After all, most of us are more familiar with stocks, bonds, bullion, real estate, and many other popular investments. So why learn what you must know about a field that is seemingly complicated?

The answer is: First, rare coins are really not any more difficult to understand than CD's, stocks, or bonds. Second, when held for their recommended holding period of three to five years rare coins can pose as an excellent opportunity for financial security.

When comparing rare coins to better known assets, rare coins may be at the forefront of appreciation winners.  Moreover, rare coins have always served as a defense against economic uncertainties, especially inflation.

SS Republic

How does the rare coin market work?

The Collector:
There are many factors that influence the coin market such as the rare coin collector.  The true coin collector has a passion for rare coins.  Whether it is for a particular coin or a key date coin to complete a set in a collection.  The rare coin collector has an impact on the market by taking advantage of buying coins when prices are low, which causes prices of rare coins to rise with supply and demand.

The Investor:
When prices are down the investor will hold his portfolio of coins, waiting for the appropriate time to sell.  If he is wise, he will acquire additional coins at a lower price.  The hopes of the investor is an upward move in coin prices, especially in times of inflation when the value of paper money has eroded.  The rare coin investor knows he is protected with a proven inflation hedge which will protect his assets.  It is also true that many investors will become collectors as well.

Bullion:

Coins can also react to the rise and fall of Bullion prices, but the value of rare U.S. coins is vested not only in their Bullion value, but also in their scarcity and condition. Therefore, the rare coins are far greater than a coin that is simply gold or silver. A quick example: If you were to purchase $1,000.00 worth of gold or silver bullion 5 years ago, as of this writing, it would actually be worth less, where as if you purchased $ 1,000.00 worth of rare coins at the same time it would probably be worth many times the original purchase amount because of their scarcity.

1938 D Buffalo Nickel

Supply & Demand:

To explain supply and demand a little further imagine the collector and investors presently in the coin market. Now, imagine the new collector, investors being introduced into this market through the money managers, financial planners, etc.. Coin supply in simple terms means you have only a specific quantity of coins available. Now take demand into the scenario and realize that as this demand grows this already small quantity of coins diminishes even thinner as more and more collectors and investors acquire these coins, thus creating an upward cycle in the prices of rare coins.

Many of the coins offered through K. Smaltz Inc. are "certified by" major third party grading services:

The two major grading services, PCGS and NGC, are nationally recognized and independent.  Together they have certified more than $10 billion in rare coins.  In addition to adding value to coins, the grading services have increased overall liquidity and protection by encapsulating each coin in a tamper-resistant plastic holder with it's individual numbered certificate.  The encapsulated coins are so secure that they now trade over the telephone sight unseen. 

Each grading service publishes a monthly "Population Report" that records the number of coins certified in each grade for every coin.  This report has now become a key tool in helping collectors determine how rare a coin is.

Coin Supply:

Now, let's talk about the existing coin supply. Most rare coins were minted before the depression. In 1933, gold coins were minted for the last time as far as general circulation. At that time, then President Theodore Roosevelt instituted a higher price for gold, therefore gold coins became worth more in weight than for their face value. Thus, it was no longer feasible for the government to produce gold coins for circulation. Silver coins were produced until 1964 when they were also discontinued.

In the year 1918, the Pittman Act called for the melting of some 270 million Morgan Silver Dollars. There were also other government actions that were responsible for the destruction of tens of millions of coins for their bullion content removing more mint state coins from existence

So, today from the original number of coins that were minted prior to the year 1933 it is estimated that fewer than 1% of these coins exist in what we call uncirculated mint state condition.

Market Supply:

So, in essence of the remaining coins available in the market today, only a small percentage of these coins are considered investment quality. Each day as more and more of these coins are scoffed off the market the quantity begins to diminish. Some find their way into long term portfolios, endowment funds and of course museum collections. While this kind of activity occurs, the high quality coins are going to diminish from the market and therefore the prices for these rare coins will rise.

How value is determined:

Factors that contribute to the value of a coin include the beauty of the design, a coin's historic significance, its bullion of metallic value, and the number of coins known to exist.

Surprisingly, age is not necessarily important. There are U.S. coins issued within the last 50 years that are worth thousands of dollars.  By comparison, there are 2,000 year old ancient Roman coins worth less than $10.

Following are some other factors that affect value:

Rarity: Rarity can be defined by the number of coins minted in a particular series, or the number of coins known to exist. Rarity is an important consideration because in general, the rarer the coin, the higher its value.

Popularity:  Coins in a popular U.S. series will sell for more than coins in a series collected by only a few.

Condition or Grade: As coins enter into circulation, portions of the design are warn away and the coin becomes less desirable to a potential collector.  Some coins received fewer contact marks at the mint or have been more careful preserved since their striking.  A coin in uncirculated or mint state is worth more than one of the same variety in a lesser state of preservation.

Market: The coin market fluctuates in sometimes cyclical patterns, thereby affecting price and consumer demand.