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Numismatics For The Beginner: Rarity Versus Condition


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Numismatics For The Beginner: Rarity Versus Condition

I want to pass along some info I have been collecting (no pun intended) over the years in coin collecting (numismatics). With the advent of “Sponsored Posting” e.i. a pay per post scheme, the number of comments and websites that appear to be related to coin collecting has increased by a staggering amount.

 

But actually, many of these comments and sites are merely bloggers throwing posts out into cyberspace to link to a particular sponsor. Heck, even I have done it; got 5 bucks for the post too. But these articles are usually “one time only” posts that mostly take the form of “Hey Coin Collectors! Want to make a lot of money? Then try buying and selling gold from our professional investment team… blah blah blah.” No real information about coins, their values, or their collectability are ever mentioned in these snake-oil posts.

 

Additionally, many other sites are coin dealers looking to sell individual coins, usually at a hefty profit, especially to people just starting in coin collecting. Unscrupulous people who pass themselves off as experts, sometimes even displaying coins in professional looking containers with overinflated estimates of their condition and value marked on them. These folks are called “self-slabbers” in coin lingo, and they are poison to your pocketbook.

 

I hope to help you steer clear of these landmines on the information superhighway with this article. Not every coin dealer is a shyster, and not every blog entry is viral marketing. But a good list of solid websites and resources is a fundamental start in collecting coins or just making sure you aren’t taken to the cleaners when you do need to liquidate a collection.

 

One of the most common questions asked by the novice collector or the grandson who has just inherited his grandfather’s coin collection and hopes he has a million dollars worth of rare coins is, “HOW MUCH ARE THESE COINS WORTH?”

 

The answer is always, “That depends… what specific coins do you have?” Usually the grandson looks at the vast amount of coins in the collection and heaves a great sigh. Even if all the coins are in 2×2s and labeled properly, he hardly wants to go to all the bother of cataloging the hoard. He can’t understand why a coin collector won’t just offer him gobs and gobs of money.

 

First thing to remember is that the United States Government has never demonetized any of their coinage or currency, with a few notable exceptions. So any coin you have is always worth its original denomination. A quarter is worth a quarter no matter how old it is or whose picture is on the front. The hard part is assessing the “numismatic” or collector value of the specimen.

 

There are two parameters that come into play when determining the numismatic value of a coin, the rarity of the specimen and the condition of the specimen. The rarer the coin is, generally, the higher the price it can command. Likewise, the better the condition the coin is in the better the price it can realize when sold or auctioned.

 

To get a handle on coin values one of the best online sources is the Professional Coin Grading Service website, or PCGS for short. They have a VERY comprehensive list consisting of each denomination of coin made by the U.S. Mint since the late 18th century, further broken down by year minted, which branch mint struck the coin and a value for each coin.

 

But wait a second! Those values are even further broken down according to the condition of the specimen in question. So let’s say you have a Morgan Dollar minted in 1884 by the San Francisco mint. My god!!! According to the website you have a coin worth HALF A MILLION DOLLARS!

 

Maybe not. Maybe (and much more likely) you have a Morgan Dollar minted in 1884 by the San Francisco mint that is worth 23 dollars. Remember the rarity of the coin is important and the 1884 S Morgan Dollar is not spectacularly rare. So you are wondering why it could be valued at 500,000 dollars.

 

The date and branch mint a coin was pressed in is very easy to determine and does not leave much, if any, room for speculation or second guessing (the 1922 Denver Mint Lincoln Cents a rare exception). What you have is what you have and you can know immediately if it is rare in terms of mintage (1893 S Morgan Dollars) or preserved specimens (1964 Peace Dollars).

 

Coins, as mentioned earlier, are also rated in terms of their condition, i.e. amount of the metal that has been worn away from everyday use. The more use a coin saw in circulation, think of today’s Quarters, the more wear that becomes evident. The curls in the hair of the obverse (front) are worn smooth. The details of the device (image) on the reverse (back) are dulled.

 

Individual coins are graded on a scale of 0 through 70, 0 being the absolute worst condition and 70 being a perfect, flawless sample. As you have probably guessed, there are very few coins that grade an absolute zero. It would be a unrecognizable disk of dull metal if it were. And there are very few coins graded a perfect 70. The tiniest blemish, scratch, or unevenness will knock it out of the flawless category.

 

Most coins fall between 0 and 70. The closer you get to the “0″ side of the Sheldon Scale the closer you get to “melt value” or bullion value (i.e. the value of the metal itself). The fact that it is a coin no longer matters to the collector in terms of price. And as one approaches the perfect “70″ score much higher prices will will be realized since there will be very few coins that are perfectly preserved, especially for over 120 years like our 1884 S example here.

 

The range of descriptive condition names used in numismatics varies from country to country but generally the labels start at POOR then continue on to GOOD - FAIR - FINE - UNCIRCULATED - GEM with differing qualifiers added such as ABOUT GOOD (AG) or EXTRA FINE (XF) or BRILLIANT UNCIRCULATED (BU), etc. And each descriptive grade has a range of Sheldon Grades (0-70 scale) associated with it.

 

The real danger to you wallet begins when we begin to talk about the conditions in the Uncirculated categories (60 through 70 on the Sheldon Scale). By definition those specimens saw zero (or next to zero) action as “coins”, meaning they were never spent. They were either taken from circulation very early or never left the storage bag or roll they were shipped in by the U.S. Mint. It is completely up to the “grader” to determine if the coin is a 60, 61, 63, 65, 67, or even a 70.

 

For determining the Sheldon Grade of coins that saw circulation there are rather specific guidelines for each denomination and for each grade. For example, many coins include the word LIBERTY somewhere in the device. Depending on how much of the word LIBERTY has worn away determines to a large degree what Sheldon Grade to give the coin.

 

In Mint State (MS) coins there are no clearcut telltale signs. The number of contact marks (places where coin touches coin in a mint bag) sometimes determines if a coin is a MS-61 or a MS-63. But how many marks are too many? There might be dozens, even hundreds of tiny contact marks but the coin still be considered a higher grade.

 

In a word, grading Mint State coins is SUBJECTIVE. There are formulas given for grading in the world of “perfect coins”. But ask a numismatist that spends a lot of time looking over high grade coins and he will tell you, “I know in the first 5 seconds what grade I am going to give a particular coin.” Visit the website CoinPeople.com and they have an entire section devoted to “Grade That Coin” where you get to vote on what grade you believe a coin to be. Many times the polls are very close as far as opinions go.

 

To sum all this up, there are really only two factors involved in starting out in coin collecting: the rarity and the condition of your specimen. A good “Red Book Guide to United States Coin Prices” will help cover both of these areas. I can assure you that this will not be the last book you buy on coins but it should be your first. It will give a list of every coin every minted by the United States (and then some), and it will give a summary of the prices you can expect to pay for those coins at a coin shop or auction house.

 

The online resources listed will also be a great help in beginning your interest in coin collecting. You can drop me a note at Coinpeople and tell me what you think.

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The Sheldon scale is a 70 point scale starting at '1' and ending at '70'. There are no coins graded '0' using this scale - it is not a 71 point scale.

 

Rarity and condition are certainly two important factors determining value. Demand is a third and should not be left out. A 1909-S, VDB is a good example. Using mintage as a reasonable indicator of rarity in this case, compare prices at the same condition between the SVDB at a mintage of 484K and, say, an 1879 3 cent piece at a mintage of 38K. In comparable condition, the cent commands multiples of the 3-cent despite the latter having a fraction of the former's rarity.

 

Still a nice post for beginners - makes several good points.

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I have seen some coin "graded" as zero on their 2x2s. Is the zero grade "accepted" as an unofficial designation for very ugly/worn coins?

 

As far as desirability, that fluctuates over time. The twenty cent piece or the half cents recently have shot up in price. That is a bit more ephemeral and subject to correction and the prices will eventually go back down on those issues at some point.

 

But thanks for the correction on the scale... I will make the changes.

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