Determining the "Value" of Coins

As anyone who has taken a course in Economics 101 knows, the Law of Supply and Demand prevails in the free market. In the early days of the US, the government tried to be fair by ensuring that there was one dollar's worth of silver in a Silver Dollar, and a commensurate amount in coins of other denominations. Other factors made that a challenge, however such as the populace's hoarding silver during lean times such as the Civil War, and the declining price of silver because of rich lodes being discovered after the war. Changes were slower back then, though, and could only happen as fast as horses-and-riders could carry the news.

Today, with our modern technology, prices fluctuate every minute, up and down like a child's yo-yo. Prices trend upwards, then back down again, based on complex inputs from all the various world markets and current events over the globe. Fortunately, the prices of most collectible coins are not quite so volatile as other commodities, but it can still be a challenge to peg values exactly. Hopefully, this article will help readers to navigate some of the confusion.

In order to determine any coin's value, we should look at three different categories:

• The "Face Value" of a coin is the denomination that is stamped on the coin, and is what the issuing government says it is worth as legal tender.
• The "Melt Value" of a coin is the value of the metals in the coin on the open market. This price fluctuates with the market over time.
• The "Collector Value" of a coin is what price the coin might bring if it were sold to someone who collects that particular type of coin. This value can be quite subjective based on the rarity of the coin, oddities during minting, sentimental reasons, etc. Just as fiat money only has value because the governments say it does, collectible coins sometimes only have great value because the collectors say it is so.

  As an example, 2,050,000 dimes were struck in 1894 at US Mints in Philadelphia and New Orleans. That same year, the San Francisco Mint struck 24 dimes.^[1] So, because of that rarity, the coins bearing the "S" mint mark are incredibly valuable. But, are those dimes really "worth" more, in the grand scheme of the universe...? No. They contain no more silver than other dimes of the era, and President Grover Cleveland, himself, did not turn the wheel of the press. But, collectors insist they are "valuable" because of the rarity of the letter "S" on dimes of that year, so they command a greater price.

  
  
  Now that the definitions and preliminaries are out of the way, let's break-down the three different values of a couple of coins. First, let's examine the "value" of the NEPAL 1 PAISA coin which I previously posted in my blog. Afterwards, we will examine the various "values" of one of the most iconic US coins, the Morgan Silver Dollar.

  The same techniques are applicable to all coins that were minted as legal tender by a government as well as non-coin "bullion" rounds that are minted for investment purposes. The only difference is that bullion does not carry a true "face value," even though such may be imprinted for decorative and commemorative purposes.

  🔸 Face Value

  The Nepalese Rupee (NPR) is the official currency issued by the Federal Democratic Republic of Nepal. The Paisa is a unit equal to 1/100^th of a Nepalese Rupee, just as 100 US pennies equals the US Dollar. One NPR is only valued at current exchange rates to 0.0085100 USD.

  From the above information, 1 Paisa = (0.0085100 / 100) = $0.000085100 and it would require 118 of them to equal USD $0.01, a single US Penny! 😮

  🔸 Melt Value

  At the time of this writing, the "melt value" of brass is approximately USD $1.67 per pound. This coin weighs 1.45 grams, which equates to 0.0031967 pounds (avoirdupois). Therefore, the brass in this coin, if melted down, would be worth USD $0.005338489 on the open market, just half a penny.

  Some folks who collect coins or deal with the exchange of precious metals refer to the Melt Value as "Spot Value." An online search for the etymology of the term yielded no concrete results, so I will offer my own guess as to how that term might have originated. The price of precious metals fluctuates constantly, up one minute, down the next, up again the third. So, if you hold something in your hand that you can trade immediately — i.e., "on the spot" — then your piece has a certain "spot value" which could change at any time, up or down.

  🔸 Collector Value

  The Numismatic Guaranty Corporation (NGC), a third-party appraiser of coin values, provides the following information regarding the possible value of the 1965 NEPAL 1 PAISA coin to a collector:

  
  ^{SOURCE: NGCcoin.com}

  Depending on whether the coin would be graded as Fine (F), Very Fine (VF), Extra Fine (XF), or Mint State (MS) is an important consideration for the value of any collectible coin. I have never been trained in assaying the grade of coins, but would guess that mine is either in the (F) or (VF) categories, so it would be worth USD $0.10 to USD $0.20 today, which is considerably more than the Face Value and Melt Value!

  

  Another Example

  
  As for the other aforementioned example, consider the Morgan Silver Dollar which was minted 1878 to 1904, and again in 1921. I am fortunate to have a lovely 1885 Morgan Silver Dollar in my collection.
  • FACE VALUE: The imprinted denomination on the coin is "one dollar," so if one chose to spend this money in a store 😮 it would be worth one US dollar only.
  • MELT VALUE: According to SilverPrice.org, the price of one Troy Ounce of silver is currently trading at USD $14.49 at the time of this writing. Each Morgan Silver Dollar is comprised of 90% silver, so the "melt value" of the silver in the coin is USD $11.24 or so.
  • COLLECTOR VALUE: To a collector of coins, the Morgan Silver Dollar is worth much more than either its Face Value or Melt Value, as it is an antique, a piece of US history, and a genuine piece of art. All of those things add value far beyond the mere Melt Value of the silver which the coin contains. Other factors come into play, too, such as the year the coin was minted, where the coin was minted, how many of the coins were minted, the condition of the coins, and so forth.

    Determining the condition of coins is largely dependent on whether the coins were ever in circulation to the general public or not. For coins that were in circulation at some point, a determination is made as to how much the coin was "worn down" from daily use or damaged in other ways by handling (scratches, chips, bent edges, etc.). During this process, the coins are "graded" according to a 70-point system. Coins can be graded as in Poor (P) condition, Almost-good (AG), Good (G), Fine (F), Very Fine (VF), Extra-Fine (XF), or Mint State (MS). Even with those categories, sub-categories can exist; for example, a "Mint State" coin can be graded as MS60, MS63, MS65, and so forth.

    As mentioned previously, the Numismatic Guaranty Corporation (NGC) is one of several third-party entities which exist to provide fair, non-biased opinions on the value of coins. For my own 1885 Morgan Silver Dollar, here are the values listed by the NGC:

    
    ^{• SOURCE: NGCcoin.com •}

    My Morgan falls into the Extra-Fine (XF) category, so it would be worth USD $33 on the open market. That is quite a bit more than the $1 Face Value and $11.24 Melt Value! It is amazing to me that such a coin in perfect "Mint State" might command $22,500 on the market! 😵

    I hope you enjoyed this little walk down Coin Value alley, and hopefully everyone learned something, as I did while writing this article!

     😊

    SOURCES
       ¹ CoinCollectingGuideForBeginners.com: Mint Marks on Coins
       ¹ Wikipedia: Coin Grading

    

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