If Financial Markets Plummet, What About Numismatics?
Global financial markets have been extremely volatile in the past week, with many recording near-record or record one-day declines.
Global financial markets have been extremely volatile in the past week, with stock prices mostly dropping. On Monday, Aug. 5, the Tokyo Nikkei 225 Index experienced its largest-ever one-day decline.
Some investors and investment funds have borrowed funds to acquire stocks. Margin calls galore were issued for them to put up quick cash or other collateral to continue owning their stocks. As has happened before, many investors chose to sell other assets to generate cash flow, with bullion-priced gold and silver being among the assets liquidated.
In times of greater economic uncertainty, consumers tend to rein in their spending. While purchases of essential goods like food, shelter, and energy are little impacted, spending on discretionary items – including numismatics – can plummet.
In today’s world, what would happen to numismatic markets if global stock values continued to decline? I cannot say for certain, but reviewing what has happened in the past gives some indicators.
The likelihood is that overall spending on collections would decline, and coins and currency put up for sale would increase. These two factors would tend to halt recent rising prices in many numismatic niches. It could also result in some level of price declines.
Having said that, though, there is one niche that could continue to see price increases. That would be gold and silver coins with a collectible value that are traded for relatively close to their intrinsic metal value.
As people grow fearful of owning paper assets such as stocks, bonds, and currencies, ownership of bullion-priced physical gold and silver coins and ingots becomes a more attractive safe-haven alternative. So, even though gold and silver prices dipped early this week, there is a significant prospect they could rise far above recent highs.
Remember, the spot prices of gold and silver declined significantly in late 2008 during the Great Recession. Then, however, prices of both metals rose over the coming years to set a longtime high for silver at the end of April 2011 and an all-time high for gold in September 2011.
There is one numismatic niche that could suffer more quickly and to a greater degree than other categories. I call this niche Instant Rarities. They are modern issues made to sell directly to collectors on the basis of the designs. Most of these issues are struck in gold or silver and are marketed at higher percentages above metal value than bullion-related issues.
I envision that demand for forthcoming issues will drop first, and then the secondary market demand for extant pieces will also dry up. This happened with world-proof sets that started to appear in the late 1960s and became a flood in the 1970s. Today, many such issues trade close to metal value.
The extent to which prices of everyday numismatic items could stall or decline will depend on how long financial volatility continues.
Answer to the Previous Trivia Question
Last week, I asked: Which foreign country’s founding president was born in Virginia?
The answer is Joseph Jenkins Roberts, the first and later seventh president of the African nation of Liberia. Liberia was colonized by the American Colonization Society beginning in the 1820s. Born in Norfolk, Va., Roberts, whose mother was a former slave, left Virginia for Liberia in 1829, became the high sheriff of the colony in 1833, vice governor in 1839, and governor in 1841. Upon that nation’s independence from the United States in 1847, he was elected the new country’s first president from 1848 to 1856. He was again elected president, serving from 1872-1876.
This Week’s Trivia Question
In a public poll taken in the 1970s, who was the most popular person suggested to appear on a U.S. coin? Come back next week for the answer.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award, and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), the Professional Numismatists Guild, the Industry Council for Tangible Assets, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So,” and “Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).
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