What Determines the Price for Rare Coins?


People often wonder why certain coins are so expensive and others are worth very little at all. Is there any rhyme or reason for this and can coin collectors in Grand Rapids and elsewhere predict at what prices specific coins will sell or auction for?

The answer is yes – and no. Like most everything in our economy, price is determined by supply and demand. This is a basic principle of economics. If there is an oversupply of bananas at the store, the store will lower the price in order to get rid of its inventory. In the case of bananas, the price will lower faster because of the short shelf life of the produce, but price can drop (or rise) suddenly for non-perishable goods like coins as well.

Let’s look at the first factor, supply. We’ve discussed how increased mining of silver in the American West resulted in a sharp drop of its price when we talked about the Morgan dollar. The financial panic of 1893 (which was brought about by a run on the United States’ supply of gold by bond holders) led to the repeal of the Sherman Act. As a result far fewer silver Morgan dollars were produced in the 1890s, and the Mint stopped producing them entirely in 1904.

At this point in time, the Morgan dollar was not very valuable at all. There were too many of them. It had face value, but not collectible value. After the Pittman Act of 1918, however, nearly half of all the silver coins the U.S. mint had produced were melted down to supply Great Britain with the silver bullion necessary to prevent a run on banks in India. This greatly reduced the supply of Morgan dollars in circulation, of course, although the exact number destroyed is unknown. More were produced in 1921, but this coin was quickly superseded by the Peace dollar. A fraction of the destroyed Morgan dollars were replaced.

Over time, the remaining Morgan dollars in circulation got lost or degraded, while the population of the United States and active coin collectors with income to spend grew larger. Eventually these coins also became historic which increased demand as well. Now instead of having more pristine Morgan dollars than anyone knew what to do with, there were collectors clambering for the few that had survived the aftermath of the Pittman Act and the intervening years. This made each coin that remained more valuable.

Can coin collectors predict what a particular coin will sell for? Well, that is what coin buyers and sellers do every day when they list coins. They factor in what they know about a coin’s availability, its condition, and what the market for that coin is at present, and determine what price to set. Of course, there are factors that can increase demand that are sometimes hard to predict. As consumers we see demand spike inexplicably every Christmas when one toy becomes the gift kids have to have. Invariably some people see an opportunity and will buy up an inventory of that toy, then resell it for more money because greater demand + limited supply = higher price.

If you have any questions about what your coins may be worth on today’s market or what a coin you’d like to acquire might cost, Grand Rapids Coins would be glad to help you. It’s our job to know coins and know the fluctuations of supply and demand in that market, and we love connecting coins with collectors.

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