The following Q&A is excerpted from Clifford Mishler’s Coins: Questions & Answers: Q: Is collecting any type of coin a good investment? A: No! The hobby collector—be it of coins, back-scratchers, or Bavarian beer mugs—is occasionally persuaded to purchase by impulse or sentiment. Indulging frequent lapses into irrationality is part of the fun of maintaining a hobby. But the strictly … [Read More...]
The most eagerly anticipated coin of the year, the 2018-W American Palladium Eagle Proof one-ounce coin, was launched by the U.S. Mint on September 6 at 12:00 noon EST with a mintage of 15,000 coins and a household limit of one.
Unlike in September 2017 when the bullion version was released amidst uncertainty about how much demand existed for the new eagle, there was widespread agreement that the Proof coin would be a winner with relatively few dissenting voices. In part, that is because the bullion coin has retained a strong premium of at least $600 over spot a year after its release and only small supplies are today traded on the market. As the first palladium coin, the 2017 issue clearly resonated with collectors.
Moreover, the Proof coin is significant in numismatic terms too because it is the first Proof palladium coin the U.S. has ever issued and only the second true high-relief coin in a metal other than gold (after the bullion palladium issue).
In addition, the mintage level of 15,000 (the same as that of the bullion version) seemed large enough in theory to allow those who want one to get one, while not so large as to diminish the coin’s premium quickly, as has happened with so many other coins.
The main question in the run-up to the launch of the Proof coin was how soon it would sell out. Most people (based on postings in the major online forums and talking to collectors) seemed to feel that a sellout would not be instant and would take anywhere from a couple hours to a few days or even more.
Instead, at about 12:05 p.m., the coin became “temporarily unavailable,” which is what the Mint says when it has received orders for available supply of a coin but has not yet verified all payments. The following morning the Mint declared first day sales of 14,782 coins.
That amounts to revenue to date of $20,510,025, which given the $400 markup over the melt value of an ounce of palladium, minus production costs, should generate a nice return for the Mint compared to the $1.4 million it lost last year on the bullion coin (despite selling out of its entire mintage to the Mint’s distributors on the first day it was offered). In fact, the feasibility study conducted before the coin was produced said that the bullion might not be profitable, while a Proof version for collectors likely would be.
A key indicator this would be another quick sellout is that many dealers sent their customers e-mails before the launch offering them from $100 to $500 or more for coins purchased from the Mint and sold to the dealer. However, many of these companies were those that primarily sell bullion, as opposed to those who mostly sell numismatic coins.
On opening day, sales of ungraded examples started off in the $1,800 range but as the day went on, and news of the apparent sellout spread, completed sales moved up to between $1,900 and $2,000, and by the weekend reached as much as $2,150 for coins in hand. Proof-70 coin pre-orders were from $3,350 to $4,000, depending on grading service and label.
Ian Russell, president of Great Collections, said: “There has been a lot of wholesale interest in the palladium coin — with several large telemarketers wanting to buy 1,000-3,000 each. That was enough for it to sell out instantly.”
The day after the sellout, one major retailer started offering raw coins for $2,100, while another had NGC Proof-70 coins listed for $3,295. By Sunday, one dealer had sold out of raw coins at $2,100.
Since there is no way to know in advance whether such prices are sustainable, especially for 70-graded pieces, it is useful to compare the palladium Proof with other major coin releases from recent years.
A Dealer Warning
The evening of the launch, longtime dealer Barry Stuppler sent a notice to his clients advising them against buying the coin at this time and comparing it to what happened in August 2014 when the 2014-W Kennedy gold half dollars caused a frenzy at the summer ANA show where they were sold and graded at the show. Prices quickly rose way over issue price, even for raw coins at the show. But before long prices for show-graded pieces tumbled, and today the raw coin is basically worth melt value, though Proof-70 coins still bring a premium. I have heard that dealers lost many millions in this affair.
A poster on the PCGS message board echoed the comparison between the palladium Proof and JFK gold: “Another JFK gold, just wait three months, below issue price.”
Stuppler said: “Based on what we are seeing in the market, the large majority of the sales went to dealers who paid a premium for them and are selling the coins for very inflated prices back into the market in certified holders. We see this as being a temporary issue where we can expect to see these coins retail in Perfect-70 condition at prices that far exceed $3,000 (the coin was released for $1,387.50). I want to make it very clear that we see these prices as way too high and recommend that any investor/collector looking to buy these coins wait about 6-12 months.”
“Once we see the time is right, we will be happy to send out another email to clients offering these Proof Palladium Eagles at a fair market price! We anticipate the price being between $1,600-$2,000 within 6-12 months.”
But Ian Russell of Great Collections disagreed with the comparison with the JFK gold, noting: “I think these coins will end up with collectors — one here, two there etc. — very different compared to the Kennedy where people ended up with very large quantities.”
Playing Field Not Level
Every time a coin that is expected to sell out very quickly is launched, a feeding frenzy emerges. Some buyers later complain of being locked out, while others brag about how many coins they got. Based on forum posts about the palladium Proof, some collectors did miss out because the high level of activity slowed the Mint’s site down (though not nearly as much as before the Mint revamped its order management system such as the infamous 4.5 hour-sell out of the 2011 25th Anniversary Silver Eagle Set). Others were not able to order right at noon or lost out for other reasons.
Many such buyers were upset not just about being unable to order a coin but also that major dealers used their network of employees, customers, and others to secure large numbers of the coins. Dealers would respond that they are in the business of selling coins and need to secure inventory.
Besides, like it or not, dealers offering substantial premiums to buyers helps push wholesale and retail prices higher, but that is only sustainable with demand from collectors down the road. The 2011 eagle set is instructive in this regard because dealers were forced to purchase from customers since they could not obtain enough sets from the Mint, and to this day those sets sell for a premium of almost twice issue price.
The catch is when this situation gets out of hand, as it did with the gold JFK coins when those were first released, or the 2010 America the Beautiful five-ounce silver sets, which were initially sold for vastly inflated sums too. There is no clear way to know how much of a frenzy it takes for new coins to “pop and drop” without knowing how much underlying demand exists.
Collectors vs. Flippers
Probably the key factor in shaping the market for these high-profile releases is the breakdown between those who bought the coin to hold over time and those dealers and flippers who bought for a quick profit.
The split between speculators and collectors is rarely clear early on, except for situations like those in 2014 and 2010. Time will tell if a majority of the palladium Proofs remain with collectors, as Mr. Russell suggested, which would be reflected in higher long-term prices and lower supplies on the market.
If you were able to buy from the Mint at issue price, there is a good chance your coin will maintain a premium given the rapidity of the sell-out, but how much of a premium remains to be seen and will depend in part on what happens to palladium spot prices and to the evolution of this series.
A modern precious metal coin with a mintage of 15,000 coins is hardly rare, and there are plenty of coins with lower mintages. One good example is the 2015-W American Platinum Eagle Proof coin, which also sold out in minutes and has a mintage a little under 4,000. And some coins that are popular but have high mintages like the 2009-W Ultra High Relief Double Eagle have also maintained a premium, especially for graded 70 coins, though they are off their highs, especially for ungraded pieces.
The palladium Proof seems to have injected a dose of excitement into the modern U.S. segment of the hobby, which needed it. What is less clear is whether it will prove to be a temporary jolt that fizzles out as prices drop, or something of more permanence if the piece retains a solid premium.
So far, the Mint has not announced when will it release a bullion piece this year. The Mint has a greater incentive to sell Proofs given the substantial premium for those coins compared to the very small margin over spot with the bullion pieces. Besides, the new Proof will likely temper demand for a bullion coin issued not long after it.
The legislation that created the program says that the Secretary of the Treasury “shall, to the greatest extent possible, ensure that the surface treatment of each year’s Proof or Uncirculated version differs in some material way from that of the proceeding year.” This presumably means coins with Reverse Proof, Enhanced Proof, Burnished Uncirculated, or other finishes.
It remains to be seen how popular palladium coins with different finishes will be. Some collectors have said that a Proof, or a bullion and Proof, is probably enough. Most collectors love the iconic Adolph Weinman designs on both sides of the coins, but the law mandates that the same designs be used indefinitely.
Different finishes with an unchanging design have arguably already begun to depress the market for silver eagles, and it remains to be seen whether such an approach will prove successful with Palladium Eagles, especially as the novelty of the coin fades with each successive issue.
Louis Golino is an award-winning numismatic journalist and writer specializing primarily in modern U.S. and world coins. His work has appeared in Coin World, CoinWeek, The Numismatist, Numismatic News, and COINage, among other publications. His first coin-writing position was with Coin Update.
In 2015, his CoinWeek.com column, “The Coin Analyst,” received an award from the Numismatic Literary Guild for best website column. By 2017, he received an NLG award for best article in a non-numismatic publication with his “Liberty Centennial Designs,” which was published in Elemetal Direct.