Evaluating Coins

Even if you are someone who is into coin collecting just for the fun it is still useful to know what gives a coin its value. The general impression is that the older a coin is the greater its monetary value. This is entirely wrong. For example, a Roman denarius, minted almost 2000 years ago, is much cheaper than some strikes of U.S. golden eagles minted in the second half of the 19th century. It may be that a Texas cowpuncher was paid with one among his 40 dollars per month wages, which he then proceeded to spend in one go on a payday binge in town, but, today, there are many collectors who are willing to part with large sums of money to get their hands on one.

So! What gives a coin its value? There are many factors: rarity, the duality of demand and supply, the coinage metal, condition, and, of course, age. There are also some other external factors which you may come across as you proceed with your hobby. We shall now deal with each of the mentioned factors one by one.

Age.

First, we shall consider the age of a coin, the factor which is most commonly mistaken as being the most important one in determining the value of a coin. As mentioned earlier, there are many coins minted hundreds of years ago less valuable than some minted within the past 20 years. As we study the other factors we shall know why. Of course, it’s very exciting to be able to hold in your hands a small piece of history hundreds of years old! A Roman denarius in your collection may invoke within your consciousness scenes of glory and barbarity from the ancient Roman Empire! So, age has a certain romantic value which may not be fiduciary but which, nevertheless, means something to the serious coin collector. That is why I recommend that, when you, like Uncle Scrooge, go about accumulating that wonderful moolah, be sure to include a few pieces from far back in our exciting past. Now that you know how it is with coins, let me say that the old dictum that “Old is Gold” holds true for many old coins. This is because truly old coins are very rare and, so, very costly.

Grade.

Now we shall look into how the condition of a coin affects its value. Condition is better known as grade in the coin trade. A coin’s condition is determined by a Standard International Grading System. Roughly, the grades that can be attributed to a coin are: poor, good, very good, fine, very fine, extremely fine, uncirculated and proof. Obviously, the lowest grade is poor and the highest proof. There are more gradations but they are mostly finer degrees of these given grades. The grade of a coin determines its value most of the time, often most dramatically.

Later 19th century and early 20th century U.S. coins are mostly available in large quantities in their lower grades. Such low grade coins are cheap; an 1850 U.S. gold dollar, graded poor, struck in one of the State Mints may cost as little as $500 while another gold dollar from the same mint and same year, graded extremely fine, may cost as much as $50,000. The uncirculated and proof varieties may not be available at all. Such cases where lower grades are amply available while higher ones are rare are termed as cases of conditional rarity. Basically, as you may logically conclude, coins of lower grades are much cheaper than coins of the same mintage but of higher grades. You can learn more comprehensively about grades from some reference books and coin catalogs. These may be available from your local bookstore on order or from your coin dealer. If you buy a coin catalog make sure that the coins are listed and valued according to their grades. A good catalog has photographs of the more popular coins according to their various grades. Also, it teaches you how to easily spot the different grades. Remember! Grades are tricky! If you buy expensive coins make sure that you are getting the right grade at the right price.

Rarity.

Rarity is a factor which may greatly determine the value of a particular coin. The number of specimens of a particular coin that has survived over time determines the rarity of that coin. Often, for very old coins, only one specimen may be known to be in existence and that makes it absolutely priceless. Nevertheless, the mintage figures for a particular strike do not entirely reflect its rarity or commonality. A particular strike may have been minted in large quantities in a particular year in the past but only a few specimens have survived to date while another strike may have been minted in much lesser quantities in the past but large numbers of it are available at present. The former coin is rarer than the latter. This does not mean that the former is costlier than the latter because, in pricing, other factors come into play. I have already dealt with a specific case of conditional rarity. Rarity is also, sometimes, a situation of the interplay of demand and supply. Many U.S. coins from the past, available in ample quantities, are considered rare and command high prices while coins of the same period of a poorer country like India, struck on the same metal and available in lesser quantities, may not be considered as rare and command much lower prices. This is simply because there are more affluent buyers for the U.S. coins than there are for the Indian ones. Rarity of a coin, like most of the other factors, is relative and rather dicey to determine accurately. True rarities are hard to come by but you should study reference books and catalogs and know what exactly to look for. In time, you may pick up one or two, even if you are collecting on a low budget.

Market economics.

Like all other markets, the coin market is also affected by fluctuations in demand and supply. When a particular series is in great demand its price rises and when the demand is low and there are a lot of a series in the market looking for buyers the price falls. The coin market can be as fickle as any other market. One month there may be great demand for a particular strike and its price soars astronomically while in the very next month the demand falls and the price tumbles. Thus, it is necessary for you to keep track of the latest trends in the market so that you are not caught unawares by short-lived fads and end up buying a strike at high prices which then fall the very next month. This is just like with stocks. The best way to follow the market is to subscribe to a good coin magazine. Stay clear of hot favorites unless they are perennial or you may end up spending money that you may never recover. It is my advice to wait out these temporary crazes and buy the strike when prices have settled down because, then, the price would be a better reflection of the true value of the coin. Otherwise, during the hot periods, the prices are over-inflated by the excessive demand. If you sense a long-term rising trend in the demand for a particular strike, get in early and buy it while prices are still low. Then you will get a desirable piece at a reasonable price.

Endpiece.

Since coin collecting can be quite an expensive hobby, accurately evaluating particular strikes is very essential. If you intend to become a serious collector, always keep with the latest version of a good coin catalog which lists coin prices according to grades. Also, subscribe to a good coin magazine and keep in with the latest trends in collecting across the world. Of course, all hobbies are ruled by the heart but try to listen to your brain once in a while and be practical when buying. That way you will accumulate not only an enjoyable collection but also a lucrative one. Happy collecting!