We think of coins today as small, round metal disks of money struck with statements of value that are used for purchasing goods or services.
Early human civilizations had no so luxury. The world’s first “money” was literally any item of value that could be exchanged for something else of value—whether it was cattle, grain, pottery, or tools. It was not until gold, silver, and other metals were recognized as precious elements that anything remotely resembling coins came into being.
Indeed, this did not occur until the sixth century B.C. in the Asian kingdom of Lydia. At first, metallic money consisted merely of hunks of gold, silver, or copper metal that were more convenient to trade than cumbersome commodities like cows and sheep. Gradually, these “ingots” of metal were hammered into coins using crude dies made of bronze, tin, or even hard woods. The very first coins bore no real design and were not much to look at, perhaps stamped with only their weight and fineness. Portraits came much later, as did inscriptions, dates, and other symbolic motifs as more governments began issuing coinage. However, hammered coins continued to be the rule until the minting process was revolutionized in the late fifteenth century with the invention of the screw press. These presses imparted the design to a coin blank with a turn of a screw, rather than the blow of a hammer. It would take two or more men to turn the large screw atop the press, which would drive the upper and lower dies into a coin blank placed between them― imparting the obverse and reverse designs.
At first, the new screw presses actually slowed production, but the quality of their product was much better than hammered coins. Many minters, however, were slow to adopt the new technology and the old and new methods coexisted for more than two centuries, despite improvements in screw press efficiency. By the 18th century, the screw press was the dominant force in coin manufacturing and became the obvious choice when the United States established a federal mint of its own in the early 1790s. Men and horses provided the power to strike the earliest U.S. coins, and individual tools were used to punch the dates and lettering into each die, such that no two dies were exactly the same. The result was the creation of hundreds of “die varieties” that are important to collectors and investors today.
Technology exploded in the 19th century and steam engines were developed to replace the horse and manpower of early mints, first in Europe and then later in the United States. By 1836, U.S. coin production had moved fully to the rapid steam presses, which required fewer employees to operate and produced superior coins with greater consistency and strike quality. Oil and coal were later used to generate steam for the presses, and still later, electrical presses became the standard. The powerful electric presses used by the U.S. mint today can strike over 120 coins per minute with exceptional accuracy―producing flawless coins of exquisite detail, like the proof half dollar shown below.
“The majority of coin collectors commence their cabinets with the single thought of finding amusement, and view collecting merely as a pastime, interesting and fascinating, but with no more substantial value than to employ agreeably a few idle hours. The acquisition, accidentally or otherwise, of one or more coins or medals, which are at the time unknown and strange to them and therefore arouse their curiosity, engenders a desire to possess other specimens with similar attributes—and thus they become collectors.”
―Virgil M. Brand. May, 1905.
Numismatics is the collection and study of coins, paper money, tokens, and related objects. Those who study such money are known as numismatists. Numismatics is a discipline with a long and rich history― people have been collecting money in some way or another since the introduction of metallic coins by the Lydians in 600 B.C. The systematic collecting of coins for their rarity and historical value, however, did not begin until the 16th century, when the resurgence of interest in Greek and Roman cultures gave rise to coin collecting as a popular and prestigious hobby among wealthy Europeans. The first book on coins, De Asse et Partibus, was written by Guillaume Budé in 1514. By the late 1590’s, this hobby had become extremely popular among the nobility and coin collecting became known as “the hobby of kings.”
In the United States, coin collecting became vogue in the 19th century, with collectors saving large copper cents by date and arranging them in specially made, velvet-lined mahogany cabinets. Since then, rare coins have attracted such diverse enthusiasts as John Quincy Adams, Cornelius Vanderbilt, Enrico Caruso, Theodore Roosevelt, Buddy Ebsen, Chris Schenkel, Tony Blair, and Wayne Gretzky. Several noted numismatists have assembled world famous collections during their lives. One example is that of Louis E. Eliasberg Sr., who, from 1925-1950, set out to build a complete collection of United States coins of every date, mintmark, and major variety of every U.S. coin ever struck, from a 1792 half cent to a 1933 gold double eagle. To this day, no one else has ever accomplished this daunting task.
Coin collecting has since gained a worldwide following, with an estimated 50 or more million collectors, and as many as 7-10 million in the United States alone. Numismatics is widely recognized as one of the most rewarding hobbies in the world, instead now called “the king of hobbies.” Because coins have been minted for more than 2,500 years, today’s coin enthusiast has an inexhaustible range of collecting choices available, including ancient coins, rare U.S. coins, modern proof coins, and bullion issues to name a few. Some of the world’s greatest coin collections, including several specimens from the Eliasberg collection, are now housed in museums. The Smithsonian Institution in Washington, D.C., the Metropolitan Museum of Art in New York City, and the great museums of London, Paris, Vienna, and Berlin are just a few that boast tremendous collections of world coinage.
It has often been said, “what could be worth more than money itself?” Indeed, numismatic investments are the only investments that literally accumulate money. This section highlights the three basic determinants of a coin’s value, including face value, intrinsic value, and numismatic value.
The law has required that every coin minted by the United States Mint since its foundation must be stamped with a statement of value, called the face value, which is denominated in the basic monetary unit of our country—the dollar. One important attribute of U.S. coins that is somewhat uncommon among world coinage is that all U.S. coins ever minted still remain legal tender for the purchases of goods and services. Thus, a 1793 half cent will still buy its share of goods at the supermarket like it did over 200 years ago. This also includes modern bullion coins, which bear a nominal face value as necessary to render them legal tender.
1793 LIBERTY CAP HALF CENT
Since its inception in 1792, the United States Mint has produced coins in a wide variety of denominations—many of which might seem peculiar to us today. A total of 18 denominations have appeared on U.S. coins, including 1/2 cent, 1 cent, 2 cent, 3 cent, 5 cent, 10 cent, 20 cent, 25 cent, 50 cent, 1 dollar, 2.50 dollar, 3 dollar, 4 dollar, 5 dollar, 10 dollar, 20 dollar, 50 dollar, and 100 dollar denominations. Of note, the 50 and 100 dollar denominations appear only on modern gold or platinum bullion pieces. Many of these seemingly odd denominations were instituted with good intentions back in their day. For instance, the 3 cent piece paid the price of a postage stamp in 1851. The 4 dollar gold piece on the other hand was intended to be roughly equal to the value of several European coins circulating in 1879. It was thought that having a coin valued similar to other nations would facilitate international trade with the United States, but the fluctuating nature of currencies rendered this coin a failure by 1880.
From an investment perspective, a coin’s face value provides a definitive price floor. Even if platinum metal became worthless, the one ounce platinum American Eagle would still be worth its face value of $100. Stocks do not enjoy similar security. If a company suddenly goes out of business, the stock will be worth nothing and there remains no chance of salvaging even a portion of your investment capital.
The second determinant of a coin’s value is its metal content, also known as the intrinsic (or melt) value. For most circulating U.S. coins today, the intrinsic value is worth less than the face value. In recent years, the intrinsic value of the nickel has fluctuated from slightly below to slightly above the coin’s face value. At times throughout history when the intrinsic value of a coin began to greatly exceed its face value, it became necessary to change the coin’s composition to a cheaper metal. In 1965, the government was forced to change the content of dimes and quarters from an alloy of 90% silver/10% copper to 75% copper/25% nickel due to the rising cost of silver. For this reason, these old silver coins are no longer in circulation but are now traded extensively for their silver content.
Here again, the intrinsic value of a rare coin provides another price floor. Many rare coins are made of precious metals such as gold or silver but are worth more as collectables than as a piece of metal. If collector interest in a particular gold coin was to disappear, the coin would at least still be worth its weight in gold. For instance, a common date Liberty Head twenty dollar gold piece containing $1,700 in gold may be worth $2,500 to collectors in mint state condition. In this situation, the intrinsic value of the gold would provide considerable support to the total value of this investment, should collector demand fall.
Although many rare coins are in fact minted from precious metals like gold and silver, the primary determinant of their value is the collector value, not their metal value. This is also known as the coin’s numismatic value. For some extremely rare or unique specimens, the numismatic value can be substantial—sometimes over $1,000,000. As with any collectible however, the value of a rare coin is established in a free market by investor and collector activity. The size and intensity of that activity is influenced by three major factors: rarity, condition, and demand.
The rarity of a particular coin is a strong predictor of its numismatic value. Because many collectors and investors prize the scarcer issues and target them for acquisition, the rarest coins frequently command the highest prices. Two components of rarity include mintage and population. Mintage refers to the number of pieces produced, whereas population refers to the number of remaining pieces known to exist. The disparity between these numbers can often be enormous. In some instances, coins with high mintage figures may be scare or even rare because large numbers were later melted or otherwise destroyed through the years. This happens most frequently with gold and silver coins, which have been melted throughout history because of government intervention or bullion market conditions that made them worth more as metal than as money. One famous example is the 1933 Saint Gaudens gold double eagle. 445,000 specimens were minted in 1933, but Franklin D. Roosevelt ordered all of these coins to be melted when the U.S. gold standard was discontinued later that year. At least 13 have since been discovered, but since these coins were never meant to be released, significant controversy surrounds the rightful ownership of many of these specimens. For the complete story, investors can read David Tripp’s “Illegal Tender: Gold, Greed, and the Mystery of the Lost 1933 Double Eagle,” available through Olevian Numismatic Rarities.
1933 SAINT GAUDENS DOUBLE EAGLE
Rarity in some ways is also dictated by the year a coin was produced, and the mint location that produced it. The U.S. Mint produced fewer coins in some years than others, though mintage figures generally increase with time. Thus, older coins are very often rarer than newer coins. This is also true because older coins were more likely to have been destroyed throughout history. Production numbers also differ between U.S. Mint facilities, reflecting the size of the respective mint and the territory it supplied. Mints have existed at Philadelphia, Denver, San Francisco, West Point, Charlotte, New Orleans, Carson City, and Dahlonega, but only the first four are still in use. Small letters called mintmarks appear on coins to designate where they were minted, including P, D, S, W, C, O, CC, and D for the above mints. Of note, coins produced at Philadelphia prior to 1979 are designated by the lack of a mintmark, rather than a P. In a given coin series, more specimens were typically produced at the main mint in Philadelphia than at branch mints like Carson City or New Orleans. Thus, coins bearing the CC and O mintmarks are usually rarer than their Philadelphia counterparts, etc.
By now, the rarity of old U.S. coins has been fairly well established. Reliable mintage figures for virtually every coin produced by the United States Mint can easily be obtained. Furthermore, relatively accurate estimates of current populations also exist, and coin certification services maintain detailed population figures for all coins certified by their company in each grade. (See the next section for more details about coin certification services).
The second factor that influences a coin’s numismatic value is its condition. As with any other collectible, quality is a major consideration. The best examples of coins are in the greatest demand and bring the highest prices. The experienced numismatist thus wants to purchase the best example available, or at least the best that he or she can afford. This dictates the need for a classification system for determining the grade, or level of preservation, of an individual coin. Coins are graded on a 70-point scale according to standards set forth by the American Numismatic Association, with 1-59 representing circulated grades and 60-70 representing mint-state grades.
Circulated coins have undergone wear as a result of use in commerce or mishandling. The overwhelming majority of U.S. coins ever minted have been circulated. The more wear these coins have, the lower their grade. The adjectival circulated grades in increasing order of preservation are Poor (P-1), Fair (F-2), About Good (AG-3), Good (G-4), Very Good (VG-8), Fine (F-12), Very Fine (VF-20), Extra Fine (EF-40), and About Uncirculated. (AU-50).
Uncirculated coins are those which have been struck for commerce but show no signs of ever having been used in circulation. They are assigned grades ranging from Mint-State (MS) 60 to 70. These specimens have the best eye appeal, command the highest premiums, and are of particular interest to collectors and investors.
There are also Proof coins (graded PR-60 to 70), which are presentation-quality coins struck on flawless blanks at a slower rate and under higher pressure than business-strike coins to produce specimens of great detail and quality. Proofs are not intended for circulation but instead are produced for sale to the public at premium prices. These coins, too, are highly cherished by collectors and investors alike.
The technical grade of a coin not only takes into account the degree of wear, but is also influenced by other attributes, including marks, luster, sharpness of strike, and toning. For a coin to be truly top quality, it is not enough that it simply carries a high mint-state grade. The coin must also have an overall pleasing appearance. Coins with great eye appeal may very well jump out at you amongst similarly graded coins in a dealer’s case. These specimens will undoubtedly command substantial premiums over their mundane counterparts. Therefore, investors should avoid coins without good eye appeal, regardless of how high the technical grade may be.
As the grade is a chief determinant of a coins value, it is useful for investors to become familiar with grading standards. However, no grading experience is needed to start collecting and investing, as Olevian Numismatic Rarities will assist you in acquiring beautiful coins of the highest grades at the best possible prices. If you do wish to learn the details of coin grading, please see The Official Guide to Coin Grading and Counterfeit Detection, 2nd Edition by Scott Travers and John Dannreuther― which is available for purchase through Olevian Numismatic Rarities.
As you may now have realized, there could be a great deal of subjectivity when assigning a grade to a coin on a 70-point scale. One person’s MS-65 may be another person’s MS-66, and so on. Very often, this difference of opinion matters considerably. For example, an 1886-O Morgan dollar is worth $145,000 in MS-65 and $425,000 in MS-66. Clearly, it is important that all parties involved agree on the grade of this high-end specimen.
Professional Coin Grading Services
Prior to the mid-1980s, coins were generally graded by the selling dealer, causing serious conflicts of interest in the rare coin market. Many investors fell victim to incidents of grading abuse in which they were unable to resell coins at a profit because dealers often inflated grades at the time of sale. In response to these abuses, independent expert grading services were established. For a fee, these firms examine your coin, certify its authenticity, and assign a consensus grade based on three expert opinions. If genuine, the coin is then encapsulated in a sonically sealed, hard plastic holder called a “slab” with its grade and certification number displayed. Plastic slabs provide physical protection for the coin and safeguards against tampering with the grading documentation. The two leading independent coin grading firms, Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC), have become widely recognized for their objective grading practices and high industry standards. They continue to provide reliable consumer protection for rare coin collectors and investors and preserve the integrity of the rare coin industry. Examples of PCGS and NGC certified coins are shown below.
PCGS CERTIFIED COIN NGC CERTIFIED COIN
Consider Certified Coins for Investment
Olevian Numismatic Rarities (ONR) strongly recommends that investors only purchase rare coins that have been certified by one of these two organizations. Not only do certified coins make numismatic investments safe, these services publish monthly population reports that detail the number of coins that have been certified in different grades and issues, which serves as a guide for determining the scarcity of graded coins. In addition, certified coins are more readily sold, with thousands of certified coins sold daily “sight unseen”—a testament to the trust the industry places in certification services. With a guarantee of authenticity and the exact grade printed right on the coin’s label, investors need only to reference the latest price guide to determine its market value—it’s that easy.
It is worth noting that it is less common to certify bullion coins that are purchased mainly for their metal content. The exact grade is often less important with these coins compared to rare coins and they are infrequently counterfeited. However, some investors do prefer certified bullion pieces and ONR offers a full selection of certified bullion coins for the interested client. Please see the section on bullion investment products for more details.
The third and perhaps most important factor that influences a coin’s numismatic value is its demand. Ultimately, a coin is only worth what someone is willing to pay for it. The level of demand varies between coin series, with some coins appealing to a great number of collectors and investors. Lincoln cents, Buffalo nickels, and Morgan dollars are examples of coins that have always had an enormous following. Other coins are not collected as widely, such as silver half dimes issued before 1873. Since there are more collectors pursing them, Lincoln cents and Buffalo nickels are considered scare at mintages that are considered normal in other series. The1914-D Lincoln cent has a mintage of nearly 1.2 million, yet will sell for several hundred dollars in heavily circulated grades. The 1843 half dime on the other hand has an almost identical mintage, yet brings well under $100 in grades approaching mint state. This is because the number of collectors and investors seeking to acquire the Lincoln cent far exceeds the number who wish to acquire the half dime. Thus, rarity does not necessarily always equal higher prices.
1829 HALF DIME
This is not to say that less popular coins are not cherished by the group of dedicated collectors who study them or that they have not increased in value over time. Indeed, their current value relative to their values at previous points in history may be substantially higher. However, the smaller demand for these coins may translate to reduced liquidity for average examples and for this reason Olevian Numismatic Rarities encourages investors to focus on more popular series. In summary, rarity, historical significance, quality, and investment track record all influence the level of demand for a particular coin. With a better understanding of what determines a rare coin’s value, please visit the Rare Coin Investments page to review some specific strategies for investing in rare coins that are more likely to produce substantial long-term profits.