Commems Collection: Question & Answer #09 - Impact Of Spot Prices

This one was originally posted on CCF before I joined 11+ years ago, but I've seen versions of it over the years so I thought it merited inclusion in my resurrection list..

Coin Chaser asked:



Note 1: I'm interpreting "Old Commemoratives" as the coins of the classic era (1892-1954).

Note 2: I believe in the old adage, "Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime." So, this post includes a bit more setup and math than some will like, but its all basic math and will enable a person with interest to apply the thinking to other scenarios. (At least I hope so!)

It would be good to begin the discussion with a statement of the weights/amounts of precious metals in each classic-era coin:

Coin                             Weight          Precious Metal Weight

Silver Quarter:                 6.25   grams            5.125  grams
Silver Half Dollar:            12.5    g               10.25   g
Silver Dollar:                 26.73   g               24.05   g
Gold Dollar:                    1.672  g                1.505  g
Gold Quarter Eagle ($10):       4.18   g                3.76   g
Gold Quintuple Eagle ($50):    83.59   g               75.23   g

Note: all coins are 0.900 fine, with the 0.100 balance being copper.

One other reference point: a troy ounce of silver or gold is 31.1035 grams.

The silver coins - quarter, half dollar and dollar - all contain just fractional amounts of a troy ounce of silver (16.477%, 32.954% and 77.322% , respectively). Because of the low weights involved, even significant increases in the spot price of silver do not have huge impacts on the intrinsic value of these classic coins. For example, the intrinsic/melt value of a US commemorative half dollar is $3.617 when silver is at $10 per ounce and $10.851 when silver is $30 an ounce - an intrinsic value increase of $7.234 per coin vs. a silver spot increase of $20.00 per ounce.

Even though the value percentage changes might seem significant, at the low intrinsic dollar values of these coins, most moves in silver spot price have no meaningful impact on the market price of classic US commemorative coins in higher grades. In contrast, a very common, lower grade (XF/AU) silver commemorative coin, such as the 1893 World's Columbian Exposition half dollar, which some dealers sell largely based on bullion levels, will likely be impacted by rising silver prices. But even if silver were to move to $100 per ounce, the change in its intrinsic value is not likely to appreciably effect the price of a Mint State-65 Battle of Antietam half dollar (though some dealers will increase their prices and blame the spot price increase!).

The much higher spot price of gold changes the story a bit.

Gold Dollars weight 4.839% of a troy ounce of gold, the Quarter Eagles weigh 12.089% and the Quintuple Eagles weigh 241.870% (i.e., ~2.42 ounces of gold). Converting to dollar values:

- At $800 an ounce for gold, the bullion value of each coin is: $38.70, $96.76 and $1,934.96, respectively.

- At $1,762 an ounce for gold (price on 8/17/22), the bullion value of each coin is: $85.23, $213.11 and $4,261.75, respectively.

Most dealers I know will reflect these types of intrinsic value increases in their market prices - and likely even add a bit to their overall increase! Even higher grade examples are likely to experience a price increase when gold goes up significantly (I'm not talking about increases of $10-$20-$30 an ounce).

It's fair to say that changes in gold spot prices have more of an impact on the selling price of classic-era gold coins than do fluctuations of silver spot on classic-era silver coins.

Note: weights, percentages and values quoted above are subject to slight rounding differences that do not change the conclusions presented.