Meridian Coin is constantly involved in the rare coin and precious metals marketplace. Aside from the institutional level and investor level analytical information that we, like other interested parties, review; we also get the benefit of seeing consumer sentiment from the street level due to our brick and mortar coin shop. As 2016 gets ready to begin, we have developed our own view of what we think is more likely than not to be the general trend over the year. Please keep in mind that we are in no way in possession of a crystal ball and we fully reserve the right to blatantly state that we were wrong and you never should have listened to us. But, we do believe that there are some macro trends that are developing in both the rare coin and precious metals markets.
The rare coin marketplace is changing on multiple levels. In our opinion, the generational shift occurring in the marketplace is a huge factor for the future of the coin business. The World War II generation has passed on, or is passing on, and with it the holdings and accumulations that defined that generation. It has been a long time since liquor stores and family owned groceries have been operating and accumulating circulating change that consisted of metallic value. Many of the greatest collections of the aforementioned generation have long been sold, so it is unlikely to have a large source of fresh material from that era entering into the rare coin marketplace. The Baby Boomers, primarily responsible for inheriting the collections of the World War II generation if not sold already, are sophisticated in their capabilities to use the internet. This capability results in much more calculated liquidations of these estates and collections and reduces the occurrence of large fresh deals entering the rare coin marketplace in a random manner. In effect, there are fewer players getting fewer large deals with regards to rare coins at the organic level.
In addition, the price transparency of the internet has altered the role the rare coin dealer to that of more of an adviser. In many ways the current rare coin marketplace is very efficient with regards to protecting the consumer and removing much of the secrecy and numismatic intellectual value that was held more closely by the dealer populace in the decades past. The grading companies have continued to excel at finding ways to make the graded product more secure and liquid for buyers on a global level for all types of collectible coins. All of this should point to a very vibrant future for the rare coin business. One problem, the average collector of serious rare coins is probably over 55.
Over the next ten to fifteen years, the most successful and genius coin dealers who have shaped the current marketplace will most likely exit that marketplace. As that generational shift occurs in the dealer community, there will be a whole host of high caliber inventories that will need to be absorbed by a dealer/collector community that is much, much smaller. Additionally, the landscape of the networks that were used to distribute large quantities of coins; i.e. telemarketers, TV shows, vest pocket dealers will change dramatically. The simple fact that a buyer/collector can instantly get online and research the price that he/she just paid will cause the existence of high margin, sales force operated business models a thing of the past (except for the unscrupulous, which will always exist somewhere).
So what is the best strategy to succeed in a future marketplace dictated by more net sellers than buyers, a dealer/collector base that is substantially smaller, and price compression in many areas of numismatics? Get smarter, diversify, learn how to accurately analyze upside/downside risk, buy quality and buy things that people will want in the future marketplace.
With the exception of the specialist collector, one who collects a single series or even more in-depth, some of the best buys will be in high quality and liquid generic coins that could develop price inequalities in an environment where precious metals prices, generational shift of inventory and collecting trends do not conform, leading to opportunity. As always, buy the best that you can buy. Buy significant coins as they relate to the history of America. Make sure to pay attention to the set building trends of the American Eagle Series coins in silver, gold and platinum. Do not be afraid of world coins and ancient coins. The successful future dealer/collector will be able to be nimble in a whole host of numismatic scenarios.
Our hope is that the coin business will rejuvenate itself in a very healthy manner during this shift. The technology is present for quick trading, confidence in the product being traded and the ability to research a much broader area of coins with more lethality. This should bode well for the dealer/collector generation that will come to be.
Just keep in mind, if precious metals continue to decline, there could start to be substantial price compression sooner rather than later. All of this creates opportunities for those that decide playing in the wonderful arena of rare coins is worth their time and study.
The precious metals market has most likely been manipulated to some degree, just like other asset classes. As the year 2015 ends and the interest rate spectacle has come to an end with the Fed actually committing to raise interest rates, it seems like 2016 could be an interesting year for precious metals. Our belief is that a large portion of the expected interest rate increase was already factored into the declining price of gold and silver over the course of 2015. Yet we also believe that there is a level of uncertainty that could see prices of gold and silver drop more in 2016. The paper nature of much of the bullion trading business could cause accelerated losses to the NY Spot price if the interest rate situation produces an even stronger US dollar. Therefore, while I have been advising clients that it seems acceptable to start accumulating physical gold and silver at current levels, do not be surprised if gold tested the $800-1000 range with silver correspondingly moving South.
The case for precious metals accumulation is strong for several reasons. Prices are down by nearly 55% from the highs of several years ago. The demand for physical precious metals is confirmed by continued record sales of mint products by not just the U.S. Mint, but most sovereign global mints. Tangible portable wealth is gaining more traction as people become more concerned about the rise in geopolitical tension and warfare. Terrorism abroad and domestically is likely going to continue to rise and the affects could become more and more disastrous. With the potential for global warfare and/or the advancement of a new political and military order in the world, it might be wise to have an insurance policy that consists of gold and silver.
It is very hard to call the top or bottom of any market. Meridian Coin believes that clients should now start to systematically put a portion of money on a regular basis into gold and silver. There are opportunities with platinum and palladium as well. We think that, pending a massive geopolitical event or financial calamity, gold and silver should trend flat to potentially down over the next 6 months. While we would not recommend someone go all in at this point, just periodically accumulating precious metals per your own budget could turn out to be a very wise choice.
Best of luck in 2016.
Meridian Coin is a rare coin and precious metal firm that is always available to help individuals, estates, business, banks and any other credible entity with their rare coin and precious metal needs. Please contact us for any reason to discuss your options with regards to selling and/or buying rare coins and precious metals.