Personal Finance

Four Factors That Determine the Value of a Coin

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Last updated on July 23, 2019 Comments: 10

I recently wrote about some changes coming to the presidential dollar series released into circulation by the U.S. Mint. Jeremy asked:

My wife and I received two fancy rolls of uncirculated coins of a 2007 series in a plastic display case as a gift this Christmas. For now they are just going to sit in the safe deposit box at the bank, but I wonder if they will ever have some sort of added value. Flexo, do you think these will ever have any sort of collector’s value (baring mistakes, die errors, etc)?

Collecting coins is fun, if you’re into that sort of thing, as I am once in a while. I don’t do it for the money, though. In most cases, trying to make money with a coin collection is speculation worse than day trading. Think about when you used to collect baseball cards. Chances are that if you did, you were doing so at the same time I was, in the late 1980s. Everyone was collecting cards at that point, or so it seemed. Supply was through the roof, and then when baseball started losing favor with Americans, demand dropped. So much for the value of late 1980s baseball cards.

Coins are similar. To answer Jeremy’s question, you’d have to take into account four main considerations that go into the “value” of a coin at any moment. If you want to see what the market is supporting, check recent successful eBay sales. But why is a 1955 cent worth more than $47,000 while an 1815 quarter dollar only $95?

Factor 1: Condition

1878 Morgan Silver DollarThere are two major components of condition, and the first is pre-circulation. Everything that happens to the coin while at the mint, including the way the design is struck on the planchet and marks left by other coins during transportation, plays a part in determining the condition of the coin. If the coin is circulated, then wear and tear plays a roll.

Several companies take the guesswork out of rating the condition of the coin, for a fee. They will grade the coin on a scale of 1 to 70, with 70 being practically perfect, and place the graded coin in a display holder that will hopefully prevent any future damage. The better the condition, the higher the value.

Factor 2: Rarity

Most modern coins will never be rare. These days, there are many collectors and the mint produces many items of each type of coin being produced every year. If you’re collecting coins for investment potential, modern coins are not good bets, unless you have a true rarity such as an error coin. That being said, a coin’s old age doesn’t correlate to rarity. Some older coins are more common that recent pieces. The higher a coin’s rarity, the higher the value.

Factor 3: Bullion value

Coins are generally composed of at least one type of metal, and that metal has a market value. For example, silver is currently $15.35 an ounce and copper is currently $3.1608 a pound as I write this article. A 1960 quarter dollar was composed of 90% silver and 10% copper. Multiply the price by the weight of each metal in the quarter, and you’ll find that the bullion or melt value of a 1960 quarter is $2.7804. For the most part, you should be able to sell a coin for at least the bullion value. Coinflation will tell you the metal content of U.S. coins and give you bullion values based on the latest market prices for the composition metals.

Factor 4: Demand

Ah, demand. Without demand, coins would fetch only their face value. That same 1960 quarter could only be used in financial transactions and would be worth no more than $0.25. Demand for various coins ebbs and flows as tastes change.

I can’t predict whether any particular coin will be in demand in the future. It’s likely that most modern coins won’t be hot among collectors thanks to their overabundance. But the coming changes to the edge of the coin may make the earlier series more desirable. Unfortunately, many of the early presidential dollar coins didn’t leave the Mint without unattractive damage. (See the first consideration of “condition.”)

The coins that Jeremy has are uncirculated, which means they may be in better condition than average. The best bet might be proof coins, which go through a special process to ensure that they remain in excellent condition throughout the minting and packaging process. Proof coins look much different — shinier and stronger — than circulated (“business strike”) and other uncirculated coins. If any coins have the ability to increase in value, it’s the rarer proof versions of these coins.

On the other hand, proof coins are hoarded among collectors. Secondary demand (after the initial demand during production, when collectors can buy directly from the Mint) will remain low for a while.

Rather than worrying about these factors, it’s much more enjoyable to collect for fun. If you want to put a value on your collection, check out from a library the 2008 Guide Book of United States Coins, also known as the “Red Book.” Another good source of coin values for those who prefer to do their research online rather than the library is the PCGS Price Guide.

Article comments

Anonymous says:

Either of you have a 1995-W PF 70 American Silver Eagle (SAE), you’d be willing to let me have at face value (1 USD), or bullion price (1 oz .999 fine silver)?
Rarity in the coin world is actually on the supply side of economics. What the mint provided (in the case of 1995-W SAE, only 30,125 were minted. Relatively rare in light of millions minted in other years of the SAE series). Subtract from that the number returned to the mint and melted down. (None that I’m aware of in the 1995-W SAE) = Rarity.
Demand stems from those collectors that would like one in a given condition. Since only ONE has been graded at what is perfect condition, PF70 (by a reputable company), several thousand collectors would like to own it. And it is valued at $5,000. (A Guide Book Of United States Coins, 2008 edition)

So, Flexo accurately represented condition and rarity in the first 2 positions. (Although I think they should be reversed.)

To Jeremy and “Two Nickels” I would say collect whatever coins appeal to you. Get them straight from the mint, where they’re typically cheaper. ( That’s how I started my modest collection. An investment of about $3,000 over 6 years and my collection is now worth over $9,000. Not a great return on my investment. BUT I have fun with it; and I can always sell them for bullion. 🙂 — Mike

Luke Landes says:

Don K: Thanks for that catch. I’ve adjusted the article above.

Anonymous says:

The Spot Price of copper, referenced above, should be per POUND not ounce.

Anonymous says:

It’s just like a stock, the most important factor is demand. Sure, if you ask a stockbroker, they will give you reasons for a security’s price that include its EPS, dividend growth, P/E ratio, and book value, among many other valuation tools. In the end, though, the stock’s value is merely what the next buyer is willing to pay for it. Think of the Dutch Tulip Bulb Mania of the 1600s. In one month, the price of tulip bulbs went up twenty-fold to over $76,000. Then in six weeks, prices fell to below $1. Before, after, and all along, tulip bulbs were rare, and in various conditions ranging from poor to perfect. Demand is what determined the tulips value, and demand is what determines the values of stocks and coins today.

Anonymous says:

I did mention that if the coin is legal tender that it is then only worth its denomination. It should be noted that bullion value is not the same value as melting down the coin. bullion value considers 100% (well nothing is 100%, it’s more like 9’s), of which most coins are not. If you melted the coin down, then you would get scrap value (and still would have to include the cost of separating metals), which is far below bullion and below the coin’s denomination value. so you are correct, I omitted the scrap value.

Flexo: all four factors affect the demand for the coin. If there is no demand (i.e. no body wants to buy it), then the coin is only worth its face value. the rarity and condition and bullion value increases the demand for a finite item, which increases the “value” or amount someone is willing to buy the coin (i.e. demand). I think it is more tomato and tomato, but i see the other variables affecting demand driving the price, rather than all as independent variables.

Luke Landes says:

It can certainly be argued that the four factors listed above (where demand above refers to the popularity of a certain series or to coin collecting in general) influence demand (the broader economic concept), but if you ask someone why a coin fetches a certain price rather than a certain other price, it’s not enough to say, “demand.” All four aspects are factors because a change in any one factor could affect the price the market is willing to pay.

Dan: thanks for mentioning the currency/face value. Even the most undesirable collector’s item, as long as it’s a coin meant for circulation, can be used in transactions at its face value.

Anonymous says:

There are only 3 factors:

1. Currency value
2. Bullion value
3. Demand (condition and rarity impact demand)

I almost agree with Tim, but he missed an important point. Even with absolutely no demand, the coin can be used as currency or melted and sold as a metal. Therefore, demand cannot be the only factor.

As to condition and rarity, even a mint condition, one of a kind coin that is only worth its currency or bullion value without demand.

Anonymous says:

I disagree here. The only thing that matters is demand, because if it is legal tender then it is simply only worth its denomination. The other variables go into its demand desirability.

Anonymous says:

Thanks for answering my question in greater detail. Collecting coins is something I’ve considered getting into, and maybe these coins I received as a gift will be a good start.

Anonymous says:

I started off trying to collect various older coins through auctions (real auctions, not ebay), but some of the more ‘experienced’ collectors always outbid me and it wasn’t worth the time (to me). So, I just started ordering proof sets directly through the U.S. Mint – I get them when they’re released, stick them in a safe, and check their value once a year or so just to see if they’ve gone up any. I like it.