If you are a frequent visitor to the Antique Sage website, you know that I talk a lot about premiums in relation to the vintage jewelry, sterling silverware and rare coin markets. Premiums are simply the price charged on an item above and beyond its intrinsic value, usually expressed as a percentage. Only pieces composed of precious materials (gold, silver, gemstones, etc.) have intrinsic value, but these are exactly the kinds of antiques that I'm interested in.
In one sense, a premium is the imputed artistic value of an antique item - the price people are willing to pay to acquire a historically or aesthetically interesting piece in excess of its raw material value. As such, premiums can vary widely across both time and geographic distant. When a certain item is "hot" in the antiques marketplace, premiums will be high. Likewise, when an object is out of favor and few people want it, premiums will be correspondingly low.
This is pretty straightforward stuff, right?
Well, there has been an interesting trend developing in the antiques space over the past year or so. I've noticed that the premiums on a broad range of intrinsically-valuable antiques have compressed considerably over that time. In fact, it wouldn't be a stretch to say that in some instances antique premiums have outright collapsed.
The poster child for this phenomenon is semi-numismatic gold coins. These are coins struck before the 1930s Great Depression, when most national monetary systems were still on the classical gold standard. Because these coins were intended for circulation, they were struck in large quantities. Therefore, they are fairly common today (although scarcity varies by denomination, date, mint and condition) and have relatively modest premiums over their melt value.
Now, when I say that premiums for semi-numismatic gold coins are modest, I mean that even the cheapest examples (from a premium perspective) traditionally traded for 15%, 20% or 25% over melt. There is persistent collector/investor demand for these treasures that means they pretty much never trade right at the value of their gold content, but always a bit over.
At least, that used to be the case. Now I'm finding it increasingly easy to find pre-1933 semi-numismatic U.S. gold coins (which consistently sport higher premiums than similar foreign gold coins) retailing for 5% to 10% over melt.
This used to be unheard of.
Semi-Numismatic Foreign Gold Coins For Sale
For the better part of a century, old U.S. gold coins drew robust bids because of strong collector interest in their historical importance. For example, in the late 1990s/early 2000s a circulated $2.5 quarter eagle gold coin might have gone for a premium of 300% or 400%. A common-date U.S. $20 double eagle may have sold for 40% or 50% over spot. These coins just didn't trade close to their bullion value, unless they were heavily worn or damaged in some way. Collectors would snap them up if their premiums dipped even a little bit.
But no longer.
A couple months ago I discovered a lightly-circulated U.S. $10 Liberty Head gold coin listed on eBay by a major bullion dealer for just 4% over melt. And that's not the only deal I've found lately either. It is commonplace to find old British gold sovereigns selling for 3% to 5% over spot on eBay (Editor's note: this article was written before the precious metals shortage of March 2020, so you might not be able to find the same sorts of deals today). I even stumbled across a 1931 Austrian gold 25 Schilling coin during Black Friday (2019) selling for 2% under spot on Etsy.
This is crazy stuff. After all, bullion dealers don't receive the full proceeds from their sales. They have to pay the online listing platform (eBay, Etsy, etc.) and the credit card processor their respective cuts. They also generally have to pick up the tab for free shipping.
By the time all these fees get paid, the bullion dealer can't be clearing more than the melt value of these coins in many instances.
But the madness doesn't end with semi-numismatic gold coins.
Antique sterling silverware has also seen a dramatic fall in premiums. In many instances it is possible to buy full or partial sets of vintage sterling flatware by venerable U.S. manufacturers like Gorham, Reed & Barton and Towle for very little above melt value. Even pieces that would normally be considered high-end can sell for improbably low premiums.
For example, I recently purchased an elegant set of 1920s French teaspoons in 1st standard (.950 fine) silver on eBay (pictured in the hero image at the top of this article). The workmanship on these demitasse spoons was absolutely exquisite. Their classic thread, fiddle and shell pattern had been double-struck (patterned on both the front and back) in very heavy-gauge silver - a good indicator of quality.
But the real surprise was that they were created by the French silversmith and jeweler Robert Linzeler, whose mark was active in Paris between 1897 and 1926. Robert Linzeler did top-notch work - so much so that he became a regular supplier to the French luxury firm of Cartier. In fact, after Linzeler de-registered his maker's mark in 1926, it is probable that he continued working chiefly as a Cartier contractor. When Linzeler finally retired in the late 1930s, Cartier valued his firm so highly that they ended up purchasing it.
Now normally one would expect a treasure of this magnitude to sell for a very strong premium - perhaps something on the order of 200% to 400% over melt. The value of the contained silver would typically be considered secondary to the artistic value and superlative workmanship of the teaspoons. But in today's tremendously undervalued antiques market I managed to pick up this gorgeous prize for a piddling 73% premium - a mere $67 above scrap value.
Antique Sterling Silver Flatware Sets For Sale
I paid more for the spoons' value as silver bullion than I did for their superior craftsmanship! This situation would have simply been inconceivable as little as a decade ago.
So what's going on?
I suspect that many antique/bullion/collectible dealers are running into cashflow problems. When this happens, one of the quickest and easiest ways for a business to raise more funds is to discount inventory in the hopes of drawing in bargain hunters. Although it is too soon to tell, if my hunch proves correct we could eventually be looking at a full-blown liquidity crisis - probably sometime in 2020 to 2021 timeframe. Under those circumstances, people with too much leverage and too few dollars will be forced to panic liquidate good antiques at great prices.
FYI, I originally wrote this article before the March 2020 market crash, so this turned out to be a pretty good prediction.
You can take advantage of this trend toward lower premiums by buying when everyone else is selling. I would also encourage you to stack credit card rewards with eBay Bucks to maximize your purchasing power. I have been following my own advice in this regard, and have been buying aggressively. I am confident that my investments will appreciate briskly in due time.
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