Rising interest rates - coin prices suffering?
ARCO
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Now that interest rates are rising after almost ten years of effectively zero rates (Money Market, bank CD), it seems that earning interest on your money is a better "investment" than purchasing coins. Now, coins by most here have not been considered an investment, but with higher rates, the glaring reality of how bad a coin can be as an investment or store of value is glaringly more obvious. I love collecting, but I try to balance my love of the hobby with some fiscal responsibility.
What are the opinions of those here? Will rising rates hurt the coin market? Whether it is rates or other demographic variables, it does seem that coin prices are dropping in every area that I collect and dropping faster than I have seen in my 20 years as a collector.
Have others decided against a coin purchase(s) because prices are too high and the returns better elsewhere?
Tyler
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A sub 3% fed funds rate is not hurting the coin market. Other threads have accurately detailed the culprits.
Even though rates are up, they are still very low by historical measures..... I have decided against purchases because the prices were too high, but not because I could get a better return elsewhere. I would rather have a cool $1000 dollar coin then the $20 dollars a year it would otherwise garner in a money market fund. The scarier part is the $1000 coin may be worth a lot less down the road, but that's the risk we hobbyists of all sorts need to face.
Perhaps not. For myself though, I have started taking a lot closer look at coin prices and the coin's potential to hold its value over time (not looking good) and returns elsewhere.
Maybe it is just the high retail prices vs the much lower market prices (the price you and I get when we sell at auction) that is keeping me away, or maybe it is a combination of too high prices and the ability to make money instead of losing money as a coin sits in a safety deposit box as its market price drops in the coming years.
Coin collecting is a hobby, not an investment. Use money you can afford to lose. Some coins do well, but collect for fun and you cannot lose. Edit to say money loss yes, entertainment value no.
Don't be worried about interest rates.
Be worried about interest in coins.
Another reason to get more and more selective in your numismatic spending.
If prices are generally falling, there could be some good opportunities. I just found out I missed out on a gold US medal with 2 struck
Top coins will continue to have interest so there's some safety in the flight to quality.
It appears that younger people with cash are buying quality, if auction results are an indication. But I would agree that the Whitman folder days are long gone.
I agree with those who feel that the cause of steadily declining prices is the ongoing erosion of the collector base. Broadly, I think it's tied to the decline in the use of physical (cash) money. Not nearly as many kids are likely to find coins fascinating as did years ago.
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My mind reader refuses to charge me. . . . . . .
I am in no way touting rare coins as an investment strategy. At the least, as you noted, the spread between acquisition cost and liquidation can be substantial.
On that note, it is not wise to assume that coin values will erode further from current levels. They may or may not. Returns from the stock market can certainly go negative at any time and no one is keeping up with inflation at a 1-2% bank deposit return.
On the flip side, I don't think phones were very interesting years ago
Or maybe the prices just soared way out of sustainable levels. The $10,000,000 1794 dollar was a thousand dollar coin as recently as the late 1940's. A ten thousand-to-one appreciation may be considered excessive.
I bought several of the Newman coins at auction about 4 years ago. Each included a kraft envelope with the acquisition cost. One civil war proof half dime was purchased by Mr. Newman for under ten bucks. I paid $1350. Coin is worth about $900 today. Still a hundred fold premium in a couple of generations.
I've never personally borrowed money to purchase a coin, so the higher rates haven't impacted me at all, at least not directly. That said, I do know that higher interest rates become a drag on the stock market at some point. People feel less wealthy as a result, which may in turn cause them to temper their collecting budget. I know when the market is roaring, I'm hunting coins loaded for bear!
Dave
You old farts have no idea what you're talking about in regards to Millenials and the YN's of the world. There are a lot of young collectors, you just don't see us.
Just because we don't post here much and don't go to coin shows doesn't mean were not on Reddit, Facebook, Instagram, Discord coin groups and hitting F5 on ebay new listings.
I think the general thing is that prices are falling across many coins regardless of where specific collectors are.
I also check out those sites and one thing I've mentioned is that on some of those places, modern collector bullion is very popular, like Silver Bug, which would not show up in the traditional pricing areas.
I only spend cash for my hobby. This is entertainment for me. So, in the intervening time between now and the time my eye sight deteriorates to the point where I can no longer participate in this hobby... that's my price of admission. Whatever I get back is icing on the cake...
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No. There were already a number of safer, higher yield investments than coins.
A lot of collector money is spent annually on new offerings from the Mint, leaving less money for the classics. And the coin market has become more fragmented, with many more options than were available when I started collecting in the late 1950s. Back then, most collectors favored assembling sets of coins that were currently or recently in circulation, along with perhaps a few classic commems. Purchases of earlier coins were mostly to fill type sets. Today's collectors have far more choices, and both rare and common classic coins have far more competition for the collector's dollar. Even if the collector base stabilizes, I don't see demand for classic coins ever returning to its former levels.
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With the amount of buying and selling that goes on, it is wrong to say that coins are not an investment. Yes, I understand that an expensive coin should not be purchased with the idea that it will be your toddler's college fund....however, there would not be a market if there were not profits - and the market is there - witness coin shows, shops, the internet. So yes, coins are an investment for those who sell coins. Cheers, RickO
top and scarce coins will continue to get record prices.
people with very deep pockets do not care about earning interest on their spending money.
they will continue to buy top coins. just watch the European auctions.
Overall, I'm sort of bemused/have a wait-n-see attitude regarding plummeting coin prices; I see it as a net positive for me, as for the next 4-5 years I really don't expect to be in the market at all. I hope to get back to collecting after that, and if I find things to be much cheaper overall, my selective dollars will go much further.
Thanks Ricko. These are my sentiments also. What I absolutely love about the hobby is that coins are like little pieces of art that I search out and acquire based on my aesthetic preferences. The other aspect I love and that attracts me to coins is that those little pieces of art are valuable, desireable, collectable and a store of value (to some degree or other).
So, when coin prices are falling, there are many more opportunities to acquire, but also the second part of the equation is now diminished. Since I am a buyer/holder, I cannot turn my inventory as prices drop (plus, I just don't want to
) like a dealer can.
This is what I want: I want beautiful coins that after I own them, many others will want them at a price higher than I paid.
Not too much to ask is it?
Rising interest rates inevitably "pop" bubbles - if something else doesn't pop the bubble first.
So are your coins in the bubble zone?
Many of the coins I have purchased this past year are rising in value. My proof nickel for example is worth 25 dollars more that it was in 2014. Not much but still an increase, so have my other coins.
I have collected VF-AU classic coins in the $150-$500 range, with maybe 10% of my collection in the 1k or higher range, so there isn't much of a bubble, but the aggregate of the prices paid over the bulk of my acquisition years of 2012-current is adding up to something larger now.
Nowadays, VF-XF coins are not cutting it and I am into the AU-MS coins at the $500-$3000 range. Now the reality of overpaying, or dropping prices is much more painful. Almost any auction record at Heritage I see shows 2018 auction prices much lower than the 2011-2016 period.
I do think that coins had a rapid price increase during the post 2008 financial crunch when you would least expect prices to rise. Given that rates were low then, and they are rising now, I wonder if there is a correlation and if so, how much.
@ARCO Solid collector/ classic coins like you seem to be accumulating won't go down as fast, but down markets will still take their toll.
There is not just an issue of price, but also an issue of liquidity.
IMHO, the bubbly numismatic stuff is the super-colorful and "rare-in-this-condition" material.
Coins is an 'antiques' market, not a financial market. Antiques are for prosperous people in prosperous times when money flows freely with few cares.
Great statement.