Valuable Coins

Whatever the asset or the size of the commitment, investing your money always entails an element of risk and investing in valuable coins is no different. With such a huge variety available at a huge range of prices, it can be difficult to know which is the best choice. In order for you to make the best decisions regarding your investment, then, it is vital that you know exactly what makes a coin valuable.

Different people will be attracted to different types of coin and will therefore value them according to different criteria. Although they can overlap, there are two main groups of coin that people buy- bullion and numismatic.

The buyers of valuable coins can also be split roughly into two groups- investors and collectors. Generally speaking, the former group will be interested in the financial benefits of buying coins and the latter group will view the activity as more of a hobby. Of course, that is not to say that the two groups can’t overlap and many investors will take pleasure in buying coins, while many collectors may view their hobby as one from which they can take long term financial benefits.

The key difference between these two groups is their idea of what makes a coin valuable and the type they choose to purchase. The vast majority of investors will be focused on bullion coins. These are made from precious metals such as gold, silver and, to a lesser extent, platinum, and therefore have an intrinsic value. Investment in bullion coins is often used as a hedge against inflation and economic crisis as investors look to store a part of their wealth in a tangible asset with a high worth. For these individuals, the value of a bullion coin is an objective issue that can be easily calculated by multiplying the weight of its precious metal content with the current value of that particular metal. As investment in bullion is viewed as a money-for-money exchange, investors will want their purchase to be as cost-effective as possible, and are less likely to see cosmetic or other factors as a reason to pay more for a certain coin.

Numismatic Coins

This leads us on to the second type, numismatic coins, whose value is more often based on the sentimental value attached to them by collectors than the intrinsic value of the material from which they are made.

Numismatics is essentially the study and collections of physical currency such as coins and bank notes and is a topic of interest for millions of people across the globe. Coin collectors will often follow their hobby according to a theme such as country, year, or series and will tend to collect coins that have been, or still are in circulation as currency. These will therefore have a nominal face value attributed to them by the issuing government or central bank, but a particularly rare or important coin will cost a collector far more than its monetary value.

For a numismatist, a coin can be valued based on different criteria, and the amount it is worth is based on certain cosmetic aspects such as beauty and condition as well as factors such as rarity and age. For example, a coin in good condition that was issued hundreds of years ago, of which few still exist would now be valued higher than its face and material value, by collectors who wish to own a rare piece of history.

Another good example of this is a 20p coin issued by the Royal Mint in 2008. A batch of these was accidentally produced without the date being struck on the coin. It was not until after these undated 20p pieces had entered circulation that the mistake was realised and members of the public finding them among their change were able to sell them to collectors for huge amounts of money. One was sold on the internet for as much as £7,000, a vastly inflated figure above its material and face value, illustrating the way in which demand based on sentimental interest can lead to astronomical prices for items that are not intrinsically valuable coins.

At BullionByPost, our coins are all made from precious metals and are therefore valued on the basis of their precious metal content. As a result, they will cost only slightly more than the value of the weight of their precious metal content.

Some of them, however, such as proof, rare coins or those marking a special occasion, will also be particularly attractive to numismatists. These are commonly described as being semi-numismatic, as their value is based on their numismatic qualities as well as their precious metal value. While the value of bullion will fluctuate with the spot price, the price of a semi-numismatic one will also be influenced by these other external factors. This means that in a bearish gold market, for example, a semi-numismatic coin such as the 1989 Sovereign is likely to sell for much more than a more common Sovereign.

Some, however, are semi-numismatic by nature, without being particularly rare when they are issued. A 2016 Sovereign, for example, is a common, recently issued bullion coin that is currently available at a low premium. In 30 years’ time, however, they will be much more scarce, as more and more are melted down due to deteriorating condition, and collectors of the future may be willing to pay a significant amount in order to add it to their collection. Buying semi-numismatic coins can be an excellent long term investment, then, as not only are they an excellent store of wealth, but they also have the potential to be worth significantly more in the future.

Some examples of popular semi-numismatic coins are:

Sovereign

Gold Eagle

Investors should be aware that the value added to certain semi-numismatic coins would not be reflected when it comes to selling it to a bullion dealer, who will value it purely on its fine gold content.

There is arguably an additional element of risk when purchasing semi-numismatic coins at large premiums. A numismatist will always pay much more than a bullion dealer as they give it extra value based on certain subjective factors. While there might well be an interested customer willing to pay the inflated price for the sake of their collection, they are not as common as bullion dealers, and you may stand to lose money if you are forced to sell your coin for its material value.