Investing in Coins : Entry Prices
A recent scan on the internet featured this statement on a page offering advice on coin investment
This in our view is misleading. In our long experience in the numismatic market this type of statement is a deluded effort to shed light on many dealers and coin retailers mark up without in fact doing so. The statement even given the most casual of scrutiny contains an inherent absurdity if it is not possible to get a return on coins for 10 years how can any coin dealers make a living?
Let us try to more accurately make the point we believe is being made;
If you pay a dealer or retailers full asking price they are possibly working on a 100% or more mark up so you may be paying say £100 for something the dealer likes to buy at £50. The '10 year' advice also implies you will go back to the dealer as your exit strategy so the market needs to have doubled to a point where this dealer wishes to sell the same item for £200 and buy for £100 for a break even point to be reached. A good example is The British Royal Mint's Gold Proof Sovereign Series throughout the 1990s these coins were offered each year for sale at £149 for most of this time their intrinsic gold content was around £50. The Royal Mint did not buy back their coins, they bought gold bullion and manufactured the coins. The secondary market where these coins could be sold with a few exceptions of the odd sought after date paid a bullion related price i.e. £50. In recent times the price of gold has tripled most of these Sovereigns still trade at bullion which is at the time of writing (May 2009) £150 each. Here we see an excellent illustration of the 10 year warning.
The secondary market buyers were able to pick up these Royal Mint issues when Gold was at £50 for £50- £60, they could not buy them off the shelf patience and supply research was required but it was rewarded by a 300% return in 10 years rather than a break even position.
The issue here is the entry price paid and its relationship to the trade price (current price a majority of active dealers would pay). It is crucial that anyone considering coins as an investment knows this relationship, our advice would be to sell some items from time to time to ensure your understanding of these trade prices is based on empirical experience.