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The value of a
rare coin, not unlike other collectibles or investments, is determined
in the marketplace by the fundamental factors of supply and demand.
Additionally, value is determined by the condition or quality of the
coin and its rarity.
The supply
of investment quality rare coins that is available in the world
is fixed. Rare coins cannot be manufactured or produced. In fact,
as quality rare coins are placed into permanent collections or are
bought by investors for long term holding periods, the supply of
rare coins that is available to the marketplace acutally decreases
each year.
The demand
for rare coins comes from both collectors and investors. Collectors
generally buy those coins which they wish to acquire as part of
life-long collections, usually without any intent to sell. Investors
generally acquire coins to properly diversify their investment portfolios
and for the security and profit potential they provide.
Because of
the ease of liquidity and increased consumer protection through
independent third party grading, the demand for rare coins has been
rising steadily for the past several years. Not only has this demand
come from the private sector, but also from institutions including
several of the major Wall Street brokerage houses.
The United
States began minting coins for general circulation in 1793. Coins
were minted for two different reasons:
- To be circulated
in the economy as "money" (MS or Mint State), and
- As presentation
pieces or to be sold to collectors at a premium over their face
value (PR or Proof Coins).
Over the years,
the overwhelming majority of these coins were heavily circulated.
In addition, many were damaged, mishandled, melted or otherwise
lost through attrition. The result of this is that only a very small
fraction of the coins that were originally minted exist today in
what could be called investment quality condition. Therefore, the
higher the quality of the coin, the greater its value. Scarcity
also plays an important role in determining a coin's value.
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