Authoritative estimates indicate that the rare coin market is a $10 billion per year industry--and growing. Moreover, this $10 billion estimate does not include the sales from the US Mint's bullion coin program. Official reports from 2010 disclosed that the US Mint was the world's largest coin dealer, with more than $3.89 billion in sales. That figure was a record high for the Mint and was more than 33% higher than its 2009 sales.
The growing ranks of "baby boomers" has resulted in a new segment of the investing public with an appetite for alternative assets that has prompted them to invest in coins after originally discovering numismatics as a hobby in their childhood. Many of these people started collecting coins at a very young age, searching for old pennies in jars of spare change. What people do as youngsters tends to make them nostalgic in their later years, leading them to return to those roots as an investment, rather than simply a hobby. The manifestation of this phenomenon is just beginning to have a positive impact on the rare coin market.
Gold is bought and sold in U.S. dollars, so any decline in the value of the dollar causes the price of gold to rise and this has a supportive effect on the other tangible asset categories, especially rare coins. A depreciating dollar makes the country poorer. It makes every individual who holds dollars poorer. However, that depreciating dollar also makes holders of tangible investments, such as rare coins, wealthier—often much wealthier.
The most effective method for diversifying a portfolio to protect wealth that includes investments in the stock market is to concurrently invest in assets that are negatively correlated with the stock market. Tangible assets such as rare coins are the ideal diversifiers for an equity portfolio, simply because they are negatively correlated to stocks. The reason for this negative correlation is that the economic and financial factors that determine the value of rare coins are vastly different from those that determine the price of stocks.
Rare coins have historically provided protection against periodic episodes of economic uncertainty in which paper assets such as stocks, bonds and the dollar suffer. Rare coins are financial insurance, the portfolio diversification that protects wealth when other investments are weakening. The negative economic and financial market conditions that make the value of rare coins rise are often the same conditions that throw the stock and bond markets into turmoil.
A weak economy can destroy banks. Poorly run banks can sink an entire national economy. And today, with increasing globalization, bank failures cross borders and destabilize the international economy. The impact of a banking crisis tends to push the value of tangible assets, such as rare coins, higher, especially as investors begin to distrust banks and turn to safe havens. Unlike banks, tangible assets are not dependent on anyone's promise to repay. They are assets in their own right.