Mintage is the first indicator to be studied when guessing the available supply of any coin. The mintage of the 1796 Draped Bust Quarter was 6,146 pieces, and this sets the upper limit on how many could possibly have existed after 1796. Survivorship is the most significant modifier to the original mintage figure. In the case of the 1796 quarter, many US gold and silver coins perished in the late 18th and early 19th centuries when bullion profiteers shipped them in great numbers overseas, exploiting imbalances in international precious metals prices. There weren’t that many 1796 quarters to begin with, and of that number, quite a few of them ended up in the melting pot, leaving us today with a much smaller subset to scramble for.
Another example of mintage modification occurred in 1918, when the Pittman Act authorized the destruction of over 270 million silver dollars! In the gold and silver boom of 1979-80, millions of silver coins were withdrawn from private collections and sold for a melt value temporarily far above their numismatic worth. Moreover, a huge number of collectible coins have been lost or destroyed by methods other than melting, further reducing the supply. To state the situation more concisely, the supply of coins issued in the past is finite and can never increase. There are exceptions to this, such as the discovery of a hoard of rare coins in a shipwreck or in a heretofore unknown important collection surfacing, but blockbuster headlines like this are is very much out of the ordinary.
Condition of Coins
Condition is critical when considering supply availability. Condition is a numismatic term to express the state of preservation of a coin. The words “condition” and “grade” are used interchangeably in coin collecting jargon. Coins are very durable, but seldom can collectible coins be found in the new condition they attained in being minted. From the instant a coin is ejected from the dies, it is gouged, handled roughly, and exposed to everyday wear. As you might expect, the quest for better grade specimens becomes more difficult because the supply gets smaller and smaller the higher you go. The degree of deterioration is measured by the grade assigned to a coin by a collector, dealer, or coin grading service. Grading is subjective and leads to varying opinions, and can be one of the less appealing aspects of coin collecting.
There is a range of grades widely recognized by numismatists, starting with About Good (AG-xx) and going to Uncirculated (MS-xx) or Proof (PF-xx). Coinciding with this range is a numerical scale from 1 to 70, with 70 being perfect. The grade can significantly affect a coin’s value. Continuing on with our 1796 Draped Bust Quarter example, a specimen in Good condition (aka G-04, which by definition, exhibits heavy wear) has an estimated retail price of $12,500. Near the opposite end of the spectrum, an MS-60 sells for $85,000. A really stunning demonstration of how condition defines supply occurs with the 1892-S Morgan Silver Dollar. In the Almost Uncirculated (AU-50) grade, the coin retails for around $2000. The next major grade up, Uncirculated (MS-60), it sells for $30,000! Such an incredible jump in price from one grade to the next is not all that uncommon, so you see how critical the coin’s condition is in determining supply, and ultimately, value.
It is now time to review the factors creating demand. Collectors (let’s include investors in this group) comprise the demand side of the equation. If there is no demand, there is no market. Over the years, a higher and higher percentage of our population has become coin buyers. The number of collectors has increased from about half a million in the 1950’s to countless millions today. No one really knows for sure how many (the definition of “collector” is vague) but there are TONS of them. The State Quarter program of 1999-2008 is credited with attracting a large number of new collectors into the fold. More and more buyers competing for, at best, a fixed supply of rare coins points to only one thing: higher prices in the long term future. The most important demand factors are found in part three.
Part of the “Silver Coin Series” of articles, written by numismatic expert Daniel J. Goevert.