So what makes a coin valuable? Ultimately, coin values are based on essentially the same set of rules as any other product bought and sold in the open marketplace. If everyone wants to buy, prices go up, but if everyone wants to sell, prices drop. Most people will acknowledge this as the Law of Supply and Demand.
For coins, supply and demand is determined by factors specific to coin collecting. Each of the factors must be carefully considered to arrive at an estimation of the value of any particular coin. All collectors should learn to recognize how these factors intertwine to determine the market price of a coin.
Point of clarification: “Numismatist” is a term often used to describe a serious coin collector (that’s really only an approximate definition, but it will suffice here). You’ll notice the term and its variants sprinkled throughout this article.
First of all, let’s take a look at the supply portion of the Law of Supply and Demand and how it relates to coin values. What exactly is the supply? Broadly speaking, the supply of any coin of a specific date and mint mark can be defined as the number of examples available for sale at any point in time. What, then, sets the parameters of availability? Let’s think of a 1796 Draped Bust Quarter as an example as we step through the process.
Precious Metal Content
Of the factors creating demand for coins, this is the one with the least amount of collector influence. In today’s environment, values rise and fall for common date 90% silver coinage (i.e. dated 1964 and earlier) mostly in tune with bullion market activity. The numismatic value component of these coins is small and does not fluctuate nearly as dramatically. Returning for the final time to our 1796 Draped Bust Quarter example, the market price of silver has absolutely no direct bearing on the worth of this rare United States coin.
Now that you have been exposed to the basic supply and demand forces affecting coin values, you’re probably curious to know who interprets these daily and sets prices accordingly. The major coin dealers do. Through today’s technology, they closely monitor the industry’s pulse by watching the trading, buying, and selling activity taking place from coast to coast and worldwide. Because of their familiarity with the marketplace, they know approximately what any given coin will bring in wholesale or retail trade at any given time. Their observations, when averaged with the estimates of other coin dealers, determine the value of a coin. You can follow the price movements of today by studying online price guides, coin periodicals, and buy/sell advertisements.
Part of the “Silver Coin Series” of articles, written by numismatic expert Daniel J. Goevert.
Part 2: Mintage and Condition