How to Value Coins and Coin Metals and Useful Resources

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How to Value Coins and Coin Metals

When talking about gold, what the heck is a karat anyway?

This can be quite confusing, since we talk about carats with diamonds as well — and those carats refer to weight.

Gold karats (spelled “carats” outside the U.S.) don’t refer to weight.

Indeed, for arcane reasons we don’t need to worry about, gold karats refer to the ratio of gold to other metals in an object.

Specifically, what fraction out of 24 is gold.

So a piece of metal that’s 9k (nine karats) is 9/24 gold and 15/24 is other metals (often copper).

That’s equivalent to 37.5% gold (nine divided by 24).

Incidentally, a 9-karat hunk of metal isn’t considered gold, by U.S. standards. Ten karats (10/24) is the minimum ratio to be considered gold (and that’s still less than half gold).

The purest gold you can get is 24 karat — because it’s 24/24 gold. In practical terms, you can only claim that 24-karat gold is 99.9% pure (often noted as 0.999 on gold bars, using a slightly different measuring system).

That’s why the seemingly random number, 24-karat gold, is the... ahem… gold standard.

Now that we’ve got that piece of trivia out of the way, the important thing to note for coins is you only want coins that are a minimum of 22k.

Many collectors and investors will only grab the purest 24k gold coins. But — with gold being a very soft, malleable metal — 24k coins are very easy to scuff or damage

Which is why some collectors prefer 22k coins. They are 91.7% gold, which is high enough gold content to matter. But they have just enough hardier metal in them to make them sturdier coins, much harder to damage.

Whether you want 22k or 24k coins is more a matter of choice — both are fine as collectibles and investments.

Silver, of course, has an entirely different grading system.

There are a number of grades on the spectrum, but the most important ones to remember are:

• Fine silver — 99.9% silver, the equivalent of 24-karat gold
• Sterling silver — 92.5% silver, with the rest of the composition made up of other metals, usually copper
• Coin silver — 90% silver, the most common ratio used in coins.

In the U.S. silver coins have usually had to contain at least 90% silver. Foreign coins sometimes contain as little as 75% silver.

All things being equal, you want to focus on coins with higher silver content.

However, with numismatics — the practice of collecting coins — things usually are not equal.

For instance, nickels produced between 1942 and 1945 are often called “silver nickels,” because nickel was an important metal for the war effort, so these nickels are actually 35% silver.

While that’s not a high silver content, the unusual circumstances surrounding these coins — when nickel was temporarily more valuable than silver — make them highly desirable and collectable.

 

Likewise, the Kennedy silver half dollars minted between 1965 and 1970 are very sought after, even though they are only 40% silver.

n other words, knowing the precious metal percentages is important — especially in bullion coins — but it’s not the only thing.

When it comes to numismatic coins — those mostly of interest to collectors and investors — other factors will often override metal percentages.

There are other minutiae involving precious metal weights and values — like troy ounces (which are 31.1 grams, instead of the 28.3 grams of the regular ounce).

That’s important only because some less scrupulous dealers sometimes try to overvalue their goods by listing them in regular ounces instead of troy ounces, to overstate their weight.

Watch out for that.

Otherwise, most of the peculiarities of weight and other measurements make for interesting trivia but won’t greatly affect the value of your coins.

Now that you’ve got the metal basics down, it’s time to dive into one of the more important aspects of coins.

The grading system.

Here we’ll address the U.S. grading system — the most exact and widely used. Especially when dealing with “modern” coins (meaning those produced circa 1800 or later).

Before we even begin, you have to know that numismatic coins are separated into three categories:

• Mint or uncirculated (MS) coins. These are coins that never went out into the world. As a general rule, uncirculated coins will almost always be in great shape

• About Uncirculated (AU) coins. These are coins that did go into circulation or were otherwise handled in some way. They often show signs of wear. However, the wear is so miniscule that these coins are in near-mint condition

• Circulated coins. These are the most common types of coins — those which served their original purpose out in the world. The conditions of circulated coins obviously can vary wildly. And their values can vary wildly as well.

As an investor, you will generally want to focus on MS and AU coins. There are some circulated coins that are worth owning as well, but consider them on a case-by-case basis.

Investment-grade, numismatic coins are graded on a scale from 1–70.

As a general rule, you should only be interested in mint, or uncirculated, coins, graded MS-65 and up and exceptional AU coins.

An MS-70 is a perfect coin. There are no nicks, no blemishes, the luster is ideal, it has a sharp strike (which means the coin is minted perfectly, with no problems in the imprinted illustrations). This coin looks like it just came out of the mint.

An MS-65 coin — as low as you want to go for mint coins — will have excellent (but not perfect) luster. It can have a few small scattered contact marks or two larger contact marks (but not both). It can have one or two patches of hairlines — only visible under magnification. And the high points of the design can have some minor scuffs.

AU — About Uncirculated — can go no higher than a 58 grade. But a 58 grade is exceptional — it means the coin will have nearly full luster, which is extremely rare in a coin that’s been in circulation. It will have no large contact marks and only the barest signs of wear at the highest points of the design.

An AU-58 will often look better than coins graded above it. The only reason it isn’t graded higher is that it has been handled in some fashion… though it has almost never been in full-fledged circulation.

Finally, regular circulated coins make up the majority of coins out there. And — with few exceptions — you should ignore them as investments.

The exceptions are important. Ancient coins — by which we mean coins aged in millennia — are often only available as circulated. And the finest examples can fetch high prices, even if they’re fairly far down on the grade scale.

Coins that have unusual stories attached to them can also have a lot of value even if they’re in less-than-ideal shape — like coins rescued from famous shipwrecks.

But you shouldn’t spend a lot of time thinking about them. Instead — unless there is a particular coin you want to add to your portfolio — focus on coins in mint and AU conditions. There are fewer paths to mistakes or trouble that way.  

Unconventionally yours,

Ryan Cole
Editor-in-chief, Unconventional Wealth

NOTE:  Decades ago I got a divorce & she got all the "prizes" from our marriage.  I left with only my computer and clothes...the one thing that saved my bacon was having a stash of gold and silver coins.  Selling them allowed me some breathing space as my business had been sold that year and the buyer never paid me [I lost about $500K that year]...

 

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