There are a number of factors that determine the value of a coin. These include rarity, condition, popularity and precious metal content.
Grade
The grade of a coin is the single most important factor that determines the value of a coin and is determined by the condition of the coin. If you are a coin collector being able to grade a coin is an essential skill to have should you fall victim to someone trying to sell you an overvalued and over graded coin.
While coin grading companies abide by the grading standards introduced by the American Numismatic Association many grading services will over grade a coin making it appear more valuable then it really is.
Of course if the coin has been graded by a professional and reliable coin grading service such as ANACS, PCGS, NGC or ICG you can be more confident that the coin has been graded correctly. These services are generally recognized as the most reliable grading services in terms of consistency of their grading and quality of their service.
If you are new to coin collecting I recommend you purchase a graded coin until you can correctly determine the grade of a coin yourself as this is important for determining its value. If you are purchasing coins that have not been graded these are referred to as ‘raw’ coins.
A graded coin will be sealed in a tamper proof slab and contain a label with information about the coins type, denomination, grade, a unique serial number and a machine readable barcode.
The grading of the coin is based on a grading system called the Sheldon Scale. This is a 70 point scale developed by Dr. William Sheldon in 1979. Although the Sheldon scale has been modified slightly in recent times it is still the standard for coin grading today and coin grading services use this scale when assigning a grade to a coin.
Rarity
Rarity is another factor that determines the value of a coin. There are two types of rarity – ‘Condition Rarity’ and ‘Absolute Rarity’. ‘Condition rarity’ is determined by how rare a coin is in a particular grade, usually coins in a high grade. A coin could be very common in a worn circulated grade, yet only a few coins may exist in grades higher than MS-64. ‘Absolute Rarity’ is a coin that is rare in any grade and is determined by how many coins were minted and have survived till this day.
I consider ‘Absolute rarity’ or ‘mintage rarities’ as true rarities. This is because they are more likely to increase in value over the long term. If they are key coins in high grades they are even more likely to appreciate in value. Key coins are usually the lowest mintage coins of any given series and so they tend to be rarer. Grade rarity tends to be based more on current fads and there is no telling that a coin regarded as a rare grade will be considered rare in years to come. They therefore may not be the best coins to invest in.
Just because a coin is old does not make it rare. Some Ancient Roman coins that were minted in large numbers can fetch significantly lower prices than rare old coins minted in the 20th century.
If you want to invest in a coin that is likely to go up in value it is best to invest in coins of a high grade that were few were minted and few have survived to the present day. These coins tend to appreciate in value the most particularly if they are made of gold and pre-date 1933. The U.S government recalled gold from its citizens in 1933 during the great depression so coins that pre-date this period are rare. These coins have a history of rising in value even when gold prices do not go up.
Supply and Demand
Supply and demand is another factor that determines the value of an old coin. Supply is determined by how many coins of a particular type have survived to the present day and demand is determined by how many collectors want to buy it
High demand may be caused by a number of factors. A coin may be part of a topical set that is often chosen by collectors or because the coin has historical significance. Some coins are particularly well made with great artistic quality. Coins that are popular and well documented such as the Morgan dollar usually fetch higher prices then less well known Japanese coins that were minted in greater numbers. Demand is not always determined by supply but how popular and well documented it is and its aesthetic qualities.
Precious Metal Content
If a coin contains a precious metal such as gold it can add extra value particularly if it is rare and in good condition. Silver and Gold coins have a proven track record that goes back thousands of years. These coins have intrinsic value because their worth is guaranteed in part by their material. Because the value of metals such as gold, platinum and silver tend to rise in value over time they make a good investment.
Gold coins minted before 1933 are also particularly rare. These coins should rise dramatically in value whether or not gold bullion prices go up and offer you substantial leverage above and beyond their gold value. Also Pre-1933 Rare Coins are, by law specifically exempt from current gold confiscation laws.
Ultimately the only true method of determining the value of your coins is to put them up for sale and see if anyone is willing to buy them. You could try putting them up for sale on online auction sites like eBay. You could always set a minimum starting price or reserve if you’re worried they will sell for too little. Generally coins tend to sell for a bit less then their market price on eBay but sometimes bidders will bid higher.
