Law of Supply & Demand

Question:  When do coins become valuable?

Answer:  When the Law of Supply & Demand says so.

Sorry for the terse "Smarty Pants" answer, but that's the explanation in a nutshell.

Ultimately, coin values are based on essentially the same set of rules as any other product bought and sold in the open marketplace. If everyone wants to buy without increasing the available supply, prices go up, but if everyone wants to sell, prices drop. The Law of Supply & Demand reigns supreme, whether it be coins or fuel prices.

The Law of Supply & Demand reigns supreme in coin collecting, though as we shall soon see, the supply side maximum of the equation is mostly static. Image by Dreamstine.

First, let’s take a look at the supply portion of the Law of Supply & Demand and how it relates to coin values. What exactly is the supply? Broadly speaking, the supply of any coin of a specific date and mint mark can be defined as the number of examples available for sale at any point in time. What sets the parameters of availability? Let’s think of a 1796 Draped Bust quarter as an example as we step through the conversation.

The 1796 Draped Bust Small Eagle quarter is rated one of the most desirable coins in U.S. numismatics. The example pictured above is perhaps the finest in existence, grading MS-66 and valued around $2.5 million.⁽¹⁾ Don't fret, you don't need to be prepared to spend $2.5 million to participate in this lesson. Images by Stack's Bowers Galleries.

Mintage is the first indicator to be studied when guessing the available supply of any coin. The mintage of the 1796 Draped Bust quarter was a tiny 6,146 pieces,⁽²⁾ and this sets the upper limit on how many could possibly have existed after 1796.

Survivorship is the most significant modifier to the original mintage figure. In the case of the 1796 quarter, many U.S. gold and silver coins perished in the late 18th and early 19th centuries when bullion profiteers shipped them in great numbers overseas, exploiting imbalances in international precious metals prices.⁽³⁾

There weren’t that many 1796 quarters to begin with, and of that number, quite a few of them ended up in the melting pot, leaving us today with a much smaller group of survivors to scramble for.

Of the 270 million silver dollars melted under the Pittman Act of 1918, most of them were Morgan dollars, like those pictured above. This eliminated nearly half of the 570 million Morgan dollars that had been minted up to that point. More than 95% of the resulting silver bullion was sold to America's World War I ally Great Britain to stabilize finances in the British Empire.⁽⁴⁾ In 1918, that global conflict was called the "Great War" or the "War to End All Wars". Image by Dreamstine.

Condition is critical when considering supply availability. Condition is a numismatic term to express the state of preservation of a coin. The words “condition” and “grade” are used interchangeably in coin collecting jargon.

Coins are very durable, but seldom can collectible coins be found in the new condition they attained in being minted. From the instant a coin is ejected from the dies, it is gouged, handled roughly, and exposed to everyday wear.

Grading is a critical facet of coin collecting. Generally, the available supply of a given coin gets smaller as you proceed higher on the grade scale and often has a major bearing on selling price in the presence of high demand. Image by American Numismatic Association.

As you might expect, the quest for better grade specimens becomes more difficult because the supply generally gets smaller and smaller the higher you go on the grade scale. The degree of deterioration is estimated by the grade assigned to a coin by a collector, dealer, or coin grading service.

There is a numerical grade scale popularized by the American Numismatic Association and extensively used by collectors and coin professionals. Near the low end there is grade About Good (AG-03). At the opposite end we find Uncirculated (MS-60) or Proof (PF-60). The numerical scale ranges from 1 to 70, with 70 being perfect.⁽⁷⁾

Here are three grades along the 70-point scale for the 1796 quarter. AG-03 (AG is abbreviation for About Good) shows very heavy wear with most details worn smooth. VF-35 (Very Fine) shows obvious wear, but many details are visible. AU-58 (Almost Uncirculated) has but the tiniest sign of wear, readily detectable by experienced coin graders. Images by Stack's Bowers Galleries and Heritage Auctions.

It is now time to review the factors creating demand. Collectors comprise the bulk of the demand side of the equation in the rare coin business. If there is no demand, there is no market, and therefore there would be little to no value in rare coins.

As we already know, collectors have been clamoring for rare U.S. coins for generations, some particular dates much more than others.

There would not be as many websites like this one if the demand for rare coins were on the same level as, say, anchovies.

Look at it this way: If anchovies were hugely popular, grocery stores would dedicate more shelf space to this terrible tasting little fish.  Thankfully, rare coins are more welcome at our kitchen tables than anchovies!

What does the anchovy fish have to do with rare coins? Nothing really, but if they were as unpopular as anchovies, there would be little demand for rare coins! Image by Diane Helentjaris on Unsplash.

Around the middle of the 19th century, the collection and study of U.S. coins became fashionable, leading to the founding of the American Numismatic Society in New York City in 1858.  Many view this event as the formal launching pad for United States coin collecting. 

From the get go, many hobbyists enjoyed acquiring an example from every year (and eventually mint mark) in an individual series of United States coins. That strategy remains widely practiced today.  Such a collector who focuses on, let’s say, Mercury dimes, would want a specimen from each mint for every year the Mercury dime was issued, with the goal being to complete the entire set.

Searching for the elusive 1916-D? Mercury dime collectors know the 1916-D is the rarest and toughest date to acquire in the series. My grandma introduced me to Mercury dimes at a very young age and advised me watch out for the 1916-D. For that reason, the 1916-D forever holds a special place in my heart. Image by Dreamstine.

There are a few U.S. coin types that, over time, mainstream numismatic tradition has spotlighted as leaders of the pack. These include, but are not limited to: Indian Head cents, Lincoln cents, Buffalo nickels, Mercury dimes, Standing Liberty quarters, Walking Liberty half dollars, and Morgan silver dollars. Key dates in these groups (i.e., the scarcest of the bunch) experience heavy pressure from the collector class and consistently increase in value at a pace faster than most other collectible coins.

Thus, many 20th century coins with larger supplies carry premiums above their 19th century counterparts with smaller supplies, because more people actively seek the later date coins to round out their coin collector albums. For example, the demand for Lincoln cents in general is heavier than for Coronet large cents, since there are many times more people who are interested in Lincoln cents. A 1914-D Lincoln cent with an original mintage of 1,193,000 commands $150 in Good-4 condition, while an 1821 Coronet large cent in the same condition brings only about $65,^(11)(12) even if only 389,000 were made (suggesting the existing supply of 1821 cents is much smaller).^(13)(14)

Both the 1821 Coronet and 1914-D Lincoln cents pictured above are graded close to Good-04 condition. Although the surviving supply of 1821 cents is most assuredly much smaller than that of the 1914-D, the 1914-D is worth at least twice as much due to a firmer demand from collectors. Note: the photo shows the coins as roughly the same size, but the 1821 is actually 2.25 times bigger (by surface area) than the 1914-D! That’s why we refer to the U.S. pennies of 1793-1857 as LARGE CENTS. Images by Pine Tree Coin and Heritage Auctions.

A large segment of the collector class also has a deep abiding respect for history, and views coins as time travelers of sorts. If only coins had the ability to talk, they could tell us first-hand what it was like during the early years of uncertainty following the ratification of the Constitution. Perhaps we could eavesdrop on an innkeeper from 1812 and sense the trepidation of the young, untested United States facing off against world-class power Great Britain in a military conflict. What must it have been like on the home front during the American Civil War as news of massive battlefield casualties stunned people from all walks of life?

America's story can be heard and literally felt through her coinage.  Every coin from long ago, whether rare and valuable or simply a common date, is an eye witness to history.  Concentrate and let your imagination run... it's almost possible to hear your 1864 Two Cent coin speak... what tales it could tell!

As many thousands of soldiers were dying on the battlefields of the American Civil War, a religious fervor swept the nation as people increasingly turned to God for strength. In 1864, a new two cent piece was issued and bore for the first time ever on a U.S. coin the motto "In God We Trust".⁽¹⁵⁾ The invocation was meant as an appeal to the Almighty as the crises raged on. The photo above shows Father Thomas H. Mooney celebrating a Catholic Mass for the 69th Infantry Regiment of New York State Militia and Irish American soldiers at Fort Cocoran, Arlington Heights, VA. Images by Stack's Bowers Galleries and Library of Congress.

A combination of great historical significance and extreme rarity can indeed create some of the highest values.  Consider the saga of the 1848 CAL. Coronet quarter eagle...

Following the 1848 discovery of gold in California, a very small shipment of newly found gold was sent back east, where it was coined into $2.50 quarter eagles at the Philadelphia Mint.  The letters CAL. were stamped by mint workmen on the reverse of an estimated 1,389 quarter eagles dated 1848, to indicate they were made from California gold.⁽¹⁶⁾  The 1848 CAL. quarter eagle is highly prized by modern day collectors, for its ties to the historical California Gold Rush.

On January 28, 1848, a man named James Marshall noticed something glittering in a stream at Sutter’s Mill, near Coloma, CA. His discovery sparked the California Gold Rush, attracting thousands to the American West. In December, a shipment of 228 ounces of California gold was sent back east, where Philadelphia Mint Director Robert M. Patterson had the letters “CAL.” stamped on the reverse of 1,389 quarter eagles. A brilliant example of the famed coin is pictured above in AU-55 grade, valued at perhaps $85K. ⁽¹⁷⁾ Images by Stack's Bowers Galleries and Library of Congress.

The design of a coin can have a bearing on its demand. Many numismatists seek to acquire a specimen of each design change in part or all of the entire United States coin types. They are called “type set collectors”, and this method of collecting puts pressure on certain designs minted for only a short period of time.

The 1796 Draped Bust quarter again illustrates this point. Aside from its obvious historical significance, it so happens 1796 was the only year the U.S. quarter was minted with a small eagle reverse, making it a one-of-a-kind coin. Type set collectors must compete ferociously with other buyers to acquire an example from the small available supply. The supply is nowhere near sufficient to meet demand which is what makes this coin so valuable.

The 1808 Capped Draped Bust quarter eagle has also earned a similar stardom:

1808 was the only year of issue for the Capped Draped Bust quarter eagle, of which only 2,710 were struck. Thus, if a collector desired an example of all quarter eagle types, the 1808 was the sole representative of the Capped Draped Bust theme. As expected, this coin has an impressive record of price increases over a very long period of time. The superb example above is graded MS-61 and valued at nearly $400,000.⁽¹⁸⁾ Images by Heritage Auctions.

Of the factors creating demand for coins, this is the one with the least amount of collector influence. In today’s environment, values rise and fall for common date 90% silver coinage (i.e. dated 1964 and earlier) mostly in tune with bullion market activity. The numismatic value component of these coins is small and does not fluctuate nearly as dramatically.

Returning for the final time to our 1796 Draped Bust quarter example, the market price of silver has absolutely no direct bearing on the worth of this rare United States coin. But for a heavily worn 1945 Mercury dime, the going rate of silver sure as heck does have a major impact on its retail value.

Worn common date silver coins are often called “junk silver” or “bulk silver”. However, they contain 90% silver and are sold at prices far above face value, so don’t spend them in vending machines! Nearly all 1964 and earlier Washington quarters and Roosevelt dimes fall into this category, as do 1964 Kennedy half dollars and most later-date Mercury dimes. Kennedy half dollars 1965-70 contain 40% silver. The actual value of junk silver coins is largely based on the day-to-day silver price fluctuation. Image by Dreamstine.

Coin collecting has been around since the aristocrats of ancient Rome.  During the Renaissance era of the 15th century, collecting emerged as the “hobby of kings”.⁽²³⁾  In the United States, interest in numismatics came of age in the 1850s to 1870s.⁽²⁴⁾

Through the centuries, the acquisition strategies fueling collector demand have been much the same… until fairly recently.

Now, in the age of modern communication and global networks, a new style of collecting exists that would make Caesar Augustus jealous.  We call it “Registry Sets” and it is creating demand for collectible coins through motives never fathomed previously.

A Registry Set is a collection of PCGS and/or NGC certified coins catalogued in a public online venue.  Collectors can show off their coins while competing against one other for recognition and prizes.

The two best-known coin grading companies, PCGS and NGC, have both built platforms to host Registry Sets.  There is no fee to sign up.

A screenshot from the NGC Registry. This is the gateway to the registered cent sets. As of Aug 2023, there were 12,148 registered cent sets. In July 2021 there were 8,360 registered cent sets. Use these as a benchmark to compare with the number of sets at any future date to get a possible glimpse on Registry Set popularity. Image by NGC Registry.

Here is basically how it works...  Collectors form their coins into sets according to categories specified by the platform.  For example, one category might be “Liberty Head Nickels 1883-1912, Proof Issues”. A collector with Proof Liberty Head nickels can register a set in this category.  There are set categories spanning the entire collecting spectrum, including world coins.  Custom categories are allowed if approved by the registry administrators.

In the NGC Registry, the collector submits a coin that will earn a certain number of points depending on the quality, rarity, and value of the coin. The points are summed for all the coins in the collector's set and then ranked against other sets registered with the category.  The set with the highest point total gets the #1 ranking.

For PCGS Registry sets, the "Weighted Grade Point Average" is calculated and ranked. They take a different approach than NGC, but the fundamentals on how the sets are ranked (quality, rarity, value) are very much the same.

The NGC Registry has a category “Liberty Head Nickels 1883-1912, Proof Issues”. In the screenshot above, the set named “Greenbriar Proof Liberty Nickel Collection” ranks #1 with 132,145 points total. In reviewing the Greenbriar collection, all coins are graded PF-67 or better, many with Cameo attributes. It is hard to imagine a more beautiful collection of Proof Liberty Head nickels. Image by NGC Registry.

There are hundreds of thousands of registered sets and tens of thousands of participating collectors on the registry set platforms.  

Needless to say, the competition to rank the highest is intense.  One way a collector can move up in the point tally is to complete a set of coins with the highest imaginable grades.  The #1 ranked set of Proof Liberty Head nickels shown above is a prime example.

Let's look at another example from a different angle.  The NGC Registry has a category “Standing Liberty Quarters 1916-1930, Circulation Issue”.  To vie for the top spot in this category, many of the “slots” must be filled by certified MS-67 FH coins (learn what "FH" represents, as well as other Qualifiers signify HERE).  If a set owner added one or more MS-68 FH’s, that single grading point difference could catapult the set much higher, perhaps into first place.

This screenshot shows how many points are awarded for certain 1918 Standing Liberty quarters in the higher grades:

The NGC Registry awards a set collector 6,294 points for a 1918 FH Standing Liberty quarter in MS-67 grade. Take a look at what the same coin is worth in MS-68: 10,226 points, for a difference of 3,932 points. In a tightly congested field, an additional 3,932 points could be enough to zoom a set past its closest competitors. Motivated collectors will aggressively pursue the "next higher grade up" to advance in the set rankings. Image by NGC Registry.