The Coin Analyst: What to Expect from the 2013 Coin Market

by Louis Golino for CoinWeek ……

As I did last year , I am providing CoinWeek readers with what I see as the main broad trends we can expect to see in the coin market and numismatics in the coming year.

There is always a degree of hazard in making predictions or forecasting trends, and that is especially true going into 2013 when the U.S. will continue to face a very uncertain political and economic environment that will put pressure on the coin purchases of most people.

Overall, these are the main developments I see coming for the 2013 numismatic market:

1.) The coin market will remain dominated by the bullion market other than at the very high end, where numismatic rarities trade with no regard for metal prices.

2.) The market for numismatic coins will also be shaped largely by the performance of the U.S. economy, which helps determine how much discretionary income collectors have for coins.

3.) Classic collector coins, especially commemoratives, pre-1933 gold coins, and key date coins may continue to see weaker demand, providing opportunities for buyers who understand market trends. Remember the old adage “buy low, sell high.”

4.) Collectors, especially newer ones, will continue to be attracted by modern U.S. coins because they are easier to collect, and because they allow buyers to purchase high-quality and in some cases, low mintage collectible coins for a relatively small premium over melt value.

5.) The U.S. market for modern world coins will continue to increase as major world mints continue to issue interesting and attractive coins in lower mintages than U.S. coins. And the global market for such coins will grow even more.

Precious metal prices will play an especially important role in shaping the coin market next year, as they have in recent years, for a number of reasons.

• First, higher metal prices make it harder for collectors to acquire the coins they want, especially if they are facing economic pressures in their lives. However, some people will take advantage of those prices, and sell bullion to free up resources for numismatic purchases.

• Second, coin dealers will continue to shift a lot of their business towards buying and selling bullion if prices continue to rise next year, as most experts predict they will. That will reduce demand for so-called “bread and butter” collector coins, and lower-grade and more common silver coins will see their numismatic premiums continue to disappear.

Ed Reiter, editor of Coinage magazine , echoed my views in the latest version of his annual article with predictions about the coin market in the coming year. He said in the January 2013 issue that “Brisk bullion sales have helped many coin dealers weather the economic storms of recent years and buoyed the coin market as a whole. Some dealers, in fact, report that gold and silver now account for the lion’s share of their business after many years when collectible coins were dominant.”

For buyers and investors this means mid-range collector coins are less expensive than in the recent past, providing an opportunity to fill some holes in their collections. But if you need to sell, higher metal prices are a mixed bag. Your bullion coins will bring more if you bought when metal prices were lower, but a lot of the numismatic premium, unless the coins are very rare, tends to disappear, whether you have modern U.S. Mint coins or common-date pre-1933 gold or other coins.

Contacted for this article, veteran Oregon dealer, numismatist, and coin expert Steve Estes said: “If the economy remains weak, and the stock market recedes in 2013, I look for the coin market to be somewhat soft. Some collectors expect limited discretionary income in the near term. One customer already advised he is scaling back collecting next year due to projected higher taxes. Gold should be strong, and silver may be neutral in the coming year.”

Mr. Estes’ comments are in line with the emerging consensus view among financial experts, which is that political wrangling in Washington over the fiscal cliff and then the debt ceiling increase will weigh the stock market down, while precious metal prices should be strong.

Many large banks like UBS and Morgan Stanley and analysts on the CNBC show, Fast Money, are predicting gold prices in the $1800-2000 range, and silver getting back to $40, or higher. One CNBC analyst, Brian Kelly, predicted on New Year’s Eve that gold would be “the asset class that will outperform” in 2013. But some caution is advised, as I remember hearing similar comments a year ago, and gold ended up underperforming stocks in 2012.

If precious metal prices do rise, I expect it to keep the action on the bullion part of the coin market, and for numismatic material to remain softer overall.

However, quality classic U.S. coins will continue to be in demand, especially better-date Morgan dollars and higher-quality type coins such as Seated Liberty, Barber and Bust coinage. Those series have continued to trend steadily higher in the recent past while other collectible coins were weaker.

Quoted in the January issue of Coinage in Mr. Reiter’s article, veteran numismatic market analyst Maurice Rosen said he sees two main trends. First, he believes that “accelerated concern about wealth preservation – the driving force behind the demand for gold and silver” will shape the market in the coming year. Second, buyers of collectible coins will continue to seek out and demand the best quality coins they can find and such coins will “clearly outperform low-end certified coins in the same grade.”

These predictions and analyses of likely trends provide investors and collectors with information to help them decide what to buy or sell in the coming year. I hope it proves to be useful.

Finally, as this is my last Coin Analyst column for 2012, I would like to thank readers of the column for their interest in it and for all their insightful and provocative comments. Best wishes to everyone for a successful 2013.

Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.