expensive, so I mostly buy raw type coins.
If you invest a substantial amount of money on
coins, you really should try to stick mostly to
graded pieces that are solid for the grade.
Otherwise, you could be in for a rude shock when
it’s time to sell.
I think the coin market has shown impressive
resiliency during the economic crisis of the
past two years. Some higher end coins have
declined in price, which has presented some
attractive buying opportunities, but overall
prices have held up surprisingly well. But the
market and the hobby also face some other key
challenges, which include the onslaught of
counterfeit coins from China (including slabbed
ones) and the policies of the U.S. Mint.
The Mint has alienated a lot of collectors with
its questionable decision to forgo production of
proof and burnished silver Eagles and other
products. Continuity of series may not be our
God-given right as Americans (the Mint obviously
has higher priorities), but it sure would
improve the Mint’s image among collectors. The
Mint also has an annoying habit of destroying
the secondary market for many issues by selling
one year’s issues well into the next year. And
as often discussed in these pages, it saturates
the market with products and insists on issuing
every coin in every conceivable type of
packaging.
I think the burnished gold and silver coins are
excellent products and disagree with Dave
Harper’s suggestion that the Mint stop producing
them. Many of them have very small mintages and
have experienced dramatic price appreciation.
Just look at the fractional Buffaloes the Mint
foolishly decided to stop issuing last year.
Prices for those coins are going up every week.
They have increased so much and so quickly that
I am concerned that “a Buffalo bubble” may be
forming that could result in some price
adjustments. But I still feel that years from
now these coins will command impressive prices.
And needless to say, the Mint really needs to do
something about its Web site and customer
service problems.
Numismatic News does an excellent job covering
the hobby and the market. It also provides an
important forum for collectors and investors to
share information with each other (through
letters to the editor, the Web site blogs and by
regularly soliciting the views of its readers).
I would enjoy seeing more articles on the
intricacies of grading different series and on
trends in the market. I enjoy the monthly price
guide, Coin Market, and am grateful that Harry
Miller uses more realistic values than many
other retail price guides that seem to inflate
values for most series.
However, I do not understand why some values
that are so obviously incorrect never seem to
get corrected. He continues to list prices for
common Coronet or Liberty half eagles ($5 gold
coins) that are clearly too low. The prices for
common VF-BU coins are lower than their melt
value. At $1,016 for an ounce of gold (which is
listed as the spot basis in the October issue)
the melt value of a Liberty eagle (which has a
net gold weight of .24187 ounces) is $245. But
he lists the VF-BU coins between $226 and $235.
The MS-63 coins are listed for $730. Try buying
a properly graded or slabbed MS-63 for under
$850. |