There is a temptation at this time of year to make predictions, and I will admit that I have fallen victim to that urge in the past.
If there is one thing I have learned from that experience, it is that while I am sometimes good at spotting trends, I am not so good at predicting the timeline. Take for instance the staggering number of new issues being produced by the Royal Canadian Mint. Not that many years ago I would have been convinced that the number of coins was just flooding the market, that they would never sell out, and that the secondary market would be in stagnation for years.
The truth is, the market for modern Mint products has proven to be much stronger than most of us expected, and the Mint is able to make money, and have sellouts, with impressive regularity. In fact, the profit from the sale of collector and gift coins is a significant source of profit for the Mint. Another area where I remain amazed is the capacity of the hobby to absorb high-volume, high-dollar, auction sales.
Not only has the number of sales taking place each year significantly increased in the past five years, but they all seem to be doing pretty well.
Once again, a few years ago I would have thought the market would have been saturated by now, but I was wrong again.
Simply put, despite doom and gloom reports, the numismatic market remains quite strong. That doesn’t mean everything is perfect. For instance, the very top of the market, the great rarities with great prices, remains a bit thin. Yes money is out there, but that money is smart, and looking for good deals on good coins. Some of the factors are known. With traditional investments paying poor returns, there is a tendency for the market to move to tangible assets. Traditionally that means precious metals and there can be no denying that the bullion market has been active for some time now.
However, now that bullion markets have settled down a bit, there is a tendency for some investors to move into rare coins. The theory is that rare coins, as with other art investments, have the potential to appreciate at a better rate than bullion because their value is based on demand and rarity. The argument makes sense, assuming of course one recognizes that rare coins are as liquid as other assets and it can be hard to get full value on a quick sale. On top of all of this, we have to remember that not all investors understand the coin market.
In 1991, the market crashed largely because an investment group attempted to quickly sell off a holding of thousands of “rare” Morgan dollars. The move not only flooded the market with Mint State Morgans, but also created a panic among other investors when the price of these coins understandably dropped when the supply got larger.
Hopefully, future investors will know enough to dispose of any large holdings in a less rushed manner.
Even so, when the Mint was called upon last year to sell off a bunch of gold coins from the Bank of Canada hoard, the market sort of gasped, and then just carried on without the feared market collapse. The truth is, even in a market that is well established and mature, such as the numismatic market, you’ll never know for sure what will happen.