Many times I get asked the question of why a certain coin is worth more than another particular coin. While valuing coins is not an exact science, there are three primary factors that weigh into considering the value of a coin. There are also a few other sub-factors that we will explore in this article as well.
We will start with a less important factor that may create value. Maybe one of the biggest misunderstood items for beginning collectors is the belief that the older the coin, the more valuable it is. It is natural to think some collectables become worth more money as they become older. To some extent it is true, but as we will discover in a little bit, age of a coin is not a major determinant in the value of a coin. There are many coins only 30-40 years old worth considerably more than some coins well over a hundred years old. This is true in the same series. For example, a 1939 D Lincoln cent is worth slightly more than a 1919 S Lincoln cent that is in the same grade.
The next item to consider in the value of a coin is its condition. All other things being equal, the same coin, same date and same mint will be worth more when in MS (mint state) than in a G4 condition. This is true in all coins as well as all collectables. The state of preservation has always been a driver of value, but again, this is within same type coins. The degree at which this price/value escalates though is determined by other factors as we will see.
The scarcity of a coin is indeed a major driver of value. Just like anything, the less there is of something, the more likely its value will be higher. This is just common sense and is easy to see when comparing the same denomination of coin. For example, the 1939 D Lincoln cent used in the example above has a mintage of just over 15 million. The 1919 S Lincoln Cent has a mintage of nearly 140 million. That is quite a huge difference. In this instance, the coin that is somewhat older is not worth quite as much as a slightly newer coin. When determining scarcity, you can not look at just the mintage of the coin. You must also consider its survival rate. What is that? Well, it is the rate at which the coins produced survived over time. For example, the Pittman Act of 1918 required the melting of 270 million Morgan Dollars. Many silver dollars with decent mintages are now scarce due to huge amount that were melted. It is estimated that only 15-17% of all Morgan Dollars produced now survive. Another good example is the Buffalo Nickel. As most collectors know, Buffalo Nickels with good clear dates are not as common as one would think. The date on the coin was slightly raised which subjected it to quick wear, thus the term "dateless Buffalo Nickels". Another great example is the 1883 Liberty Nickel. As is the case when a new coin comes out, it is hoarded by the public and saved by collectors. In 1883, the first Liberty Nickels came out without the word "Cents" on it. 5.4 million of these coins were produced and in G4 it is valued at $5.50. When it was discovered that many folks were able to gold-plate the coin and pass it off as a $5.00 piece, the Mint added the word "Cents" to the coin. In 1883, over 16 million of these coins were produced, yet this coin, with three times the mintage is worth $13.50 in G4 condition. Why? Collectors saved the first 1883 coins produced and put them away because it was a new coin and because of the belief they might be recalled. By the time the revised 1883 coin came out, there was little notice by the collecting public and these revised coins went into circulation and probably had a lower survivability rate.
While all these factors can determine the value of a coin, the biggest factor in determining the value of a coin is quite simply collector demand. This factor is without a doubt the biggest factor in determining the value of a coin. Demand for key date Lincoln cents has always been huge. This is due to the fact that most collectors began collecting Lincoln cents. As an example, the 1909 S VDB, with a mintage of 484,000 is valued at $750 in G4 condition. The 1879 Shield Nickel with a very low mintage of 29,100 is valued at $415 in G4 condition. This despite the fact it is an older coin, a larger denomination coin and no doubt had a low survivability rate as compared to the 1909 S VDB. The 1909 S VDB was sought by collectors immediately upon its release. It was immediately recognized as being scare due to the "VDB" initials being removed from future coins. The survivability of this coin is quite high compared to the Shield Nickel.
What then creates demand? Demand is created by several factors and is somewhat driven by scarcity. As more collectors enter the field, certain key dates will continue to rise in value as demand increases. Some denominations are collected more often than others. As previously cited, there are far more Lincoln Cent collectors then there are Shield Nickel collectors. Washington Quarters have seen a rise due to the State Quarter Program. Another factor in determining demand is coin related publications that highlight a certain coin. A coin that may have been increasing in value over a period of time can be highlighted by Coins Magazine and now suddenly collectors take notice and now everybody wants this particular coin for their own.
In review, the factors in determining the value of a coin are
1. Age 2. Condition 3. Scarcity 4. Demand
As always, in coin collecting, values, grades, etc are not an exact science. When purchasing coins for your own collection, buy what you want, for the reason you want. Investing in coins as an investment is quite tricky and dangerous as coin values can change quickly.
As always, happy collecting
