Coins vs Coronavirus

Coins vs Coronavirus

Financial markets can move very quickly - prices for commodities and securities can rise and fall in a heartbeat. Coins can be similarly volatile, but price change is limited by the slow trickle of data points between auctions where examples may only appear once or twice per year. Despite this, being bound by production schedule, by the time you read this article the data within it may still be dramatically out of date.


At the moment of writing it is Monday 9th March 2020, already being called ‘Black Monday’ for the utter turmoil experienced within the global capital markets today. Alongside the already widespread uncertainty regarding the short- and long-term effects of coronavirus (with more than 110,000 cases reported worldwide to date), a major dispute between Saudi Arabia and Russia regarding crude oil output resulted in a drop of as much as 30% in the commodity’s value. This has led to Saudi Arabia stating they will slash prices and ramp up oil production which, coupled with the decrease in travel due to infection fears, means that supply for this cornerstone industry may dramatically outstrip demand.


The knock-on effects of these factors have been described as ‘utter carnage’ by analysts: the Standard & Poors 500 Index plummeted 7% within the first minutes of market open, triggering an automatic 15-minute trading halt for the first time since October 1997; Asian markets were down between 3% and 5%; the FTSE 100 dropped 8%, and the French, German, Spanish and Australian markets were all down 7% or more. This is, essentially, the worst day of trading since the 2008 financial crisis.


Meanwhile, gold hit a seven-year high at $1,700 per ounce fulfilling its role as a ‘safe haven’ commodity. The interlinked nature of global financial markets means that the decline/collapse of a major industry or commodity can lead to a ‘domino’ effect where associated securities fold in turn (a predominant feature of the 2008 crisis).  As such, confidence in market derivatives drops sharply, while that of ‘backless’ hard assets increases – such as gold and, notably, coins.


During the 2008 crisis, prices for high-value coins (of around £10k+) remained steady with only a slight drop or levelling out in value, and continued to climb well before the rest of the market recovered. This is because rare coins are considered a stable store of value and are bought for investment, whilst also being bought purely out of interest and enthusiasm. This combination of motivations means that when investor demand softens, collectors jump back in to buy at reduced prices building in a ‘safety net’ of sorts. However, dealers serving lower tiers of the market in the £1-500 range saw a marked drop in purchases, as at this level most collectors were buying without investment in mind, and as their budgets tightened their buying rate significantly decreased.


It is not clear at present what effect today’s catastrophic trading will have on numismatic prices. But with Spink, Baldwin’s of St. James’s, CNG and DNW all holding auctions within the next month and Heritage’s April Central States auction featuring some incredible British rarities (such as the finest known Elizabeth I Ship Ryal graded MS64, an MS62+ Triple Unite and an example of the celebrated Reddite pattern Crown of 1663), time will tell how the numismatic market responds to this wider financial crisis. However, if past performance is any indication, higher value coins will retain their unique dual market position as a safe haven investment and luxury collectable, while lower value pieces may present an enticing buying opportunity. 


And remember. Clean your hands, but not your coins.


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