Photo Credit: Tom Woodward
What makes a good numismatic investment? What makes one collectible coin steadily increase in value year after year, while another languishes in price for decades at a time? It is a deceptively simple question. But the correct answer could ensure windfall profits for the savvy hard asset investor.
In order to properly explore this question, we first need to define what makes a coin desirable. In reality, coins are miniature works of art struck on tiny metal blanks. And like any other artwork, the best coins are impressive, imparting a deep sense of beauty and gravitas to the viewer.
Although there are a number of subjective features that can endow a coin with eye appeal, there are also some that are thankfully objective in nature. The quintessential numismatic investment will tend to share these desirable objective traits.
First on the list is size. The diameter of a coin is analogous to the size of an artist’s blank canvas. It is hard for a painter to produce a masterpiece on canvas that is 6 inches by 6 inches. Likewise, it is difficult for a die engraver to cram a compelling design onto a coin that is only the size of a U.S. dime – 17.9 mm across.
It is the behemoths of the coin world that really wow us. People are absolutely smitten with large coins, like old silver dollars and pre-1933 gold double eagles. And it is easy to see why. These remarkable coins are not only dripping with history, but also luxuriously massive.
And this trend holds true if we examine ancient coins, too. It is the chunky Athenian tetradrachms and substantial Roman sestertii that fire the imagination of Classical numismatic enthusiasts.
Of course, size isn’t everything.
The metal that a coin is struck from is every bit as important as its size – perhaps even more so. The rule of thumb is very simple here: the more valuable the metal, the more desirable the coin. So gold, the king of metals, sits atop our numismatic investment hierarchy, followed by the other metals.
All else being equal, a coin struck in gold is more valuable than the same coin minted in silver. And the same holds true for silver versus bronze. This is because precious metals hold an eternal charm that transcends time and culture.
In addition, coins struck in gold and silver are higher denomination pieces that were more likely to have circulated among important people and institutions. For instance, a medieval British gold noble coin of King Edward III, might actually have been held by Edward III! And although there is no way to know for certain who might have touched which coin, a good numismatic investment always has a bit of whimsy or fairy tale in it.
Speaking of ancient and medieval coins, age is also a factor in numismatic desirability. A very old coin allows the viewer to cross a metaphorical sea of time and connect emotionally with a past culture. In my opinion, however, age usually has a relatively modest impact on a coin’s desirability, especially compared to size or composition.
So when we put all of these attributes together, what do we get? What kind of coins are a good numismatic investment?
Simply put, you want to buy relatively large coins that are made out of silver or almost any size coin that is made out of gold. Lastly, older is better than newer, although only marginally.
We can check our thesis by examining the U.S. rare coin market. Which types of coins are most popular with collectors and command the highest prices. If we ignore ultra-rarities and key dates, we find that pre-1933 gold coins, old silver dollars and many varieties of silver half dollars stand above other types of U.S. coins in terms of desirability. In addition, older pieces, such as late 18th and very early 19 century coins from the early years of the U.S. Republic, have an added dimension of desirability.
So if you are looking to make a numismatic investment, large coins struck from precious metal are the way to go from a big picture point of view.
I do understand that there are very dedicated niche collector groups for Indian Head pennies, Mercury dimes, Buffalo nickels and many other smaller U.S. coin series. But personally, as an investor, I would leave these coins to the collectors. They lack the necessary “wow” factor for investment purposes.
So where do I see value in U.S. coins right now? Well, I very much like AU-58 NGC and PCGS certified pre-1933 U.S. gold coins that possess good eye appeal. AU-58 coins are usually significantly less expensive than MS-60 to MS-62 examples, but typically look much better than them. This makes many series of AU-58 coins potentially good investments. I would, however, avoid gold dollar coins as I think these are far too small with a diameter of only 13 mm (0.51 inches) to 15 mm (0.59 inches).
In addition, I think that slabbed Morgan silver dollars in MS-63 or better condition are finally poised to ascend in value after moving sideways for the last 25 years. Morgan silver dollars have everything going for them. They are large, photogenic coins with a stellar design that really encapsulates the romance of the American Old West. And with the exception of the anomalous 1921 date, they are all well over 100 years old at this point.
I also have a surprise sleeper hit: proof American gold and silver eagle bullion coins. 50 years in the future, no one will want to own most U.S. coinage from the 1970s or later. This is because silver was removed from circulating U.S. coins in the 1960s, leaving us with a miserable base-metal token coinage. Instead, American gold and silver eagle bullion coins issued from the 1980s onwards will be seen as the only convincing numismatic investment of the period.
American eagle bullion coins are struck by the U.S. Mint from pure, .999 fine silver and 22 karat, .917 fine gold. The collector’s proof versions are not only struck multiple times to ensure a crisp, frosted finish, but are also much scarcer than the run-of-the-mill uncirculated bullion variety. They are appropriately massive as well; a 1 troy ounce American silver eagle coin is both heavier and larger than a Morgan silver dollar.
What makes a good numismatic investment? It is a question well worth asking – and one that I hope I’ve helped you answer.
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