Market Blog - Written by Doug Winter on Monday, May 23, 2011 15:25 - 9 Comments
“Stick With The Keys…”
When I was a kid just beginning to get serious about coins, an older local dealer made a comment that has stayed with me for years. When discussing his buying philosophy he said, “Stick with the keys, kid, you’ll never go wrong.” What he meant, of course, was that if you bought the rarest, most desirable coins in a specific series, you would do well over time.
His advice was sound, and key date coins in nearly all series have performed brilliantly during the last decade. This was even further reinforced this morning by a key date that I had just purchased at a show.
I listed an 1854-D quarter eagle in PCGS AU58 CAC on my website this past weekend. Within one day I had no less than six people inquire about it (all the more impressive when you consider I was asking $18,000 for it) and this got me to thinking about a hypothetical situation involving buying key date rare gold coins.
Let’s say a collector had around $100,000 to spend over the course of a few years on Dahlonega quarter eagles. Would he be better off trying to assemble a complete (or near-complete) set in the EF grades or trying to spend all the money on as many nice 1854-D, 1855-D, and 1856-D quarter eagles as he could find?
I’m not certain that there is a “right” or a “wrong” answer for this. He could spend his $100,000 on processed, over-graded examples of these three dates and have a group of coins that, while rare, will prove hard to sell when the times comes to do so. In this case, I’d rather see the collector purchase thirty nice $3,000-3,500 coins.
But assuming our collector friend was patient, savvy, and well-connected and was able to acquire a few nice key dates would he have a “better” collection? I’m not certain that a small group of key dates actually constitutes a collection per se but as someone who buys a lot of Dahlonega quarter eagles, I’d personally be more interested in a small group of rarities than an assortment of more common examples.
Let’s talk about “key” dates.
There are key dates that aren’t especially popular (the 1842-C Small Date half eagle comes to mind) and there are key dates that seem fully priced at current levels (some would say the 1870-CC double eagles fits this category although I wouldn’t necessarily agree with this). The three Dahlonega quarter eagles that I mentioned above fall into the category of key dates that are popular and priced at levels that make sense.
What makes one specific key date more desirable than another? In the area of rare date gold, I’d list a few specific factors.
The first is the overall collectibility of the series a coin is a key in. If a series is actively collected by date (say St. Gaudens double eagles) than a key date within that series is likely to be highly prized–and priced. If a key date is part of a series that is not terribly popular (say San Francisco quarter eagles) than a key issue might not be in strong demand.
Certain key issues aren’t necessarily rare but they are in strong demand due to the nostalgia factor. When you were a kid, you were probably obsessed with the 1909-S VDB Cent, right? There was that gaping hole in your blue coin folder that you knew you’d never fill and that pesky S-VDB haunted your dreams for years…until you became successful and could afford a nice one. In its own little way, for a coin geek buying a nice 1909-S VDB Cent is like becoming the starting quarterback for your high school team or dating that hot girl from your 10th grade English class who’d never make eye contact with you.
For a more sophisticated coin collector, the concept of the key date has other ramifications. Is the coin rare in all grades? What is the “right” grade to buy the specific key date? Is the issue in question historically recognized as a key or is it an issue whose rarity is recently noted?
But I digress…
Getting back to our original hypothetical question, I think I would choose the key threesome Dahlonega quarter eagles if I were presented the question I asked earlier. I’m basing this decision on the fact that whenever I do list any of these three dates on my website they get multiple orders and seem to attract collectors who don’t necessarily specialize in the series.
This last point is important. A key issue is iconic if it has multiple levels of support. A coin like a 1795 half eagle or a 1907 High Relief St. Gaudens double eagle isn’t truly a “key” issue from the standpoint of true rarity but both are issues that are sought by collectors or investors who aren’t specialists in early half eagles or Saints.
I haven’t met many gold coin collectors who focus exclusively on key issues and after thinking about this, I’m sort of confused as to why more collectors don’t do exactly this. How cool would it be to see a collection of Liberty Head half eagles that contained Condition census examples of the ten rarest issues or a Liberty Head eagle collection that focused on rarities such as the 1858, 1864-S, and 1875?
What are your thoughts on key dates? Please feel free to share them with me in the comment section below.
9 Comments
I think that the collecting strategy that you propose makes some sense.However, one could easily go years between coin purchases, just focusing on, say, the 54-D, 55-D, and 56-D QEs, with lots of frustration trying to compete with others for the few examples that turn up on the marketplace. Five collectors are probably disappointed today that they did not get to buy the 54-D that you listed on your website.
A collector that goes years between purchases, interrupted only by periods of frustration and disappointment, will likely not be a collector for long.
Collecting just key dates is an interesting proposition. I think that you would still need to have some purpose behind it to stay interested. As RYK points out, if you only went after the 54D,55D and 56D QEs, you might end up frustrated but if you added type to the dimension, it might be more interesting. It seems that I am often tempted to buy a key whenever you list one on your site but because it’s only an impluse without a strategy, I don’t pull the trigger. Thanks, TL
This article took me back to one you wrote years ago about warehouseing a key such as the 1854 D $3.00. From the investment standpoint this strategy has been extremely successful ( if holding for 5-10 years ). After following this strategy within my collecting series I have found interesting die varieties in some of the key dates. Also acquired some of these with great pedigrees. Putting together a grade set of a key date could take some time but sure can be fun. Key date collecting makes sense (and dollars too). Really enjoy your insight and observations Doug, keep them coming, we all benefit from them.
Good comments by all three of you. I was probably unclear in my article about the hypothetical collector buying nothing except the three rare date Dahlonega quarter eagles; that would be tedious and unsatisfying. The “all key date” strategy would have to be expanded. In this case, it might include the key Dahlonega gold dollars (1855-D, 1856-D and 1861-D) as well as the key half eagles (1838-D, 1842-D Large Date, 1861-D).
Doug,
Great food for thought. The only downside is the additional knowledge obtained by completing the series. Most of our brains have enough room for the 70 plus coins that make up the set, and a completion would mean closure–then off to somethiong else.
ryk - May 23, 2011 04:50 pm