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Monday, September 1, 2014

Authenticity, Rarity, Historical Importance, and Price Rigging in the Ancient Coin Market

Every hard asset class must deal with three major issues: Price Rigging, Authenticity and Rarity.

In the Ancient Coins Market Authenticity has been the major barrier to entry.  Now that coins are being certified by NGC, authenticity is no longer an issue, because any coin thus certified is considered as authentic by the market.  To be sure, buying raw coins is a challenge.  There are plenty of fakes and plenty of coins that have been altered.  But the vast majority of these are easy to catch by experts, and fortunately NGC has employed a very capable expert.

Ancient coins are individual artworks that have been engraved and then hand hammered.  Even excellent modern fakes using new compression technologies just look wrong to those used to looking at hand hammered examples.  Beyond that, small errors of scale almost always exist.  And the fact is that unlike fakes in other materials, if all else fails, spectrographic analysis of silver and gold - which is done at NGC - is fool proof in spotting modern forgeries.

Rarity in the Ancients Market can be hard to gauge because on-line data base records go back only ten years.  Beyond that you need vast experience.  But let's remember what we're talking about here.  Perhaps a dealer may represent that only 30 - 40 examples of a certain rare coin exist.  And perhaps he's off for any number or reasons and there are double that amount in existence: 60 - 80 examples that have been known to exist from hoards and old collection examples logged over the last 100 years.  That's still a small number for an artwork that is thousands of years old.  And only a very few of those are likely to exist in top condition.  And very rare Ancients are often represented by 5 or 6 known pieces - or less.

Compare that level or rarity to a rare US coin where there are "only" a few thousand known examples of a "very rare" piece that's only 50 to 200 years old.  Or compare a type of Ancient to a particular modern painter in the art market whose work is only 50 years old, or perhaps current- a Picasso, or a Koons or a Warhol - where there are ten of thousands - perhaps much more - of functionally similar pieces on the market - most of which are impossible to authenticate.

The fact is, that collector/investors used to dealing in most other hard asset classes will be stunned by the comparative rarity of  ancient coins.

Historical Importance is an area that is clearly subjective.  You can surely argue that Picasso is an historically important painter.  But will he be considered so in 100 years?  How about 500 years?  Probably, but, really, so little time has passed it would be entirely myopic to consider such a proposition a sure thing.   When considering Jeff Koons, the odds are infinitesimally small that he will be considered important in 50 years.  99 percent of all contemporary artworks are worth nothing within fifty years of production.

In the realm of Ancient Coins, three to five thousand years of human history have already made an incontestable argument.  Only a world class ignoramus would argue that a contemporary portrait of Alexander the Great, such as the one pictured above, is not a permanently important historical object.

The same would hold true for many many ancient coins.

Finally, Price Rigging  exists in the ancients market just as it does in every market.  It most usually takes the form of Auction Houses engaging in shill bidding.  Sometimes it takes the form of careful management of newly discovered hoards.  But again, this is localized, small-scale rigging.  It can be avoided by simply knowing the practices of various auction houses and dealers, and using bidders and buyers to represent you who have relationships with those houses and dealers.

If you compare that to the broad institutionalized price rigging you find not just in paper exchanges but also in bigger hard asset markets like the Post Modern Art Market where price rigging is perhaps more of an artform than the product found in the underlying market, you'll find the challenges of the Ancient Coin Market to be quite manageable.

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