Error Coin Market Report 2016

1954-S Franklin Half Double Struck

Error coin collecting and the error coin market have always had their ups and downs, with both the popularity and prices of errors going up and down. It’s a “seesaw” effect, which is seen in all collectibles and areas of investment just as it is in the error coin market. However, even knowing this, it can be disconcerting to see a coin that was selling for $1,000 drop in price to $700, especially when you paid the $1,000 price for it. The good thing is there are many reasons why there is this up and down to the market, and most of the time they are not reasons to get worried about but are simply normal give and take in the hobby and error coin market. 

As a coin dealer, I set up at most of the largest coin shows held throughout the U.S., participate in major auctions, buy and sell to both collectors and dealers, and also get a chance to talk to quite a few people in the hobby. With the U.S. coin market being soft right now, there has been general concern as to how much that is effecting the error coin market, and it is a question which often comes up in conversations with other collectors and dealers. In the last several years, the U.S. coin market has experienced a fairly major drop in prices for some series of coins, while other coin series have held up well. Does this effect the error coin market? Yes and no. Note: for purposes of this article “U.S. coins” refers to non-error U.S. coins.  

Above: A 1976 Kennedy half dollar struck on a clad quarter planchet. Coins like this are very scarce, and are in fairly high demand right now.

The error coin market and the U.S. coin market are connected, but only somewhat. A great many error coin collectors collect error coins exclusively, and so are not in tune with the U.S. coin market, and so price changes in U.S. coins are not of any great concern to them. Also, error coins are collected more for what they are, and far less for their grade, which means problems such as “gradeflation” have little if any effect on the error coin market since error coin grading standards are similar, but not the same as they are for non-error coins (note: “gradeflation” is the belief by some collectors and dealers that grading standards for the 3rd party grading services are slowly becoming more and more liberal, and that coins previously being certified at a lower grade are now being graded at a higher grade. Many believe this is pushing down prices for U.S. coins due to lower quality coins being assigned higher grades.)

One effect that the U.S. coin market does have on error coins is that collectors and dealers of U.S. coins are more tied-up for cash right now due to a general decrease in the values of their collections/inventories, and also the decrease in values makes collectors and other dealers reluctant to buy coins unless they are “sure” that they are a good value. This means that there is less of both dealers and collector’s cash flowing into the error market, and while they may never have bought many errors anyway, there is still a small effect from this lack of buying. 

It’s not just U.S. coins which have reduced collector/dealer cash flow, but also lower bullion prices have contributed to the situation, since the bullion they’ve bought has been dropping in value of late. Additionally, there have also been many gigantic U.S. coin collections hit the U.S. coin market, and that has also created an increase of supply of U.S. coins, and a corresponding decrease in prices since collectors and dealers have had to sink their cash into these (often) expensive coins. Although there is some flexibility in dealers and collectors ability to absorb all these news coins on the market, that flexibility has its limits.

And last, the U.S. and world economies have been sluggish for years now, resulting in lower incomes for some collectors, and a corresponding effect on coin dealers. If people are working and making good money, they generally are not going to spend their money on collectible coins. 

So while some of this sounds like bad news for the error coin market, there is actually a lot of good news as well. As an error coin dealer, this has been our busiest year, with more sales than we have ever had in a given year, and with sales to many different customers as well (in other words, the bulk of are sales weren’t simply to a few collectors, but were spread out among many collectors.) Error collectors are buying, but the requirement is that prices be in line with the market. Some coins have gone up in value and some have gone down, but if as previously mentioned, an error coin had dropped in value from $1,000 to $700, the price needs to be at the $700 level and not the $1,000 level. This is true in any market, and so errors that have dropped in price could be a good value, while those that haven’t dropped simply are still in demand and perhaps have farther to go upwards.  

Walking half struck off-center1944 Walking Half Off-Center Reverse

Above: Rare errors such as walking liberty half off-center strikes are in high demand. The above coin is a 1944 walking half struck 30% off-center.
 

Rare errors in a nice grade are very much in demand, and as a dealer they are as hard as ever to buy, and are easy to sell. Rare U.S. type errors, and various early 20th century coin series, and rare major errors are always hard to find and while they may take slightly longer to sell due to their being more expensive, and so not easily affordable to the average collector, they do sell well. Modern major errors (2003 to present) are also hot, and there is strong demand for the scarcer error types since 2003. Major off-metals, transitionals, and rare or wild striking errors have all been popular this year, with the coins being much harder to buy than to sell.

1980 Nickel on cent planchet error coindouble-denomination cent on dime mint error
Above: more common errors such as the common date nickels on cents or 11c double-denomination cent on dimes are cheap right now.

What is soft? Summed up, it would be common errors. Any of the common date or more common error types are down in price right now. Common nickels on cents, 11c double-denominations, state quarter errors, die caps, bonded coins, planchets—any common errors in those series are soft for this year, although there are others that have had weaker demand as well. 

In auctions such as eBay, or major auction houses, prices have been generally good. While some coins sell cheap, others sell very strong, and as a whole, I would give a thumbs up to prices realized in auctions. Sometimes coins sold “cheap” because there is little demand currently, while some are cheap simply because bidders missed the coin and it “fell through the cracks.” Other coins have sold for very high prices because they are rare, very difficult to find errors for which there is high demand. 

The stock market has also been good for the coin market, with record prices in stocks contributing to some collectors having extra funds for buying coins. This is a good thing for the coin market as a whole.

So should you be concerned about the error market? I don’t think so, at least not as long as you are buying to hold for 5 years or more. The “buy and hold” strategy is usually a winner for coin collectors, and while there are no guarantees in any market in terms of prices increasing, the error coin hobby has a lot of devoted collectors behind it who love the hobby for its camaraderie amongst collectors as well as the thrill of building and owning error coin collections, and I fully expect good things for the hobby in 2017 and for many years to come.