Seven Ways To Avoid Losing Money In The Rare Coin Market

ANA - Recently we've met with a few individuals who were the heirs of estate coin and currency collections only to find that many of the items had little to no value. This can be a hard pill to swallow; especially when many of the items included invoices from the purchasing company that would indicate otherwise. If the individuals purchasing these items were doing so strictly as a hobby, with no intent of selling the coins at profit in the future, that's one thing. However, we have been told by many of our customers that their parents thought the coin collections were worth thousands of dollars. In one such case, the parent told his adult children that he was purchasing rare coins with the intent of leaving his children a nice inheritance one day. Unfortunately only about half of the items had any value. As a coin dealer that specializes in large estate collections, we've had the opportunity to evaluate thousands of collections and have identified seven common pitfalls that individuals make when purchasing rare or collectible coins. In this piece, we're going to share our findings in hopes that you or your relatives will be able to avoid making many of the mistakes that we see on a regular basis.

1. Avoid Privately Minted Commemorative Coins
The number of privately minted commemorative coins that are in the marketplace today is incredible. Many private mints produce commemorative and collectible items in all shapes and sizes that have varying levels of value. While privately minted rounds, bars and ingots composed of precious metals have some intrinsic value, many of the items that we frequently see are composed of base metals, such as nickel and copper, and have very little value. If the primary reason for purchasing an item is because it has special significance to you, such as a 9/11 commemorative coin, that's perfectly fine, but think twice if your intent is to purchase the item as an investment, as more times than not, it doesn't appreciate as expected.

2. Avoid Promotions from Non-Industry Publications
The amount of money that coin companies spend on advertising, especially in magazines and circulars, is amazing. Many hire professional advertising agencies that know which buttons to push to get you to act on a promotion. While we're all influenced by advertising to some degree or another, we've found in many cases that coin advertisements and promotions that are run in non-coin related publications are less than ideal. Many times the items were produced by private mints or were produced by relatively unknown government mints, but are packaged in a way that makes them more attractive. Most coin advertisements in numismatic publications are for quality items, but think twice before pulling the trigger on an advertisement in the National Inquirer.

3. Avoid TV Promotions
TV has become a medium for selling coins in recent years. While some shows dedicated exclusively to coins, such as Coin Vault, tend to sell quality numismatic items at reasonable prices, the type of coins and commemorative items sold by generic TV home shopping programs tend to be less than stellar. We've found that many of the offerings are of items that contain very little to no intrinsic value. For those items that do, the prices at which the items are being offered are oftentimes substantially higher than what you should expect to pay. While not all of the items offered by these shows are subpar, you certainly have to do your research and due diligence to ensure that you're picking up quality items at reasonable prices.

4. Avoid Limited Edition Foreign Commemorative Coins
As we all know, the rarity or number of an item produced is one of the key factors in determining the value of a coin or bullion. We're all attracted to rare and unique items, which in general is good, as it helps to maintain a healthy market for rare coins. However, just because an item has been produced in limited numbers doesn't mean that it will maintain its value and/or increase in value in the future. Over the years, we've seen many limited edition foreign commemorative coins from obscure countries that most people couldn't point out on a map. If you've never heard of the country, or just have a vague idea of where it may be located, chances are that many prospective future buyers will be in the same boat. In other words, you may have a limited market in which to sell the item when the time comes.

5. Avoid High Mintage Modern Coins Not Composed of Precious Metals
One of the mistakes that the U.S. Mint made in years past was the over production of nickel-copper proof and mint sets in the 1970's, 1980's and 1990's, many of which are currently selling at steep discounts from the original issue price. Unfortunately, many individuals will likely never recoup their initial investment in the items. Fortunately, the U.S. Mint has learned from their past mistakes and has lowered the production level of many modern issued sets, which has helped to maintain and even result in a price appreciation for some of these sets. Before considering an investment of modern issued commemorative coins or sets, whether they be from the U.S. Mint or otherwise, we recommend that you do your research to verify the number of coins or sets produced to determine if you're making a wise investment decision. Please note that our comments don't apply to modern issued gold and silver bullion coins, such as gold and silver eagles.

6. Avoid Painted or Colorized Coins & Currency
We're all attracted to visually appealing and colorful items, but unfortunately coins and currency that have been colorized or painted are typically worth less than the item as it was originally produced. For example, we frequently see colorized Morgan and Peace dollars and American silver eagles. Morgan and Peace dollars that have been painted are typically sold by coin dealers as "cull coins." In other words, they're sold at similar rates to silver dollars that have substantial wear or damage. While the discrepancy between colorized and non-colorized American silver eagles isn't as substantial, you can expect to receive a lower value for your colorized silver eagles. The gap widens a bit with lower mintage or key date American silver eagles, such as those produced in 1986, 1994, 1995 and 1996, which can sell at substantially higher rates than common date silver eagles.

7. Check the current spot price before purchasing items composed of precious metals
As a coin dealer that buys and sells a large number of gold, silver, platinum and palladium coins, we commonly refer to the current spot price of the underlying metal prior to entering into a transaction. The spot price refers to the current market value per troy ounce for the selected precious metal. Up to the minute gold, silver and platinum prices can be found on the homepage of our website or by visiting kitco.com. If you're purchasing an item that is composed of precious metals, we recommend that you first check the current spot price. While the value of some rare or numismatic coins have little correlation to the current precious metal value, it's always a good idea to have a general sense of the value of underlying metal as a starting point.