Pay Attention to Fundamentals When Considering a “Hot Coin” Purchase

avoid hot coin scams

image001-2Like all collectibles, certain types of coins tend to get “hot,” meaning they are in high demand for a short period of time, and then, for whatever reason, demand drops off.  What drives these trends?  Pure rarity, trade publication articles, publicity of particular series (the Washington Quarter became “hot” when the Statehood Quarter program began), and increase in gold and silver prices.   However, too often “hot” coins are the product of ambitious telemarketers. Prices increase in the short term and then retreat to pre-promotion prices when the promotion is over.  In this blog we will discuss how coin collectors can avoid getting burned in these types of “hot coin” schemes.

Avoid the Telemarketers

Have you ever watched a coin television show?  Using very professional production techniques, slick pitchmen will promote “highly collectible” coins at “bargain prices” that are certain to go up in value when the public recognizes how rare they are. Unsuspecting collectors looking for quick profits are usually burned by these promotions.  Too often, these “bargain prices” are nearly double the base collector market retail prices.  If he later seeks to sell these coins, the buyer might find their value to be just 40%-60% of what he paid. Ouch.

How a Hot Coin Becomes Hot

Consider the run-up in value of common-date graded Morgan dollars in 2011.   As the price of silver and gold rose, the base price of common-date Morgan dollars also rose,  and demand from knowledgeable collectors increased.  Stories began to appear in the trade publications about the quickly rising Morgan dollar values.  That’s when the telemarketers jumped into the game.  Telemarketers purchased volumes of graded Morgan dollars for a television promotion which lauded the rarity, the recent price appreciation, and future value expectations.  They sold the coins on television with great success for nearly double what they sold for in early 2011.  However, once the telemarketers’ inventory was depleted and the promotion ended, predictably, coin prices returned to pre-promotion levels.  Buyers who purchased via the television programs now had coins they could sell for no more than half of their purchase price.

image002-1Telemarketers have similarly promoted proof and mint sets, modern coins, statehood quarters and other fairly common “collectibles.”   Almost always, they are sold at values far above true retail value.

Our suggestion to our clients is to learn more about coin values and gain as much knowledge as possible prior to purchasing collectible coins. Avoid the telemarketing promotions and buy coins that appeal to your collecting goals. Do your research on coin dealers, coin shows, and online sites  You can buy coins online, or at any of these other outlets, and bypass the telemarketers entirely.  And definitely  avoid the “too good to be true” opportunities. They are almost always scams!

Grand Rapids Coins is always available to answer questions or evaluate your coin collection. Contact us to find out if your potential hot coin purchase has legs, or if it really is “too good to be true.”

Pat Mullen

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