Source: Melbourne Investor Feb/March 2007

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Money Makes Money

Source: Melbourne Investor Feb/March 2007

Written by Belinda Downie

Coinworks

Leading Australian rare coin dealer, Belinda Downie, has been involved in the Australian coin scene for over thirty years and is Managing Director of Coinworks.

 

Money Makes Money

Numismatists – coin collectors to you and me – were once imagined to be crusty old gentlemen, tucked away in obscure clubs, totally out of touch with the reality of the modern world.

Indeed, for decades the rare coin industry was one of Australia’s best-kept secrets, comprising a small band of passionate collectors. (Although it should be noted that while members of the ‘club’ professed a purist interest in their hobby, they nevertheless enjoyed the financial spoils that the market was already offering.)

How things have changed! The numismatic world has been swept by a tide of ‘new blood’, as a younger generation of collectors and investors discover the delights – and profits – that await them.

Interest flourishes

In the 1980s and ’90s, national interest in our history – and old coins – began to flourish, and by early 2000 the ‘gentleman’s club’ had been effectively disbanded. As government rules were relaxed, and collectables were allowed to be included in superannuation funds, a new generation entered the rare coin market.

Consider the financial achievements of one Sydney businessman (neither old nor crusty!) who in 1997 invested $36,250 in three quality rare coins, and recently turned that purchase into a $200,000- plus investment, by acquiring a rare – and rapidly appreciating – 1945 Melbourne Pattern Penny.

The Penny is the only one of its kind in private hands. It was acquired at auction, on the buyer’s behalf, for $156,700 – financed entirely by the sale of the other three coins.

The story sheds light on the powerful performance of the rare coin industry today.

Take one of the three coins bought in that 1997 deal – a 1921 Square Penny. In the 1950s you could pick one up for £12 ($24). By 1976 the same specimen would fetch $500. Our Sydney friend paid $10,000 in ’97, and by 2005 similar coins were selling for $47,000, with demand boosting them to the $55,000 level in the latter part of 2006.

The second coin in the trio was the low denomination counterpart of the Square Penny, a 1921 Square Halfpenny. Extremely rare, with less than ten known, it has enjoyed a dramatic price rise that has seen it move from £24 ($48) in the 1950s to $1500 two decades later. It was acquired in 1997 for $20,000 and is today valued in excess of $100,000.

The final coin in the 1997 trio was a rare 1935 Proof Florin. One of only two known, it was acquired at the time for $6,250 in 1997 and today is valued in excess of $40,000. As they say in America, do the math!

All these coins share a common bond. Yes, they’re scarce, but they also share an historical presence and importance that goes beyond the prestige of exclusive ownership. They play an important role in the nation’s history.

In property, the three priorities are position, position, position. It’s the same in the rare coin industry with the key priorities the sector you are looking in, and the position of the coin within that sector. If you buy a great coin in a sector that is consistently in demand, you will do well over the long term.

The rising prices of top Australian rare coins confirm the rising stocks of selected collectable coins as a secure form of investment, and are indicative of the changing role of the industry itself.

It’s all about supply and demand: extreme rarity (particularly at the top end) insulates the industry from volatility, whilst underpinning steady and consistent growth.

And the ‘gentlemen’s club’? Well, never assume that the collector fraternity has quietly slipped into obscurity. Indeed, they still play a prime role, as we saw late last year when the Reserve Bank auctioned off some of its old coin reserves. Collectors outgunned investors on every one of the high dollar value key rarities.

Clearly, then, the confidence is there, among the old hands and the new players. After all, no-one is going to outlay the price of an apartment for a single coin if they don’t have confidence about where the industry – and the coin itself – is going.