Just about everyone has heard about someone finding a rare coin in pocket change, a gold doubloon on the ocean floor, or inheriting Grandpa's vast coin collection. All of these items are worth more than the intrinsic value of the metal that they are made out of. This additional value is because they are numismatic coins.
Merriam-Webster's dictionary defines numismatics as "the study or collection of coins, tokens, and paper money and sometimes related objects (such as medals)." It also defines coins as, "a usually flat piece of metal issued by governmental authority as money." Since numismatics is a very broad field of study, the term numismatic coins narrow down to the study of flat pieces of metal issued by a recognized government.
History of Coin Collecting
Scholars widely believed that coins had been around since approximately 200 BCE when they were first minted in Lydia (modern western Turkish provinces of Uşak, Manisa, and İzmir). In the 14th century, people began to appreciate the artistry of coins and began to collect them. Unfortunately, only the wealthy could afford to save coins, and it became known as the "Hobby of Kings." In the 17th and 18th centuries, coin collecting became more academic, and coin collectors became more focused on expanding their study to include historical events surrounding the mintage of their coins and the methods of manufacture.
Coin collecting in the United States has always had its ebbs and flows. Its popularity first began to increase in the mid-1800s when economic prosperity began to appear, and people became interested in saving the early coins that the United States first minted.
In the early 1900s, coin boards became popular as a method for people to store their coin collections. Coin collecting in the 1950s and 60s reached an all-time high with people saving silver coins and hoarding rolls of coins that they thought would be valuable in the future. Institutional investors drove the rare coin market to an all-time high in the 1970s and 80s only to be followed by a market crash.
Types of Coins That Collectors Collect
Most people began collecting coins directly from circulation. They may find an old coin that looks unusual, and they set it aside to do some research. They also may begin assembling coin collections from their pocket change that they obtain every day. Other people collect coins to diversify their investments and retirement portfolios by purchasing bullion coins made from precious metals such as gold, silver, or platinum. However, there is some confusion in this area because United States law (United States Code Title 31—Money and Finance, Subtitle IV—Money) considers bullion coins minted by the United States Mint to be numismatic coins.
Collectible coins are the most common types of coins that people pull together into a logical set. These coins are usually no longer minted and have some historical provenance that interests people from many different backgrounds. Numismatists group these coins into several major categories:
- Ancient coins that were minted before the year 1000
- Medieval coins minted between the year 1000 and 1600
- World coins minted after 1700
- United States classic coins minted before 1964
- United States commemorative coins minted for special occasions and never intended to be released into general circulation
Finally, a popular area of coin collecting does not involve coins that were issued under the authority of a governmental agency and intended to be used as money. This area is known as exonumia and is the collection and studying of medals and tokens that were manufactured by private mints, foreign mints, or the United States Mint. They may have been used to commemorate a significant event, publicize a political cause, or used as barter for goods and services.
Value and the Coin Market
The most common question asked at coin shops and coin shows around the country is "How much is it worth?" The coin market functions like any other open trade marketplace. Supply and demand drive price and value. The price goes up when supply is low and demand is high. Conversely, prices go down when supply is great, and demand is weak.
Many factors go into determining the price of an individual coin. First and foremost is the relative rarity of the coin. Secondly, is the grade of the coin. The better the condition of the coin, the more coin collectors are willing to pay for it. Remember, when coin collectors are assembling their collection, they want the best-looking coins to display for their friends and family.
Other factors come into play that include the material that the coin composed of. If a coin is made out of a precious metal such as silver or gold, it is possible that the value of the metal contained in the coin can exceed its face value. When this happens, people will remove coins from circulation and melt them down to sell the metal as bullion.
In 1979, the price of silver jumped from $6 per Troy ounce to almost $50! Coin collectors were taking their low-end collection of silver coins to the melting pot to reap the rewards of this sudden increase in price. The same scenario happened in 2012 when the price of gold soared to almost $2,000 per Troy ounce. Once again, many gold coin collections went to the melting pot.
Myths and Falsehoods
Coin collecting can be a fun, exciting, and rewarding hobby. Unfortunately, there are some myths and falsehoods believed by some people:
- The older the coin, the more valuable: As explained earlier, the coin market is driven by supply and demand. You can pick up a beautiful 2,000-year-old ancient coin for about $30, while an uncirculated 1909-S VDB Lincoln cent will set you back more than $1,000.
- Shiny and clean coins are worth more: Nothing can be further from the truth. Experienced coin collectors and coin dealers can tell if a coin has been cleaned. Numismatists consider cleaned coins damaged and are worth significantly less than an unclean coin.
- Numismatic coins are exempt from government seizure: In 1933, President Roosevelt issued an executive order that all citizens of the United States had to surrender their gold coins and gold bullion to the government in exchange for paper money. There was an exemption for "gold coins having recognized special value to collectors of rare and unusual coins." However, the government could craft any law in the future and can seize anything they so desire. This could include numismatic coins and bullion.