My memory may be fuzzy when I think back to when I was five or six years old, but one thing that stands out is my grandmother’s house in Queens, New York. She had a coffee grinder full of pennies, and I’d enjoy looking through this collection, placing the best-looking coin of each date and mint mark into blue coin folders.
Somehow, after moving to and from college in later years, the folder containing the oldest and most rate of these coins disappeared, and when I have the chance, I occasionally look through coins to try to rebuild this collection. I’ve also started collecting other coins.
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Coin collecting is said to be the “hobby of kings.” It’s a gateway to history. It’s even possible for the hobby to be profitable, but it doesn’t look like that will ever be the case for me. If anyone is making money from coin collections and collectors, it’s the professional dealers who get special pricing favors from other dealers and sell to the public for profit. Dealers can also sell the public’s collections as brokers or buy coins directly for customers, another source of revenue. The individual collector is at a disadvantage.
The U.S. Mint has been involved in the collecting market almost one hundred years. What makes a coin worth more than its face value (or in some cases, melt value) is its rarity and condition. A century ago, there were few collectors and the Mint produced much lower numbers in terms of coin volume. The Mint produced coins to suit the needs for circulation, but as coin collecting grew in popularity, the Mint saw it as an avenue of profit, creating new coins designed just for collectors and encouraging the industry.
Today, the Mint produces more coins and enough collectors keep everything made by the Mint in pristine condition. No new coin will ever be rare again unless the Mint produces something with an extremely limited run. And if the Mint were to do this, collectors would snap up the issue, the coins would not be placed into wide circulation, and the few specimens will be kept in “mint” condition.
Every year I buy a set of proof coins from the Mint, showcasing the designs in the Mint’s own packaging. The Mint produces so many of these and collectors keep almost all of them perfect condition. There is little likelihood of these sets ever being worth much more than the purchase price, and in many cases, the street value could actually be lower than the purchase price. I am not looking for profit right now, just the satisfaction of building a collection that I could, possibly, one day share with someone.
Modern coins offer little for the collector concerned with earning a living from the coin collecting industry, but old coins, produced when the Mint kept volumes low enough for circulation and before every type of coin was automatically saved in pristine collection, can be profitable. Dealing with old coins is more like dealing with works of art. A small number of specimens go from auction house to auction house, increasing in price, while a larger number of old and rare coins at auction don’t sell at all. The prices of these rare and most profitable specimens are out of range for the casual collector.
Nevertheless, the idea of coin collecting has a public transfixed with the possibility of making a fortune or creating a legacy of monetary value to share within the family. The Mint will be happy to feed that perception as it continued to profit significantly from investors who buy any new product (or repackaging of an existing project) for the sake of completeness. The latest new product from the Mint, a Limited Edition Silver Proof Set which includes fewer coins than the already existing annual silver proof set, is a good example of how the Mint uses repackaging to create demand among collectors. There is nothing unique about these coins, only the packaging, of which only 50,000 will be produced.
Moves like this will stimulate some demand, but it will most likely dry out quickly. The coins themselves are minted in such numbers they will never be rare and almost the entire population of coins will be in perfect condition for hundreds of years.
For the non-professional, non-dealer collector looking to use coin collecting as a way to build wealth, modern coins will offer no such assistance. Even focusing on old coins has limited results because collectors have now preserved what could possibly exist in the marketplace. And every so often, the Mint throws the industry for a loop by releasing into the public a collection of coins held in a vault somewhere, making what was formerly a rare coin just one of many. This is what happened with certain old dollar coins (called Morgan dollars, after the designed of the image on the coins). The Mint released bags of coins formerly thought to be rare. With the coins no longer rare, the price plummeted. With the market easily manipulated by the Mint, you can never be sure how the value of your coins will be sustained over the long-term.
Despite the volatile market and likelihood for loss rather than profit, coin collecting can still be fun and educational. Every collector has a story about how he or she started or about a younger person they’ve inspired to learn about history through sharing love for the hobby. From a financial and business perspective, casually collecting modern coins is dead, but some of the better aspects of the hobby continue to live on.
Updated October 21, 2015 and originally published December 11, 2012.