Four Factors That Determine the Value of a Coin
I recently wrote about some changes coming to the presidential dollar series released into circulation by the U.S. Mint. Jeremy asked:
My wife and I received two fancy rolls of uncirculated coins of a 2007 series in a plastic display case as a gift this Christmas. For now they are just going to sit in the safe deposit box at the bank, but I wonder if they will ever have some sort of added value. Flexo, do you think these will ever have any sort of collector’s value (baring mistakes, die errors, etc)?
Collecting coins is fun, if you’re into that sort of thing, as I am once in a while. I don’t do it for the money, though. In most cases, trying to make money with a coin collection is speculation worse than day trading. Think about when you used to collect baseball cards. Chances are that if you did, you were doing so at the same time I was, in the late 1980s. Everyone was collecting cards at that point, or so it seemed. Supply was through the roof, and then when baseball started losing favor with Americans, demand dropped. So much for the value of late 1980s baseball cards.
Coins are similar. To answer Jeremy’s question, you’d have to take into account four main considerations that go into the “value” of a coin at any moment. If you want to see what the market is supporting, check recent successful eBay sales. But why is a 1955 cent worth more than $47,000 while an 1815 quarter dollar only $95?
Factor 1: Condition
There are two major components of condition, and the first is pre-circulation. Everything that happens to the coin while at the mint, including the way the design is struck on the planchet and marks left by other coins during transportation, plays a part in determining the condition of the coin. If the coin is circulated, then wear and tear plays a roll.
Several companies take the guesswork out of rating the condition of the coin, for a fee. They will grade the coin on a scale of 1 to 70, with 70 being practically perfect, and place the graded coin in a display holder that will hopefully prevent any future damage. The better the condition, the higher the value.
Factor 2: Rarity
Most modern coins will never be rare. These days, there are many collectors and the mint produces many items of each type of coin being produced every year. If you’re collecting coins for investment potential, modern coins are not good bets, unless you have a true rarity such as an error coin. That being said, a coin’s old age doesn’t correlate to rarity. Some older coins are more common that recent pieces. The higher a coin’s rarity, the higher the value.
Factor 3: Bullion value
Coins are generally composed of at least one type of metal, and that metal has a market value. For example, silver is currently $15.35 an ounce and copper is currently $3.1608 a pound as I write this article. A 1960 quarter dollar was composed of 90% silver and 10% copper. Multiply the price by the weight of each metal in the quarter, and you’ll find that the bullion or melt value of a 1960 quarter is $2.7804. For the most part, you should be able to sell a coin for at least the bullion value. Coinflation will tell you the metal content of U.S. coins and give you bullion values based on the latest market prices for the composition metals.
Factor 4: Demand
Ah, demand. Without demand, coins would fetch only their face value. That same 1960 quarter could only be used in financial transactions and would be worth no more than $0.25. Demand for various coins ebbs and flows as tastes change.
I can’t predict whether any particular coin will be in demand in the future. It’s likely that most modern coins won’t be hot among collectors thanks to their overabundance. But the coming changes to the edge of the coin may make the earlier series more desirable. Unfortunately, many of the early presidential dollar coins didn’t leave the Mint without unattractive damage. (See the first consideration of “condition.”)
The coins that Jeremy has are uncirculated, which means they may be in better condition than average. The best bet might be proof coins, which go through a special process to ensure that they remain in excellent condition throughout the minting and packaging process. Proof coins look much different — shinier and stronger — than circulated (“business strike”) and other uncirculated coins. If any coins have the ability to increase in value, it’s the rarer proof versions of these coins.
On the other hand, proof coins are hoarded among collectors. Secondary demand (after the initial demand during production, when collectors can buy directly from the Mint) will remain low for a while.
Rather than worrying about these factors, it’s much more enjoyable to collect for fun. If you want to put a value on your collection, check out from a library the 2008 Guide Book of United States Coins, also known as the “Red Book.” Another good source of coin values for those who prefer to do their research online rather than the library is the PCGS Price Guide.