In 2002, a Specimen-Proof Set of four coins dated 1916 (florin, shilling, sixpence and threepence) became available for sale at auction. The catalogue value was $30,000, while the pre-auction estimate was just $25,000. We acquired the set for $60,000.
Our winning bid drew gasps from the auction audience and set a new record. The question is: were we foolish to pay over double the auction estimate? Our answer is very simple. It's all about the coin.
The auction item was an original cased presentation set – one of only eight original sets known. It had been created by the Melbourne Mint to commemorate the inaugural striking of Australian silver coins at the Mint and presented to politicians and other dignitaries. This particular set came from the Royal Australian Mint archives. It had accompanying documentation and was considered to be the finest known – a status it still retains. Today, we estimate its value to be $275,000.
The set, which is still held by a Coinworks client, has clearly achieved an outstanding increase in value. But that wasn't our primary focus.
At Coinworks, our mantra is: it's all about the coin. (And, naturally, the banknote.) In a nutshell, we believe that if you acquire a high quality piece at a fair market price, growth – over a reasonable time frame – will follow.
However, in recent years it seems like almost all we've heard across the industry are cries of “the return, the return, the return.” In fact, we regularly take calls where the very first question is, “so what level of return can you deliver?” It's almost as if the coins themselves are an afterthought.
Of course, whether someone pays $5000 or $100,000 for a coin, they should expect value for money. They should also expect that, given time, their investment will grow in value. But the starting point must always, always be the coin itself.
As a company, we believe that quality must always come first. Prime quality is the best insurance against market fluctuations and also a strong contributor to liquidity – high quality pieces are always highly liquid.
And quality isn't just about price. While it's true that Coinworks is associated with high value pieces, we guide clients at all dollar levels. In January, we sold a Choice Uncirculated 1918 Perth Half Sovereign for $15,000. We also had a 1956 Proof Perth Penny on the web priced at $13,000. It was a stunner and we were hounded by callers.
The key is to look for genuine quality in an area of the market that suits your budget. That's why we advise against purchasing a coin that has been discounted because of damage like edge knock.
Although we place a higher priority on quality, we obviously also look for rarity.
Rarity is an important consideration in any coin or banknote purchase because, with fewer specimens available, there will be a higher comparative demand and less likelihood that a price will be challenged in the market. That helps insulate the coin against downward price pressures.
The other characteristic we look for in a coin is history. By that we mean both the historical significance of a coin and its history of ownership.
Specimens that are historically important will almost always be in continuous demand. In a supply and demand market like the numismatic investment market, that is critical to sustaining growth.
Highly historical pieces, such as Holey Dollars and Dumps, are the showpieces of the industry. It is their history that underpins their continuity of demand, and that in turn ensures an ongoing increase in value.
Of course, buying quality doesn't mean buying at any price. The balance between quality and price needs to be carefully considered to maximise the investment opportunity.
Buying a house in Toorak or Cottesloe for $10 million probably means you have purchased quality, but if the market value of the house is only $5 million you may have to wait many years before going into profit. With a good property, it will happen eventually. But it will take a long time.
When deciding on a price for a coin or banknote, we take account of all the key factors. After quality and rarity, we look at market movements and current price guides. We also do extensive historical research.
The extra yards we put in are the key to the results we deliver for our clients. Our purchase of the 1916 Specimen-Proof Set in 2002 is just one example of those results.
We would never suggest that our industry can guarantee the best returns, or that our clients should place all their funds in numismatic investments. But we do believe that rarities can and should form part of a balanced investment strategy.
Naturally, consideration must always be given to your overall financial goals.
Many of our clients take a high risk position in shares, but balance that with a low risk numismatic investment portfolio. The benefits of this kind of thinking were there for all to see in 2009, when share prices plummeted.
But remember, coins and banknotes need to thought of as a genuine investment, not a short term speculation. The owner of the famous Madrid Collection was always more interested in steady growth than spectacular overnight returns. He showed no concern if his valuations did not alter greatly over a 12 month period, instead looking for growth over several years. His patience was handsomely rewarded.
In the end, it's about understanding the market and knowing the direction the market is heading. And that’s Coinworks strength.