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Dealers & Coin Prices

Tom Becker


The vast majority of coin dealers I know do not stash coins away waiting for higher prices to increase profits. Most active dealers are primarily interested in sales volume. For dealers, coins are a commodity to be bought and sold. Even though the parting may hurt a bit, few full time dealers can afford the luxury of falling in love with their inventory.

Like the owner of an appliance store, the coin dealer knows when wholesale costs increase this will result in a reduction in inventory or a need to find additional funds to maintain the same level of inventory. Finding this fresh money is seldom an easy thing to do. Because coin values may decline even more rapidly than they rise, every dollar the dealer invests in inventory is potentially at risk. When the market goes south the dealer is often the one who takes the greatest hit.

As a teenager, I worked at a gas station. The owner worked very long days and made 5C per gallon on the gas we pumped. He was able to pay his bills and feed the family. Suddenly the wholesale price of gas shot up. Even though he was now making more per gallon on every sale it cost him much more to keep his tanks filled. Customers who previously told me to “fill 'er up” now bought a “dollar's worth” of gas. Because extra funding was not available, I lost my job and soon after the owner lost his business. For this individual, the cost of being in the gas station business had exceeded his ability to participate.

Coin dealers may welcome higher coin prices knowing demand for coins will temporarily increase. The prevalent tendency among customers has always been to buy high with the hope of selling higher.

Higher prices may prompt some collectors to part with their coins and this can temporarily increase a dealer's volume of business.

Escalating coin prices may attract new participants who become excited by the apparent profit potential of a dynamic, ever rising coin market. The thought of buying today and profiting from the experience tomorrow has infectious appeal.

In my opinion, most veteran coin dealers who have lasted through the booms and busts of the coin market realize that when the smoke clears the only participants left standing will be the collectors. It's illogical and wrong to assume every current collector is financially prepared to chase after coins as they ascend to higher price levels. Most of the collectors I've encountered have tailored their collecting interests to include items they can comfortably afford. When prices rise the collecting activity can become uncomfortable and at some point curtailed entirely. Much like the gas station owner I mentioned, rising coin values might force a collector to leave the hobby. From the dealer's perspective, it's certainly not guaranteed a bright-eyed enthusiast with plenty of money will replace the steady customer they lost.

It would seem for those of us who still view coin collecting as a hobby that the best we can hope for is stability. Let coin prices rise or decrease along with the general activity of the economy. Nobody can reasonably complain that bread now costs more than 25C a loaf. Over time, it should be anticipated that coin values would generally increase along with everything else. As a dealer, I assume that every day it will cost me more to stay in business. So far, I've been able to adapt. I can only hope my customers are willing and able to maintain this same dedication to our hobby.

 

Tom Becker is a regular contributor to the Canadian Coin Reference Site, you can direct your questions directly to Tom easily by E-mail:tom@tombeckeronline.com or visit Tom's website @ http://www.tombeckeronline.com

 




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