Deconstructing 2008-W Gold Buffalo Coins

The 2008-W Proof and Uncircualted Gold Buffalo Coins have been one of the most successful US Mint products in years, when considering the secondary market price appreciation. The coins have been a frequent topic of comments and I have been meaning to write about them for some time. I decided that I would come up with a deconstruction of some of the factors leading to the phenomenal success of the coins.

Before examining these factors, I wanted to start with a review of some of the sales prices for 2008-W Gold Buffalo coins from recently completed eBay auctions. A 4 coin proof set graded PR70DCAM First Strike recently sold for an incredible $16,999.00. Some 4 coin proof sets graded NGC PF 70 Ultra Cameo have sold for around $8,000 - $9,000, and some of the 4 coin uncirculated sets grading NGC MS 70 have sold for $6,000 - $7,000 per set. These sales prices compare to original US Mint prices of $1,959.95 for the uncirculated set and $2,219.95 for the proof set.

Individual coins and raw coins have also sold for dizzying amounts. A 2008-W $5 Gold Buffalo graded PCGS MS70 just closed at $875.00 and a raw 2008-W Proof $10 Gold Buffalo sold for $1,500. Here are all of the current eBay auctions for 2008-W Gold Buffalo Coins.

Personally, I have been somewhat in awe of the prices for these coins and have no idea whether prices have peaked or whether they have more room to grow. As mentioned, what I wanted to do with this post is examine some of the factors which contributed to the enormous success of the coins.

First, the design for the American Gold Buffalo is based on James Earle Fraser's extremely popular Buffalo Nickel design. Coins which feature classic designs tend to create higher demand, as it expands the number of collectors interested in the coins. When the US Mint first introduced the Gold Buffalo in 2006, the one ounce proof version sold 246,267 coins, demonstrating the potentially large collector base.

Second, seven out of the eight 2008-W Gold Buffalo coins currently represent one-time only issues. In January 2008, the US Mint announced that they would offer collectible proof and uncirculated Gold Buffalo coins in one ounce, one-half ounce, one-quarter ounce, and one-tenth ounce sizes. For the prior two years, the US Mint had offered only the one ounce version for collectors. In November 2008, the US Mint abruptly announced the discontinuation of all of the newly introduced Gold Buffalo options. This made all four of the 2008-W Uncirculated Gold Buffalo Coins and the 2008-W Proof Gold Buffalo one-half ounce, one-quarter ounce, and one-tenth ounce coins one year only issues.

Third, the pricing and economic conditions surrounding the US Mint's offering period for the coins resulted in extremely low sales, which translated to unusually low mintages. The US Mint released the 2008-W Proof and Uncirculated Gold Buffalo Coins on July 22, 2008. This was the exact day when gold reached a temporary peak of $961.50 per ounce. Gold subsequently entered a period of extended decline that would bring the price as low as $712 per ounce. The US Mint did not adjust coin prices until November, resulting in high premiums above gold value for nearly the entire offering period. These high premiums likely turned off some potential buyers. The state of the economy may have also held some potential buyers at bay, as the second half of 2008 was a period of extreme economic and financial uncertainty.

Fourth, the coins sold out before the close of the year. In rapid succession, the US Mint announced the discontinuation of most of the collectible Gold Buffalo products and then adjusted prices based on the lower value of gold. At that point, sales assumed a rapid pace which did not diminish until all options were sold out in early December 2008. In general, products which are deemed to sell out early, tend command instant premiums which sometimes expand over time. By contrast, products which linger in the US Mint's product catalog or go off sale at a pre-announced cut off date, tend to appreciate slower or not at all. (There are some exceptions to this, but it has seemed to play out this way in recent years.)

Fifth and final, collector money has to go somewhere. The United States Mint canceled many of their most popular collectible precious metals products last year and offered relatively little to fill the void. I think that at least a portion of the money that would have been spent on 2009 Proof and Uncirculated Gold and Silver Eagles is chasing prior year precious metals products, such as the 2008-W Gold Buffalo coins.

I think that the incredible price appreciation of these coins is the result of perfect storm of circumstances that likely will not be repeated for some time. We can certainly watch for some of these factors in future offerings and try to catch the next blockbuster early.