Portfolio Diversification

Why have rare coin prices increased so much?

The supply of rare coins is absolutely finite. They're not making them anymore. For example: A $20 gold piece called the Saint Gaudens Double Eagle was produced by our government at the Philadelphia Mint in 1926 and has a documented mintage of 816,750. Once those coins were struck, the original die was destroyed so that no more would ever be minted. Indeed even our government is prohibited from restriking coins once the year has ended.

Because most of the coins were melted or spent, the mintage suffered heavy attrition, and few investment quality (uncirculated or proof) specimens are obtainable while collectors and investors eagerly seek them.

When our government made it mandatory that all gold be confiscated in March of 1933, many beautiful gold numismatic coins were melted down (and stored in Fort Knox), leaving very few uncirculated specimens available for collecting and investing purposes. In addition, the supply of uncirculated rare coins is diminishing due to collectors who take coins off the marketplace for an average of 12-18 years. Many rare coins are held long term in trusts, retirement plans, and pensions as well.

Since it is estimated that 95% of the original fixed mintages have suffered attrition, meltdown, collector pressure, and hoarding, there is a very small and diminishing supply of rare coins which are investment quality. Statistically, it is the high quality uncirculated and proof coins which have performed very well for many years, and will continue to do so because of increasing demand from investors who constantly see the value of their dollars decline due to inflation and taxation.

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Rare Coin Pyramid

The illustration above graphically depicts the supply of all coinage. At the base of the pyramid you can see that the availability of circulated (junk) coinage is high. As your eye travels towards the top of the pyramid, it becomes quite clear that the population and availability of high quality (rare) coins radically diminishes. By the way, there are no MS-70 "perfect" coins.

What about demand?

The graph below shows how the demand for rare coins has grown exponentially through the years.

Number of Collectors

In summary, there is a documented, finite, and ever diminishing supply of investment quality rare coins with an ever increasing demand for those same coins.