Rare U.S. Coins: The Absolute Basics

Unlike bullion coins that derive their value from their metal content, the value of a rare coin is a function of its age, its condition, its limited supply, and the demand coming from millions of collectors. For the rare coin buyer, it is important to deal in coins that are of the proper quality most likely to meet the objectives of a growth portfolio. The basic guidelines for such coins are as follows:

• United Sates Coins Only. Only rare U.S. coins have sold for more than $1 million each -and much more at an auction, and in private sales.

  U.S. coins have historically enjoyed a much broader base of demand than any other coinage. Their appreciation rate has been consistently higher and U.S. coins are typically much more liquid. Rare coin experts estimate that of the six areas comprising numismatics (U.S. coins, foreign coins, ancient coins, currency, tokens, medallions, and numismatic publications) 95% of the activity is based in U.S. coins. U.S. coins are also the only area of rare coins that have prices published on a weekly basis by the Certified Coin Dealer Newsletter and the Coin Dealer Newsletter, and which have a national computerized price network linking many dealers, which operates like the NASDAQ. Further, more U.S. rare coins have been independently certified than any other type of coinage. For example, the NGC grading service in Parsippany, NJ, has graded more than 5 million coins to date, with an estimated value of more than $5 billion. When we are speaking about billions of dollars worth of rare U.S. coins, we are speaking of liquidity. The time to worry about selling your coins is when you are buying them, not years later. LCC is dedicated to helping educate you, as educated buyers make the best customers. Learn as much as you can before spending significant amounts of money. When in doubt, call 1-800-835-6000, fax us at 1-603-429-2095, or email us at info@certifiedcoins.com.

• Pre-1934 Mintage.

  Numismatic experts agree that only about 2% of all the coins minted prior to 1934 in the U.S. are still available on the active coin market today. The U.S. federal government has melted down approximately 95% of all the gold coins it minted prior to 1934 as a result of the confiscation of bullion from U.S. citizens in 1933 by FDR. Silver, copper, and nickel coinage also follow the pre-1934 rule, with the exceptions of the U.S. silver commemorative coinage minted to 1945. Other coins have been destroyed by private industry meltdowns, and many have been lost through normal attrition such as being spent, or used as jewelry. New empirical data, such as the PCGS/NGC Population Reports (how many coins each service graded to date) now support more accurate statistics on survival populations of rare U.S. coins. Prior to 1986, this type of information was not available. Today's investor can be assured of the rarity of his purchase (Remember, it isn't how many coins were minted, but how many have survived in a given grade).

• Mint State 63 or Proof 63 or better condition

  The coin industry uses a 70-point numerical grading scale to define the condition (grade) of a rare coin. Mint State (MS) coins were originally struck for general circulation. Proof (PR) coins were specifically struck for coin collectors. Coins graded MS63, PR63, or higher, are usually recommended for purchase because they traditionally have shown the best rates of appreciation and are more attractive.

• PCGS or NGC certified

  The Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC) are independent, third party grading services that are widely recognized throughout the numismatic community as leaders in the field of rare coin certification. Once graded, the coins are sonically sealed in tamper proof, inert hard plastic holders (commonly called "slabs") to protect the quality of their condition. PCGS or NGC certification is your guarantee of grade and authenticity. PCGS and NGC are the number 1 and 2 ranked grading services in the world today. PCGS has graded more than $8 billion worth of rare coins, while NGC has graded more than $5 billion, for a total estimated value of lab graded coins of $13 billion. Although there are other grading services, experts often recommend that the truly rare coins you purchase by graded by NGC or PCGS because of their nationwide acceptance. This is particularly true for the more expensive coins that you might want to acquire (we often sell less expensive coins graded by ICG, because NGC and PCGS typically charge $16 to grade a silver coin and $25 to grade a gold coin, making these services too expensive to use except for truly rare coins).

It is important to again note that rare coins are not bullion coins. While discussing rare coins, some clients ask "I have some Kruggerands and Maple Leafs. Are those rare coins?" The answer is no. Those are bullion coins. Like gold or silver bullion bars and ingots, the value of bullion coins fluctuates according to the value of their metal content. Bullion coins are simply a convenient medium for trading in bullion. The values are easy to quantify, based on how much bullion (number of ounces) is owned, and most experts agree that they are susceptible to confiscation. Harry Schultz, the "world's highest paid investment consultant" (Guinness Book of Records) at $2400 an hour, recommends that Americans ONLY BUY U.S. COINS.