What's the value of my coin?

[Figleaf]

Introduction (may be skipped)

Philosophers and theologists have argued for ages about value. It's still the most asked question of any coin forum, so apparently the correct answer hasn't been found yet. As a financial economist, I can give a partial answer.

Anybody who's studied economics in school knows that price is determined by supply and demand. You may remember the X-like graphs, with price determined at the intersection of the two lines. Forget about them. They don't exist in the real world. The theory only works in very special circumstances, called perfect competition. In all other cases, price is simply what you can get for it. Hang on. I'm going to get clearer.

Current coins
The minimal value of coins that are still in circulation (current coins) is the nominal value, the value indicated on the coin. However, that's true only in the area where the coin circulates. If you have been to Thailand on holidays and you have some coins left, don't expect to get even nominal value. Sometimes you can sell such coins to family or colleagues. More often, you're just stuck with them, unless you happen to you meet a collector who wants them. Even in this case, you often do well to get nominal value. Coins that no longer circulate are trade coins or collector's coins

Trade coins
Trade coins are the only coins that have a market price. Most are gold, some silver. They can be bought in large quantities. Their value consists of two tranches: melt value and a margin for tax and profit. Melt value is the value of the metal obtained minus melting cost. Coins that contain important quantities of other metals have a lower melt value, because the metals need to be separated. Nevertheless, melt value depends largely on metal price. The tax rate is set by the government and the profit margin depends largely on the cost of storage and sale. These elements are pretty fixed, so the bottom line is that the value of trade coins fluctuate with metal value.

Trade coins are a way to speculate in metals in small quantities. However, melting cost, tax and margin make them a relatively inefficient instrument. An extreme speculation in metal is a flight to gold and silver in uncertain economic or political times. When people "keep their gold in their mattress", they usually have trade coins. Well-known examples of gold trade coins are British sovereigns, French 5, 10 and 20 francs pieces, Begian 20 franc pieces, Austrian restrikes and the more recent Dutch 10 guilder pieces. Examples of silver trade coins are 5 franc pieces of France, Belgium and other countries, once adhering to the Latin Monetary Union as well as the "Austrian" Maria-Theresa thaler.

Trade coins become collectors coins when their collecting value rises above their trade value. Examples are the gold ducat of te Netherlands and the silver US trade dollar

Collectors coins
All other coins and numismatic items are collector's coins. They do not have a market price. There are simply not enough transactions in the market (in technical terms: the market is not deep enough). The price can be manipulated or influenced when a treasure is found. That does happen more often than you may think. People who control the sale of a treasure like to keep that quiet and sell the lot in small quantities over a long period. The price of a collector's coin is always what you can get for it. It is set by negotiation.

What can you get for it?
The starting point is catalogue value. KM (Standard Catalog of World Coins by Krause and Mishler quotes catalogue prices for the coins of the last 400+ years. This is not a market price, but an estimate of a large number of contributors all over the world. I don't know how they arrive at their estimates. I am a collaborator and I use a large price data base. Others may use experience.

The point is, a catalogue price is NOT a market price. Real market prices fluctuate every minute. KM sets its prices once a year. The catalog price is only a starting point for the nogotiation.

What idrives the negotiation?
Just like other goods we sell by negotiation (e.g. houses), the most important motives are greed and fear. The seller want the highest price, the buyer wants the lowest price and neither wants the other party to break off the negotiation. Greed and fear are sentiment. That takes us back to the philosophers and theologists of the introduction, because they say value is a sentiment. You will be prepared to pay more for the last missing coin in a series, or one that has eye-appeal, or one you once had but lost. You will pay less for a coin you already have, especially if it is difficult to trade with another collector, you will want a margin if you think the coin may be a fake, you will be resigned to pay a little more when buying from a good dealer who guarantees satisfaction and allows returns.

So you can't say anything about value?
Yes, you can. As long as you keep in mind that what can you get for it may be significantly higher or lower than what the previous and next person got. You can approximate the value of a coin with these steps:

1. Determine type, variant (if necessary), date and Mint. If you have asked for a determination on this forum and someone mentions a catalog number you have determined the type. The other information is to determine the exact line in the catalogue.

2. Determine condition (or grade) to find the column in the catalogue. Condition depends on wear. There are some standard conditions. They are, from almost completely worn to "as new": fair, good, very good, fine, very fine, extremely fine and uncirculated. In the US, the standard conditions are further refined. Classical coins come in less conditions. If you cannot determine condition yourself, post a clear picture on this forum. People will help. However, keep in mind that grading is subjective. People very often don't agree on grade.

3. Find the catalogue price. If you don't have the right catalogue, try your local library.

4. Correct for buyer. As a rule of thumb, count with 50% of catalogue when selling to a professional dealer (more for rare or expensive coins, less for common or hard to move coins), 80% of catalogue when selling to a collector and 100% of catalogue when trading for another coin.

5. Correct for sentiment.

Figleaf

[blackev]

I like your explanation it makes a good introductory Guideline, It seems solid but every theory has its flaws.

-blackev

[blackev]

I think the flaw is in modern coins, sentiment is too large a factor in the price for modern coins.
Although your theory included sentiment, it doesn't go into depth.

-blackev

[tonyclayton]

I would like to add that the Values pages on my website are a good guide as to the current retail value of UK coins from the time of the Civil War (late 1650's) to the present day.

They are kept reasonably up-to-date and follow the guide prices issued by Coin News, the leading British Coin magazine.

See http://www.coins-of-the-uk.co.uk/values

[Prosit]

What is the value of my coin is by far the #1 question asked of me on my web site even though my website has a coins prices page.  It is so prevelant that I have (and still do) given serious consideration about discontinuing my website.  It is always asked by non-collectors and they are invariably deeply disappointed when I tell them that their 100 year old coin is worth 10-20 USD and they can't retire and travel off the procededs from the sale of their coin.

Some very few are even hostile to me about it.

Depressing,
Dale

[Figleaf]

Quite right, Tony. Maybe that's a way to solve the "value" questions for Dale. Just give them a standard text like the one above and a reference to KM's web site. That'll teach them. 

Peter

[Austrokiwi]

A coins value?    When I started collecting it was a big issue for me...............now if I want a particular coin I pay what is affordable and necessary to add the coin to my collection. I have even paid happily for a fake recently for the simple reason that it helped tell more of the story that the other genuine coins I had were a part of.   

I think Peters Figleaf's overview is as good as any I have seen.    I would add only one thing to that overview: for myself, as a collector, a coin only has monetary value at two discrete points in time: The first is when I buy it and the second when I sell it.

[asm]

For most collectors, when they start, they are always looking out for the appriciation of their investments. It is after a while, when he actually starts enjoying the hobby that the importance of prices declines.
I generally look at the price with two points in mind: a) The scarcity of the coin and the importance of that perticular coin in my collection & b) also on the same line - how soon am I likely to come across another piece shoud I let this one slip away. 
I some times pay upto twice face or in some instances even much more for the current Indian commemoratives (my collection is India centric) since I have found that some of them just tend to vanish. If a few years later, the RBI (the central bank) issues the coins in bulk, the prices do drop substantially but in most cases this does not happen.
If some lot of coins of a perticular type which is quite scarce shows up, the prices can drop drastically as it happened in the case of coins of Aurangzeb coins of Hukeri mint.
The prices are determined by the law of demand and supply but for me the value of my coin is the pleasure it gives me and I do not value it monetarily.
Amit

[Salvete]

Everybody who has spoken in this thread is right.  But prices often vary even more than is suggested here.  Suppose you put a coin with catalogue value of $100 into an auction.  The price realised will not even be determined by how many people want it.  Almost everybody has a limit to what they can spend, and if two people want it, but both have 'spent out' for the month, it may fetch only a low price - say $50.  If only one person wants it, it will certainly fetch a low price.  If one person wants it badly, he will out-bid the others and the price will be a little higher - say $60.  If two people want it and both can afford to spend real money, the price will be much higher - say $100 to $200.  Estimates in auctions depend on not only catalogue 'value' but on the cataloguer's knowledge of 'the market' which might be just a few people, and the cataloguer may know what some of the buyers might be able to afford or how badly some of them want the coin offered, and how few or many of that type in that condition are available CURRENTLY to satisfy (or not) the demands of the market, or he may have to guess.  He might be right and he might be wrong.  The value is what somebody is prepared to pay AT THAT TIME and will vary with fashions as well as more down-to-earth reasons like rarity and condition.  In short, there is no answer until the deal is done.  Mostly, we need to bear in mind that, to the collector, condition is everything.  Except ..... Unless .......
  Very few coins are so rare as to be unique.  There is no such thing as 'almost unique' and 'very rare' means different things to different people.  That is why folk are reluctant to directly answer the question 'What is it worth?'  and I can understand and sympathise with the chap above who is frustrated with that question being asked every five minutes on his website.  To us (as ASM stated above) there are much more important questions, but to the owner of a few 'old' coins who would rather have the money than the coins, it is the first thing he wants to know.  If he asks 'What is it worth to you?' he might get a more useful answer.
  I know this isn't very helpful and I apologise, but if 'you' ask a complicated question, you must expect a complicated answer.  The trouble is that 'you' didn't know it was a complicated question. 

Salvete

[Luis]

This is an interesting post and responses. Peter provides a nice rule of thumb about what to expect to make by selling a coin to different types of people.

In my very limited experience, if the demand is high enough, a coin in a high end grade will always sell way above 100% of the catalog price. Right now there's only one dealer on ebay I buy from and their coins always go for 125-150%, generally speaking. Like Peter said, expect a premium if the dealer is reputable.

[asm]

........ If only one person wants it, it will certainly fetch a low price.  If one person wants it badly, he will out-bid the others and the price will be a little higher - say $60.  If two people want it and both can afford to spend real money, the price will be much higher - say $100 to $200.  Estimates in auctions depend on not only catalogue 'value' but on the cataloguer's knowledge of 'the market' which might be just a few people, ................

Salvete

Dear Salvete,

One major point you seemed to have missed out (BTW, I had missed reading your post till now) is the unscrouplous traders. I was witness to an auction od a 5 Kori, Madanasinhji coin at Ahmedabad a few years ago. The catalogue price was (if I remember correctly) Rs 8,000. I bid for it till the price reached 15,000 (the coin would have cost me around 17,000 including vat and commission). A couple of other guys dropped out around the same price leaving 2 bidders who bid upto 40,000+. The coin would have cost the winner about Rs. 45,000. I thought the guy was foolish as the going mnarket rate a year before that was 7,500 and had increased to Rs 15,000 at that time.
I was surprised to receive a phone call the next week offering me the same coin @25,000. I politely declined. Later I was told that the winner was the same guy who had put the coin on auction and the other guy was his friend. At a cost of about 4500 (10% comission and 1% VAT). he had overnight managed to hike the price from 15,000 to 25,000. I also know that he indeed sold the coin @ 22,000.
So how do you value the coin?

Amit

[Salvete]

Hello, Amit,

Yes you are right to mention the cheat and fraudster.  What you experienced is, unfortunately, not unusual.

I have evidence that I cannot share for legal reasons that a certain auction-house in Mumbai is up to the same tricks.  If somebody puts in a very high bid by post, the gentleman concerned or his son organise bids from the floor, enough to ensure that the postal bidder pays as much as he has bid.  In one case a scarce coin sold (to an Indian national postal bidder) for the equivalent of about £200 - his max. bid, and higher than the coin is really worth, and within six weeks I was able to buy TWO of them for about £90 from a dealer in Gwalior, for a friend in central India.  Accomplices in Mumbai and elsewhere include well-known numismatists who are famous for being more interested in money than coins, and who respect nobody.  The last time I knew anything about him, GV of Oswal Antiques was one of very few Mumbai dealers that I would care to trust.  In Delhi, I reckon Goga Jain and Raju Bhatt are among the best.  In Bangalore and Mysore, there is a Cauvery Market dealer who is fair, but the rest, well, I cannot comment.

No, Amit, I have not forgotten the dishonest dealer in all this, but already my post was too long, and I thought it best not to do one of my usual over-long posts.  You are right, of course.  Deal only with those with proven reputations, unless you are certain what you and others would be willing to pay, and don't be 'led by the nose.'  I know that you would not get over-exited at an auction, but just look at 'prices realised' lists to see that too many people have done!

Short of a boycott, I do not know of a likely solution.

Barry

[akona20]

The simple answer is "As much as someone is willing to pay when it is available for purchse".

There are shills and fraudsters in coins just as there are almost everywhere for the unwary and uneducated to fall prey to. Add in, in some cases, fake coins and it makes it doubly difficult.

There are times when I have paid more at auction than the 'going rate' because I wanted a specific piece but those times are very rare.

Education is the key but personal desire can never be controlled by many people.

How much is the coin worth? Well I can offer you today $x. If you don't like it then I am sorry but that is my price today. Tomorrow it might be different but at least i can say I have never taken advantage of a lack of knowledge even by dealers. Now Ebay is different of course.

[UK Decimal +]

Another point that shows up from all that has been said here is that if a grossly inflated price is recorded by one of the coin guide publishers, the 'price' for that coin will become higher than the true 'price' in their next publication.   Then every dealer will up his price.

Working with Tom and George fron SCWC, I am about to start going through the British 'prices' to see how they reflect what I have had to pay for coins recently.   This is another way in which we can help publishers.

Bill.

[Abhay]

Many a times, I have not purchased a coin or set because the price seemed too high. But I find that the price has jumped to almost 10 times within 6 months. (An example is the Proof set of 89th Inter Parliamentary Conference, which I was getting at Rs. 30,000 at Indore auction, but did not buy, thinking it to be too costly. Now the same set is being sold for about Rs. 2,50,000.00 !!!).

So, what I feel is that if you like something, buy it right there. Because it is better to repent once for buying it at high price, rather to repent for your whole life for not buying it when it was cheap.

Abhay