By Harvey Stack – Founder, Stack’s Bowers….
Every hobby has rarities. In this way collecting coins is no different than collecting stamps, artifacts, paintings, trading cards or anything else.
In the early days of the United States politicians, ambassadors and wealthy individuals in America started collecting coins for education and pleasure. People like the famous Adams Family who traveled to Europe extensively on diplomatic ventures brought home with them various coins of other nations and saved them. As shown by the early United States coins sold in 1964 as part of the Lord St. Oswald Collection in London, visitors to America sometimes did the same in reverse.
As wealth grew in the United States, and time was available to some, the search for different coins and dates became more of a hobby. At first the number of collectors of American coins was quite limited, but toward the middle of the 19th century numismatics began to have much broader appeal. This is often traced to the changeover from copper large cents to small size cents that happened in 1857. This new coinage fostered a sense of nostalgia for the “old days” and the old coins and many searched for examples. By this time the designs of United States coins had changed a few times making older coins more interesting and desirable.
As the country grew, new United States mints opened, such as those in Charlotte, Dahlonega, New Orleans, San Francisco and Carson City. The search grew as there were more possible coins to seek for a collection. Interest flourished and the U.S. Mint in Philadelphia struck special coins for collectors that they called “specimen strikings.” At first this was done on a more casual basis, but eventually “Proof” mintages became an important part of the Mint’s business. These could be purchased or “traded for,” and the Mint Cabinet came into existence, causing the Mint itself to become a collector. Coins even found their way into diplomatic circles, as they were used as gifts to officials of foreign governments. These beautiful, superbly struck examples also became symbols of how the United States had advanced technologically.
So early U.S. coins were mainly a method of exchange to replace barter, foreign coins and other means of trade. They became an important part of daily commerce, as they still are today. But for some people, coins became much more and this is where rarity gains importance, as for collectors, coins ceased to be a means to an end, and instead became the end itself.
Because of their use in trade, many coins were made of precious metal such as gold and silver. The production of each coin was limited to how much precious metal arrived at the first Mint and, in some cases, the desires of the person depositing that metal. This situation led to many rarities in early United States coinage. The use of gold and silver coins in international commerce also resulted in some of these coins becoming scarce. Adding to this was the fluctuating balance (or imbalance) of value between gold and silver that could lead to coins being melted for bullion.
Likewise measures used at the Mint to contain costs such as reusing dies and striking over already used planchets created unusual and often rare varieties. Record keeping at the time could be imprecise, and rarities were not necessarily recognized until much later when collectors realized how difficult some issues were to find in daily change. Also, some coins were used and reused, became badly worn, went with the pioneers to distant places or for some other reason were lost and not saved. These factors can affect the rarity of any given date, denomination or mintmark.
Coins are also subject to supply and demand. If the supply of something is small to almost non-existent, even moderate demand causes a shortage. Desire for a certain item (in this case a coin) that has a limited quantity causes the price to go up, as there are not enough to go around. If a greater supply suddenly appears the price could drop, and if demand grows the value goes up. In this way, rarity and value go hand in hand. For a collector, understanding these factors might require a market search, considering economic and population reports, a grasp of the actual demand in the market place, and the desire of buyers at any given time.
One illustration of how supply and demand affect the value of a coin can be seen in the case of the 1903-O Morgan silver dollar. Although almost 4.5 million silver dollars were struck in New Orleans in 1903, by the mid-20th century, the 1903-O was considered to be the most difficult of all 1878-1921 era silver dollars to locate in high grades and only a handful of Mint State examples were known.
In the 1962 edition of the Guide Book, the 1903-O Morgan dollar was listed at $1,500 in Uncirculated condition. In October of that year a few new Mint State examples had come on the market from Federal Reserve holdings, along with examples of some other rare Morgan dollars. It seems that in 1903 when these coins were struck in New Orleans there was no need for them in commerce so they were stored in vaults, with very few ever finding their way into commerce or collectors’ hands. The Treasury eventually released millions of stored silver dollars in the 1960s, including large quantities of 1903-O. Naturally, as the supply of coins went up demand was more easily met and the price dropped dramatically. In this case a coin only seemed rare because collectors did not have all the facts; in truth the 1903-O ended up being much more available than many other Morgan dollar issues.
Coin rarities happen in different ways. In some cases the Mint issues only a small number of a given coin. If the number coined is limited by precious metal supply at the time, sometimes the coins are hoarded. If the bullion value of the precious metal in the coin increases, they are sometimes melted instead of spent. Hoarding of precious metal coins for their bullion value can also be the result of dire economic events, war, or other situation that makes people distrust paper currency or non-precious metal coins.
Sometimes hoarding leads to more hoarding. When collectors hear that the “supply is limited,” often they join the rush in order to purchase rarities while they can. The value of a given coin can go up and up, once again reflecting an increase in demand unaccompanied by an increase in supply. This trend can continue upward in the case of a true rarity, but sometimes results in a “bust” if the buildup is just hype or if some other factor changes (as in the case of the 1903-O silver dollar above).
In the early days of American numismatics, some collectors were able to get special strikings or Proofs from the Mint. This was before the days of official Proof sets that were sold to collectors. These early Proofs were made in small numbers, with mintages not recorded. Thus their rarity was pretty much a given. Later, when the Mint made Proof coins and sets as part of “regular business,” mintages fluctuated, based on anticipated demand, but actual long-term availability was often a result of collector interest at the time. So a small Proof mintage might result in a “less rare” coin than a larger mintage that saw little demand. Because of this, mintage size is not the only thing that affects rarity.
As coin collecting became more popular, demand grew for many items, thus increasing their rarity. In the same way a larger number of collectors could mean that more current coins (both Proofs and circulation strike) were saved. The more affluent a collector was, the more scarce and rare coins he could acquire and these collectors preserved the coins to be passed to a later collection and so on. However, the number of collectors kept increasing, so value increased. This basic economic happening was true for many kinds of collectible, not just coins.
Among coins made for circulation, mintages were often based on the needs of commerce. In some cases the needs of commerce varied in different parts of the country, affecting the quantities made in the various branch mints around the country. Sometimes coins from one mint would become worn through use, while the coins from another mint might go into storage and remain pristine. Some mints were eventually closed, limiting the availability of coins with a given mintmark. This could lead to specialization in coins from a certain mint, adding to the demand.
All these things affect rarity and sometimes it is a complicated equation. Next time I will discuss the fact that you cannot “make a rarity.”