Understanding Auction Prices

One of the most commonly used tools to establish values in numismatics is auction prices realized. Seeing what a coin lists for in a price guide is one thing, but to know what an actual coin traded hands for can be very useful. I’m sure the editors of the NGC Coin Price Guide use auction records to some extent when trying to establish the value of higher-priced coins. Many rare coins seldom cross the auction block, while others are usually found in multiples at every sale.

Today’s collectors are very lucky that such useful information can be found with relative ease. Most of the major auction houses now maintain auction records in the archival section of their websites. Before this was the case, there was no easy way to know if a coin had sold at auction in the last several years. In the process of gathering information for the book Encyclopedia of United States Gold Coins, I realized that having such information would be critical. Believe it or not, we started from scratch by assembling information from auction sales starting in the 1980s. We hired part-time college students to enter the information into a database that could be sorted by date and denomination. It took several years of data entry and editing to bring the auction price realized information to date. The database is still being updated, and is used by most major dealers in the country to establish past auction performance of rare coins.

As useful as auction price records are in establishing values, they can be incredibly confusing. The same-grade coin can have a huge price variance for examples sold in the same year. One example I noted is the 1896-O Silver Dollar in MS 63. In 2008, three NGC examples were sold at public auction. In September of 2008, a coin sold for $5,462. In July, another one crossed the auction blocks for $6,325. But in March, an NGC MS 63 1896-O Silver Dollar sold for $11,500.

How can such a large price spread be explained? First of all, we know that not every coin looks exactly alike. Some 1896-O Silver Dollars are weakly struck, while others can be found that are fully choice, but darkly toned. Although bag marks on an MS 63 Morgan are minimal, one on the cheek can be quite distracting and limit its value. Price guides give an estimated value for an average example for the grade. It is up to the buyers of rare coins to weigh the pluses and minuses of a coin’s appearance.

This still probably does not explain the $11,500 price that an MS 63 1896-O Silver Dollar sold for at auction in 2008. One fact that is seldom mentioned in most coin literature about pricing is the amount of gambling practiced by many rare coin dealers. An MS 64 1896-O Silver Dollar is worth nearly $40,000. With a $30,000 spread between MS 63 and MS 64, the buyer was probably hoping for an upgrade and was willing to pay more for a potentially huge profit.

There are several factors that could influence a dealer to take a chance on an upgrade. The coin may have been conservatively graded many years ago, when coin certification was still in its infancy and grading standards were not fully established. There is also the possibility that the coin would benefit from conservation and the grade would subsequently increase. Lastly, the coin might have the potential to receive the Plus (+) Designation, which NGC began using in May 2010. Coins at the high end of their grade are now assigned a plus by NGC, and an MS 63+ 1896-O Silver Dollar would undoubtedly bring a premium over one graded MS 63 without the plus. Dealers will pay more when they think a coin could ultimately achieve a higher grade, and these price differences must be considered when using auction records to make a purchase decision.

Remember, coins are not a commodity. Every rare coin is different, and having a basic understanding of coin grading is extremely useful when making a coin purchase. Compare coins of the same grade prior to making a major purchase. Before long you will have a better understanding of grading and how coin prices are determined.

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