2007 FORECAST: THE TOP 12 COINS FOR THE NEXT 12 MONTHS

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2007 FORECAST: THE TOP 12 COINS FOR THE NEXT 12 MONTHS

BY SCOTT A. TRAVERS

COPYRIGHT © 2007 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

Twelve months ago, I predicted that we might be “on the verge of one of the greatest years in history for rare coins.” Those words proved prophetic, for 2006 turned out to be an incredibly positive year – truly one of the best ever – for the coin market and the hobby on which it is based.

Will 2007 see more of the same?

The answer is, it’s altogether possible. The coin market built up very strong momentum during 2006, and some of the positive trends that made it such an exceptional year were still creating excitement as the old year drew to a close.

One of these was the strength we saw throughout 2006 in market demand for precious metals – and base metals, too – and the higher prices they brought in the marketplace. There were backward steps along the way, to be sure, but at year’s end all of the metals were significantly higher-priced than they had been 12 months earlier.

I expect gold and silver to continue going up in 2007, and the pace of that increase could well become much faster. I think there’s a realistic chance that gold may surge above $1,000 an ounce in the coming year, and silver could reach levels well above $12 an ounce. That would send coin prices sharply higher, too, for the metals and coin markets are closely intertwined.

Industrial metals such as platinum, palladium, copper, nickel and zinc also enjoyed big price gains during the past year, largely because of dramatically rising demand from China and India, where they are essential to those countries’ newly booming economies. The huge exports of base metals and accompanying price increases drove the cost of producing cents and nickels above those coins’ face values, raising the very real possibility that the U.S. Mint might have to stop making them.

If this trend continues, the Lincoln cent – and perhaps the Jefferson nickel, as well – may soon disappear from Americans’ pocket change, stimulating new interest in collecting those two series and boosting the demand for them as collectibles. As it is, the hobby’s base already has been expanded tremendously by the 50-state Washington quarters, which have captured the attention of millions of non-collectors and converted many into hobbyists.

All things considered, 2007 shapes up as another terrific year. To make it even more special, check out my list of the top 12 coins for the next 12 months – and after you’ve picked your favorites, give them a try!

(1) The 24-karat American Buffalo one-ounce gold bullion coin.

There has been a stampede for this coin since it made its debut last June. And though it is strictly a bullion coin and though I have disdain for it as a collector coin, I cannot singlehandedly stop the stampede to purchase it, nor can I hold back the tremendous demand for it in all forms – including certified examples graded Mint State- or Proof-68 or 69 and “first strikes,” a term of which I strongly disapprove as it is applied in this case. On the contrary, I see it – in the short term, at least – as a coin that should enjoy continued popularity and rise in value still more in 2007. And for that reason, it clearly merits a spot among the top 12 coins for the next 12 months – though not necessarily longer.

The American Buffalo coins are extremely popular. Coin and bullion dealer Mark Yaffe of the National Gold Exchange told me that during the summer of 2006, following their introduction, they siphoned $325 million out of the market for bullion-related gold coins, such as common-date double eagles ($20 gold pieces) in lesser grades, which generally have at least modest added value as collectibles. This money was poured instead into the pure gold Buffalo pieces, which, as I have noted, are entirely bullion coins, worth just the value of the metal they contain with no added numismatic premium. (They bear a face value of $50 – well below their intrinsic value.)

This diversion of funds was a real blow to the market for numismatic coins – including semi-scarce and semi-rare double eagles, each of which contains nearly an ounce of gold. These suffered significant losses in value as buyers bought Buffalo pieces instead. Nevertheless, I see no slackening of demand for American Buffalo coins. They’re growing in popularity and that’s continuing to push their prices higher – and I expect to see them achieve record or near-record sales during the coming months.

Try to buy these coins at bullion-related prices and, before you buy them, be sure to ascertain the price of gold. Remember, above all, that just because one of these coins is in a holder from a leading grading service saying it’s in a very high grade such as MS-70 or Proof-70, you shouldn’t be paying $2,000 or $3,000 for it. With gold at $600 an ounce, you shouldn’t be paying more than $650 or $675. Just use your judgment and pay a reasonable premium – and don’t pay thousands of dollars.

(2) Common-date Type 3 Liberty Head double eagles in grades of MS-60 to MS-62.

Type 3 “Lib” $20s are the most popular and most commonly collected coins in this long-running series. They cover its final three decades, from 1877 through 1907. For years, examples in lower mint-state grades have provided just under an ounce of gold for not much more than the price of one-ounce gold bullion coins – but with the added kicker of bonus price potential as collectibles. Not so long ago, these coins were selling for close to $1,000.

All that changed when the one-ounce American Buffalo coins hit the market. While the new coins were selling like hotcakes, the Type 3 Libs were languishing in dealers’ showcases – and their prices started to plunge. Before long, they could be had for little more than melt value. With gold at $600 an ounce, a Lib $20 in MS-60 or 61 might cost you $700. I recently purchased a magnificent MS-62 example of a slightly scarcer-date 1898-S Lib $20 at a time when gold was $600 an ounce, and I paid well under $700.

The premiums have collapsed because people have been spending the money instead on American Buffalo coins, which they find more interesting at the moment. But the value will soon return to these Lib $20s once the novelty and strong initial demand for the Buffalo coins subside. So now’s the time to buy the Libs, while you can get them for just $700 or $750 – including pieces certified by the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation of America (NGC). For that modest sum, you can even get a coin with nice eye appeal that nearly makes the grade of MS-63.

If analysts are right and gold goes up to $800 or $900 an ounce, you’ll end up with a double-barreled winner: a coin whose value rises both as bullion and as a collectible. That Type 3 Lib $20 you buy today for $700 might very well double or triple in value. What’s more, this is a lovely coin aesthetically. To me, it’s a tremendous coin to buy.

(3) Common-date Saint-Gaudens double eagles graded MS-63 to MS-65.

The much-admired “Saint” has long been acclaimed as the single most beautiful coin ever minted by Uncle Sam. In grades of MS-63 to 65, its stunning design – featuring a striding Miss Liberty on the obverse and a majestic flying eagle on the reverse – can be seen to good advantage, with a minimum of detracting imperfections.

Like Type 3 Liberty double eagles, these coins have fallen in value in recent months because of buyers’ love affair with the new American Buffalo. But since they were higher-priced to begin with, they haven’t fallen as far. As the end of the year approached, MS-63s were selling for about $800 and MS-65s for about $1,800 – several hundred dollars below what both were bringing earlier in the year, but still highly respectable.

If, as I anticipate, gold bullion soars in value and the buying frenzy for Buffalo bullion coins cools down, these Saints will rebound impressively and quickly reach and pass the levels they enjoyed before they fell. They’re frequently purveyed (and overpriced) by telemarketers and direct-mail marketers seeking older U.S. coins that are desirable but available – and, above all, promotable. They’re popular with more reputable coin dealers, too, because their handsome appearance makes them easy to sell. And, of course, they’ve been big favorites with collectors for a century.

If gold does reach $1,000 an ounce, I can easily see common-date MS-65 Saint-Gaudens double eagles going for $4,000 apiece – and maybe even $5,000 or more. The only thing that might prevent that is if grading standards get a little sloppy and the certification services start to award these grades to coins with a few more scratches. If the standards remain consistent and you buy only properly graded coins, you should do very well with these truly striking coins.

(4) Common-date Indian Head eagles graded MS-64 and MS-65.

The Indian Head eagle ($10 gold piece) is the fourth member of the gold family at the top of my list this year. It’s also a close relation of the “Saint,” for both were designed by renowned sculptor Augustus Saint-Gaudens, who was widely regarded as the finest American artist in that field at the start of the 20th century.

Like Saint-Gaudens $20s, Indian Head eagles bear magnificent portraiture – this time showing Liberty with a Native American war bonnet on the obverse and an eagle in repose on the reverse. And these coins are truly dazzling in grades of 64 and 65. Also like Saints, they’re very promotable because of their beauty and relatively high gold content – nearly half an ounce.

As of this writing, in the waning days of 2006, $10 Indians graded MS-64 are available for about $1,800 – hundreds of dollars below the levels they attained prior to the Buffalo stampede. MS-65s cost about $4,600 to $4,800. A premium-quality MS-65 piece might cost you $5,000, but such coins are scarce and well worth the small added premium.

If you’re fussy about grading and make sure to get coins with as few scratches as possible and with no carbon spots on the headdress, your profits from these coins can be as handsome as their design. They could easily double in value to the $10,000 range – a tidy return indeed!

(5) Registry coins.

Here’s another instance where one of my “top 12” selections is on the list not because I think it has great potential for long-term price appreciation, but because it seems likely to rank among the coin market’s hottest sellers in the short term – namely, the next 12 months. In a number of ways, it parallels my first selection, the American Buffalo gold bullion coin: It may be a big winner for some people, but only if they’re extremely careful (and perhaps very lucky).

Registry sets combine modern technology with the age-old competitive spirit that has burned within man since time immemorial. To form such sets, collectors acquire certified coins “slabbed” by PCGS (or by NGC, which offers a similar program), assemble them into sets, then register these sets with the grading service by entering the coins’ serial numbers on the company’s Internet Web site. At that point, the grading service uses special software to assign a rating to each coin, based upon its rarity not just in absolute terms, but also in the grade in which it was certified. (PCGS, which originated the Registry concept, accepts only coins it certified itself; NGC accepts coins from either service.)

As you might expect, there’s fierce competition among Registry set owners to have their coins listed at or near the top on the Web sites. This has driven up the prices of coins whose grades are exceptionally high – often well beyond the levels at which they would sell without such sets. I see no problem with this if the coins in question are long-established collectibles with proven track records for being scarce – or even rare – in top condition. I see very big problems, however, when people pay ridiculously high amounts for common-date modern coins because they have been certified in extremely lofty grades.

In a recent Teletrade auction, a bidder paid $15,120 for a 2003 Lincoln cent certified by PCGS as MS-70. A few years ago, a 1963 cent graded Proof-70 sold at auction for $39,100. PCGS later purchased the coin to take it off the market after spots appeared on its surface. But that cent became the poster boy for coins that sell at auction for a pretty penny but really aren’t very pretty at all. Prices such as these are outrageous, unjustified and bound to come back some day to haunt the “lucky” buyers.

Though I don’t recommend modern Registry coins as investments, I do encourage you to capitalize on this phenomenon if you can. Check your proof sets and search through bank-wrapped rolls, and look for a perfect coin. If you can get that coin certified as Proof-70 or MS-70, you may be able to sell it for hundreds – or thousands – of dollars. Some people have done just that since the onset of Registry fever. If you can’t find such a coin, simply sit on the sidelines and watch the show for its entertainment value.

(6) Early gold coins.

If high-priced modern Registry coins are the graffiti of the current coin market, early U.S. gold coins – those from the 1790s and early 1800s – are the Rembrandts. I am a great admirer of the Capped Bust eagles and half eagles ($10 and $5 gold pieces) minted during the U.S. Mint’s first decade-and-a-half. These coins are not only rare; they’re also great expressions of Early American artistic genius, with designs that are startlingly beautiful.

Collectors and investors have been focusing on these coins very closely over the last several years, and that focus has translated into dramatic price gains. Just a few years ago, a 1799 eagle in a nearly uncirculated grade cost $10,000; today, it’s a $30,000 coin. Higher-grade examples have risen in value even more spectacularly. These are not generic rarities; they’re truly rare coins and they’re devilishly difficult to find in original grades.

As we see the price of gold continue to go up, these classic rarities will far outpace more pedestrian forms of gold. A word of caution, though: The grading services have been fooled by some of these coins into giving them higher grades than they deserve. That happens, for example, when the surfaces of a coin are less than pristine, even though the grade on its holder suggests that it is original. I have seen a number of these coins in holders labeled MS-62 or MS-63 where the coins turn color after encapsulation or spots break out later because something was done by a coin doctor to enhance their appearance.

With that one caveat in mind, this is one area of the marketplace that should sparkle brightly this year, next year and for years to come.

(7) Scarce-date Morgan silver dollars priced from $300 to $1,000.

I like these coins very much and they have great potential to rise in value. There are lots of options, too, in this price range. The 1881 dollar from the Philadelphia Mint is a $550 coin in MS-65. An 1879 P-mint is $600 or $700 in that grade. And you can buy all but the scarcest coins from the Carson City Mint. You can go down the list and find many great coins for $300, $400, $500 or $600.

These coins have the potential to jump in price 40 to 50 percent in 2007 and beyond. The momentum is certainly there. Morgan dollars have always been popular with collectors and investors alike, and demand for them as collectibles is getting a powerful boost from the strong bullion market. This seems likely to continue, since silver, like gold, has been trending sharply higher and seems to be headed in that direction again as the new year begins.

In buying these coins, take a close look at Miss Liberty’s cheek, which is a grade-sensitive area. Make sure it’s free from nicks, flaws, scratches and other blemishes. Take the coin and tilt it under a pinpoint light source and make sure it reflects light in a circular pattern. A truly original coin has light literally dancing on its surfaces. Morgan dollars are beautiful to look at, wonderful as investments and surprisingly affordable to own.

(8) State quarter errors and varieties.

The 50-state Washington quarter series has been an unprecedented boon to the hobby since making its debut in 1999. The program is entering its next-to-last year, and it’s still enormously popular not only with collectors but with non-collectors too. Since they’re made for circulation by the hundreds of millions, the state quarters bring little or no premium as collectibles – but there’s one very big exception: mint errors, issued by Uncle Sam with some obvious imperfection or significant deviation from the norm.

Off-center coins … coins with clipped planchets … even coins that have a state quarter design on one side and a Sacajawea dollar design on the other. These and other mint errors hold greatly heightened interest when they appear on the popular statehood quarters. That’s because these quarters have special fascination for much of the American populace – even without such errors. So when minting mistakes turn up, that interest is magnified tremendously. These coins routinely command premiums in the hundreds –and even the thousands – of dollars. The few known examples of the state quarter/Sacajawea dollar “mule” have sold for tens of thousands.

In April 2007, Random House is scheduled to release the 7th edition of The Official Price Guide to Mint Errors by error-coin expert Alan Herbert, and I look for that book to spark great new interest in state-quarter minting errors. The information in Herbert’s book will create a wave of excitement in the general press and on TV – and that, in turn, will serve as a major catalyst for increased activity and higher prices.

The U.S. Mint claims that 150 million Americans are seeking out state quarters and setting them aside. That’s a lot of interest – and during the next 12 months, I think we’ll see that legion of coin enthusiasts energized even more as word spreads from coast to coast about the big profits available from unusual state quarters.

(9) Larger proof gold coins, from half eagles through double eagles.

Proof gold has an almost magical quality. The combination of shimmering precious metal and exquisite minting detail makes these coins spectacular to behold. And their high intrinsic value makes it clear that they belong on a very high pedestal. All proof gold coins – including “matte” proofs, which have a sandblast appearance – should do extremely well in the coming year as gold increases in value and demand for gold in general continues to grow. But brilliant proof gold coins will clearly be the biggest winners of all. And since they provide the most appealing showcases, larger pieces will be in the greatest demand.

Many coin dealers have a tendency to push gold bullion coins when customers first express interest in buying gold. They encourage these customers to buy American Buffalo coins, American Eagles and other bullion coins – and after a while, these purchases add up to holdings with considerable value. Sometimes they also include semi-scarce numismatic gold coins, such as MS-65 Saint-Gaudens double eagles worth perhaps $1,700 or $1,800 each. A steady gold buyer may end up with multiple safety deposit boxes filled with gold coins worth tens or even hundreds of thousands of dollars.

At that point, the buyer may feel the urge to trade all this gold for coins that are truly rare. He or she may go to a coin show and see a magnificent proof example of a Type 3 Liberty double eagle – a coin with a proof mintage of only 80 or 90 – and jump at the chance to buy it for $50,000.

Many people now possess large quantities of bullion coins and common-date Saints, and they’re in a prime position to trade these coins for rarities, including proof gold from 1915 and before. Quite a few will – and they’ll be glad they did, since these are the gold coins with the greatest upside potential. They’re totally irresistible, and I see them soaring in value, especially in grades of Proof-64 to 67.

(10) The 1909-S VDB Lincoln cent.

I recommend this coin almost every year – and just like clockwork, it almost always goes up in value. I’m not about to change my approach this year, for this “king of Lincoln cents” – a perennial favorite with collectors – seems likely to enjoy an especially strong run in 2007 and beyond.

Lincoln cents are spending lots of time in the limelight these days. In one respect, all this attention is good: The U.S. Mint is making plans for four special cents in 2009 to mark the bicentennial of Abraham Lincoln’s birth and the 100th anniversary of the cent that bears his image. In another way, however, the publicity has been negative, focusing on the fact that rising metal prices have made the cost of producing cents more than a “penny” apiece. That has many Americans calling for a halt to further production.

No news may be good news, but this time just the opposite is true for the popular “S-VDB.” All of the news – including the bad news regarding metal prices – is pumping up interest in putting together sets of Lincoln cents. And as the longtime centerpiece of the series, the 1909-S VDB is drawing the greatest attention.

I recommend the S-VDB in all grades from fine to MS-66 Red and beyond. It’s a wonderful coin to own – and with all the ongoing news about the Lincoln anniversary and possible discontinuation of the cent, it will remain in the limelight for years to come.

(11) Proof type coins.

Proof gold isn’t the only proof coinage I’m recommending. Proofs in other older series – Barber and Liberty Seated dimes, quarters and halves, for example – also have captivating beauty and also are attracting a great deal of interest in the current super-active marketplace. These coins will hold their own – and possibly do even better – during the next 12 months. They are very strong collector coins, and as we see more and more newly minted collectors progressing from modern coins into more established series, the spillover effect will be significant – and highly beneficial.

In the last half of 2006, we saw much more interest in proof type coins in the Barber and Liberty Seated series – more than we’ve seen at any other time in the last three years. People realize that these are great values and very underrated. Coins with minuscule proof mintages are available in the $1,200 to $1,500 range. Some can even be had for $500 to $600 if you go down to grades such as Proof-63. I recommend these coins in grades from 63 to 66, and I expect that within a few years, we’ll see a 50- to 75-percent increase in value.

(12) Mint-state type coins.

My final recommendation is a mate to proof type coins. Mint-state coins aren’t as flashy as proofs and as a result, mint-state type coins will lag the proofs a little. A lot of new collectors are looking for flashier coins and coins that are easier to grade, and on both those counts, proofs are the better bet. Business-strike coins can be treacherous to grade.

But mint-state examples of business-strike coins are tremendously popular just the same, and demand for them has risen sharply since the advent of Registry sets. These have given a shot in the arm to all mint-state type coins – and some of the rarer issues, such as Draped Bust silver dollars, have gone up in value by 100 percent or more.

There you have them – my top 12 coins for the next 12 months. These predictions and projections are based on marketplace momentum and on the assumption that the market will continue to be vibrant and the current exuberance will continue. They also assume that metals – both precious and base – will keep trending upward in value.

With that, I wish everyone a prosperous 2007 – confident that when it’s done, we’ll all have many reasons for celebration.

I can think of at least 12!

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