Amongst the questions that are asked of me is what makes one coin worth more than another and why does one dealer charge more than others. The numismatic community was reminded that coin prices can vary based on a lot of conditions when a 1793 Chain Cent was auctioned for $1.38 Million at this year’s F.U.N. show in Orlando, Florida. In this article, I will discuss price and value of coins.
There is a difference between the “price” of a coin and its “value.” The “price” of the coin is what you pay when you buy the coin—sometimes called the retail price. The “value” of the coin is what a dealer will pay you for the coin—also called the wholesale price. Sometimes, the difference between the two concepts frustrates collectors who look at price guides as the price tag of a coin when it is a guideline. Dealers become frustrated because collectors fail to understand the business aspect of buying and selling coins. Hopefully, I can educate both sides.
Of all the factors that go into setting prices, the major consideration is supply and demand. While there are a lot of good definitions of the basic laws of supply and demand, in the numismatics industry the supply drives the price harder than the demand. This is because once a coin is minted, it is rare that they will be re-minted. There are exceptions to that rule, such as the 1804 silver dollar and 1942 Mexican Dos Pesos gold coin, but once the mintage period for those coins pass, no more will be struck.
Another factor that drives supply is how many of the coins survived the various melting and recalls that occurred over the years. While there have been many good educated guesses as to how many coins have survived, the only definitive answer are the population reports from the grading services. But those reports may not be accurate because of the number of people who crack the slabs and resubmit the coins hoping they receive a higher grade without reporting this to the grading services.
Supply factors do not apply to the bullion market. Coins minted strictly for their metal content, such as the American Eagles, are usually not affect by the supply. Of course there are exceptions that include the coins associated with American Eagle Anniversary Sets.
Although supply is a significant issue, demand should not be underestimated. The demand is determined by how many of us collectors want to purchase a particular coin. The easiest way to envision how demand drives up the price is to take the classic 1909-S VDB Lincoln Cent. With 484,000 struck by the branch mint in San Francisco, it is the key to completing a Lincoln Cent collection making the demand higher than almost any other coin in the over 100 year old series. Since the supply remains unchanged but the demand increases with the number of new collectors entering the hobby or as collectors could afford a coin, it leads to a higher price.
Whenever supply and demand is explained to a new collector, they pull out their favorite reference book and point out that the 1914-D Lincoln Cent is worth more than the 1931-S Lincoln Cent even though more 1914-D cents were produced. That is when I bring up the third factor that determines price and value: state of preservation, or as many collectors call it, the coin’s grade.
Coin grading is one of those topics you do not want to bring up in polite company because the differences in opinions are akin to religious discussions—not only is everyone wrong, everyone is right. In other words, contrary to what many are lead to believe there are no right answers. After all, the two top grading services cannot agree amongst themselves. This is why the rest of this article will not discuss grading but use the concept as a relative term.
The higher grade of a coin, the better the state of preservation. The better the state of preservation, the more desirable the coin. Thus, it could be said that the state of preservation decreases the supply. Even if the demand remains the same, when the supply decreases the value increases. In the case of the 1914-D Lincoln Cent, the issue is that the coin did not feature a sharp strike as other coins and finding problem-free coins are difficult. Because the economy of 1914 was not strong, not only was the need to strike new coins were reduced, but citizens were more likely to spend their coins rather than save them. With the weak strike and heavy circulation, the actual supply of desirable collector coins is much lower than its mintage figures suggest.
Although there were fewer 1931-S cents struck (886,000 versus 1.193 million for the 1914-D cent), there are more 1931-S coins that were well struck resulting more desirable coins survived. Although 1931 was near the beginning of The Great Depression, enough coins were produced in the 1920s that the many 1931 coins were spared heavy circulation. In short, the supply of desirable collector coins is closer to its mintage than that of the 1914-S.
State of preservation also considers environmental factors of the coin. Using the copper cents as an example, a cent that still has its red luster as if it came right out of the Mint’s presses is worth more than a similar coin that has tarnished to a red-brown or even dark brown color. Because it is difficult to prevent copper from oxidizing, the number of copper coins (pre-1982) that still have their red color is far less than others lowering the supply for a high demand item. As the coin oxidizes, it joins a larger supply of others and lowers the value.
Similar to the red-to-brown oxidation of copper coins is toning on silver coins. Toning describes the result of the natural oxidation process of the silver-copper or gold-copper alloy used to strike older coins that create a tarnish or patina on the coins. The nature of the alloy can create very colorful toning on the surface of a coin making it more desirable to collectors. The condition that creates toned coins vary and not every coin becomes toned leaving a smaller supply. However, collecting toned coins is a matter of taste which reduces the demand for these coins and lower the expected price of a coin in a smaller supply.
Coins made of precious metals such as gold, silver, or platinum, at a minimum, will be worth the intrinsic value of the metals used in its manufacture. For example, a Morgan dollar was made with an alloy of 90-percent silver, 10-percent copper, and weighs 26.73 grams. Thus, a Morgan dollar contains 24.057 grams of silver and 2.673 grams of copper. Using the current price of silver and copper, known as the spot price, of the metals ($28.81 per troy ounce for silver and $3.3836 per pound of copper), the value of the metals in the Morgan dollar, called the melt value, is $22.30. You should never expect to pay less than the melt value for any coin even for the most common coins. If you find someone who will sell you coins for less than the melt value then please contact me—I am always in the market for a bargain!
Starting in 1965, the United States changed the composition of its coins because the spot price of silver was making the coin’s melt values worth more than their face value. Silver was replaced with a copper-nickel alloy that is still in use today. However, the Kennedy Half Dollars struck from 1965 through 1970 were struck using an alloy that contained 40-percent silver. Also, the U.S. Mint has continued to strike commemorative coins and special sets using silver and gold. These coins use the traditional alloy of 90-percent silver or gold along with 10-percent copper. They were not struck for circulation and are valued in much the same way as circulating coins.
Up until 1982, the Lincoln Cent was struck using an alloy of 95-percent copper and 5-percent zinc weighing 3.11 grams. In 1982, the law was changed to allow the U.S. Mint to strike Lincoln Cents on a copper-coated zinc planchet. The coin is 99.2-percent zinc with .8-percent copper weighing in at 2.50 grams. Since the change occurred in the middle of the year, the U.S. Mint struck coins of both types. Specially packaged sets of these Lincoln Cents are in high supply with a low demand translating into an affordable collectible.
To learn more about the melt values of various U.S. and Canadian coins, you should read the information at coinflation.com.
Artificial factors are those that usually detract from a coin’s value. Coins that have been cleaned, doctored, tooled, dipped, whizzed, polished, or any other way that someone can use in an attempt to make the coins better will lessen the coin’s value. At one time, it was acceptable to clean and polish coins to make them look better. One method that was once acceptable to preserve the red color of copper cents was to use clear shellack to coat the coins. Do not clean, polish, scratch, or try to make your coin look better. If the coin has an issue that is not a permanent problem with a coin, you may want to consult a company like Numismatic Conservation Service to find out of professional conservation could save a coin that may have been damaged by accident.
Not only will altering a coin to make a common coin look like a rare coin lower the coin’s value, it is also illegal. Changing mint marks, dates, using a tool to make the coin look like another variety—usually with Morgan Dollars—will make the coin worthless and if you try to sell it as genuine will genuinely land you in jail.
Buffalo Nickels and the Standing Liberty Quarter Dollar were coins whose design did not wear well in circulation. On the Buffalo Nickel, the date was easily worn from the coin. Some people take dateless coin and use a special acid to determine what the date was on the coin. Acid can also be used on the reverse of the 1913 Type 1 Buffalo Nickels to show a mint mark that might have been on the mound the buffalo is standing on. These are known as “acid coins.” Both Buffalo Nickels and Standing Liberty Quarters can be enhanced using engraving tools. These altered coins are worth much less than their counterparts with original, non-altered, surfaces.
Tooling for altered surfaces can have value in certain circumstances. One of these collectibles are Hobo Nickels. The Hobo Nickel is an art for where the surface of a small denomination coin is carved to create a mini work of art. The nickel was the popular coin for its low cost and the softness of the metal. This art form became popular during The Great Depression when Hobos would carve designs in these coins and sell them in order to earn money. Hobo Nickels vary in value depending on the aesthetic value of the artwork and the artist. Two artists of the 1930s, Bertram Wiegand, known as Bert, was the first great Hobo Nickel artist. His student, George Washington Hughes, known as Bo, have both carved Hobo Nickels that have sold for prices equivalent to semi-key date coins.
Another type of tooled coin is a Love Token. The artist who creates a Love Token takes a coin, smooths one side and hand engraves a design. Many of the designs are an expression of love and given to a woman by her suitor. Love Tokens were more popular in the mid 19th century and mostly engraved on Seated Liberty Dimes, although other coins were used. After engraving, holes were punched in the coin or loops added to it in order to turn the new art work into jewelry. Prices vary with the type of material used and the quality of the artwork.
If you are not yet confused, then let’s take a new look at toning. When toning is natural or created accidentally over the years because of environmental factors, these coins are called “naturally toned” and desirable to some collectors. However, natural toning can have detrimental effects such as toning that occurs on coins because they were improperly stored. “Album toning” occurs when the coin is store in an old album that may be made of an acid-based paper that has leached chemicals on the coin. Verdigris is the green “toning” that appears on any coin containing copper that came from being stored in or near plastic that was made with chemical softeners such as polyvinyl chloride (PVC). Toning from improper storage can be ugly and not desirable which will lower the coin’s value.
Those who collect toned coins like the rainbow of colors. However, it is possible for coins to be artificially toned and made to look as if it was naturally toned. Determining the difference between naturally and artificially toned coins can cause an argument whose passion rivals that of a religious debate. Naturally toned coins are worth more to toned coin collectors than artificially toned coins, if you can tell the difference between the two.
If you dig further into pricing and exceptions of various numismatic items, determining price can be even more confusing. One area I did not discuss is paper currency, which is never worth less than face value. And this is only half the story. In the next installment, the discussion will look at how this information determines “price” and “value” when you visit a show or a coin dealer.