Coins can be valuable for many reasons. The first thing that comes to mind are glimmering, glittery gold coins spilling out of a treasure chest, perhaps in a cave, or a pirate movie. But lost treasure isn’t the only way that coins obtain value–and, in fact, is not even the most common. In reality, coins become expensive just like any other good: by balancing the supply and demand.
Supply and Demand
Any economist will tell you that the economy is precipitated on supply and demand. If a good or service is wanted, and there is an equal level of supply available in the market, the price will stay level. However, if there is a high demand for a product, but the market is unable to supply it at the rate it is demanded, the price will rise. In some cases, this can be a dramatic change. Over time, however, the supply will generally be increased by companies who want to take advantage of an increased demand and who up their own production of the good or service.
However, sometimes there is no way for the supply to increase, because there are only a limited number of items available. In this case, the demand for the object is higher than the supply available–and the supply cannot shift–so the price may rise greatly.
Coins are prey to this, just as any other good or service in the market is. A coin is most fully valued by the demand that it ekes out of the economy. In many cases, coins were minted in limited batches, so if only 1,000 were minted, only a total of 1,000 of the same type of coin will be available anywhere. This ensures that coin suppliers will get a high price, since demand is so high. If many thousands or tens of thousands of coins were produced, it’s likely that that coin won’t be as highly valued by the market because the good is so readily available.
Condition & Rarity
When buying a coin, most people seriously consider both the age and the physical attractiveness of the coin. This is often called the “grade” of the coin, and includes things like the color, the luster, damage, corrosion, or other imperfections. Coins are then given their grade, which varies between a score of 1 and 70–with 70 being mint condition.
A grade of 65-70 generally means mint condition–indicating that the coin, regardless of all other factors, looks like it was just minted by a treasury. In this case, the “strike” of the coin (the depth and detail of the coin designs), any discoloration, physical damage (like scratches, dents, or corrosion), and the general aesthetics of the coin all play a part in determining the grade. A higher grade indicates a better coin, and therefore a much more valuable one.
The age of a coin can also play a huge role in determining how valuable the coin is. One would think that an older coin would immediately be more valuable, but this isn’t always the case. Again, depending on the number of coins originally minted (the demand), a coin from the late 1800s that was made in bulk might be less valuable than a coin from the 1990s of which only one hundred were minted. However, it’s important to consider that this discrepancy is different when dealing with historical artifacts, and not just coin investors.
If the coin is rare, it simply means that few were produced. Age isn’t necessarily an indicator of this, and the most accurate way to determine the rarity of a coin is finding out how many were initially minted. It’s also possible to determine the number of coins that have been certified as a certain grade–if only one coin of the original stock exists at a 65-70 grade (or any specified grade level), that coin is exceptionally rare. Higher rarity–combined with higher demand–equals a higher price.
Intrinsic Cost & Collectors
Oftentimes, there is an assumption that what makes coins valuable is the physical quantity of fine metals involved. While this isn’t always the most important factor, it can be greatly alter the price. A coin that is large and made of solid (and pure) gold is going to be much more expensive than one made of impure gold or silver, since those sell for much lower in the marketplace. Generally, silver is a less expensive metal. The purity of the metal is important for that same reason. For example, this exclusive silver coin is 99.9% silver, certified by the Treasury of Austria. This ensures a certain level of quality and purity.
Collectors acquire coins for a variety of reasons–whether for their own personal enjoyment, a family passion, or as an investment opportunity. They tend to focus the most on the rarity and aesthetic value of the coins they’re collecting, and less on the intrinsic value inherent to the metal. However, this internal cost can drive up prices even more.
In truth, it’s a combination of all of these factors that make a coin truly valuable. If it’s in good condition overall, it’s rare, and demand for it exists in the marketplace, then it will be a valuable coin. Being simply old or pretty won’t do it. Even if a coin is rare–there were only a few made–and it’s in perfect condition, if there are no buyers who are interested in the coin, the selling price will be significantly lower. When either collecting, dealing, or investing in coins, it’s crucial to keep all of these factors in mind and determine the most effective and accurate cost. However, some of these factors can change–while rarity is an intrinsic factor to a coin, there is no guarantee that demand will stay the same over time. In fact, demand is almost always assured to change, as people prefer some things over others. This means that while a coin may be rare forever, it’s not necessarily going to be valuable forever.
A rare coin that’s in demand will be extremely valuable; one that is rare but unwanted will be worth nothing (outside of the metal it’s made of). In all cases, it’s the combination of rarity and demand that truly inform how valuable a coin truly is.