True Rarity Counts

Nearly everyone agrees that the rare coin market in the United States is a multi-billion dollar business. Collectors buy everything from the latest US Mint products to million dollar rarities. Obviously, the level of sophistication of rare coin buyers varies greatly. What everyone has in common is the desire to spend their hard-earned money in the best way possible. This means everything from deciding what to collect to deciding the correct grades to acquire. The possibilities are nearly endless, but hopefully the following information will prove helpful in those decisions.

For decades American silver dollars have been extremely popular with collectors. At one time a Gem common date Morgan silver dollar sold for nearly $1,000. This was before third-party certification and the invention of population reports. A lot of coin dealers specialized in silver dollars and the series was widely collected. A few rare coin investment books were produced in the late 1970s and early 1980s that touted the investment potential of $1,000 common date Morgan silver dollars. Today, a common date MS 66 Morgan silver dollar can be purchased for under $250. What went wrong with those optimistic predictions that turned out to be so off base?

In my opinion, rarity, or, in this case, the lack of rarity explains why Gem Morgan silver dollars have fallen from $1,000 to $250 over a 30 year period. Since its inception in 1987, NGC has graded over 3,000,000 Morgan silver dollars. They have graded almost 250,000 1881-S silver dollars alone. I doubt that in the late 1970s anyone had any idea that there were that many Morgan silver dollars in Mint condition, let alone thousands upon thousands in Gem condition. The population reports have exposed the true rarity of nearly every coin in every grade. These are amazing research tools that collectors from past generations lacked.

1881-S Morgan Silver Dollar NGC MS 67
As an example of the way rarity has played out over the years, we can study the above mentioned 1881-S silver dollar and the much rarer (a true rarity) 1883-S silver dollar. For the 1881-S silver dollar NGC has graded 54,437 MS 65 coins, 17,598 MS 66 coins, 4,454 MS 67 coins, 286 MS 68 coins and 1 MS 69 coin. The current NGC population for the 1883-S stands at 13 coins graded MS 65, 2 coins MS 66 coins and a single MS 67 example. Going back a few decades you can see how these two silver dollars have performed over the years. In 1984 (over 30 years ago), the Greysheet bid for an 1883-S silver dollar in MS 65 was $3,000. The information below tells the story:

1984 Greysheet Bid, MS 65 Silver Dollars
1881-S $250; 1883-S $3000

2017 Greysheet Bid, MS 65 Silver Dollars
1881-S $150 (40% decrease); 1883-S $27,000 (800% increase)

Obviously, the lack of true rarity for an 1881-S has become apparent over the years and the demand has never truly outpaced supply.

The same supply and demand factors play out for many other series of United States coinage and explains why so many have been stuck in the mud for decades. Years ago proof three cent nickels were all the rage and touted as a wonderful investment at over $2,000 each. Today, 30 years later, they can be purchased for about $500 in Gem condition. Again, the lack of rarity explains the imbalance of supply versus demand. NGC had graded over 1,000 1881 Proof Three Cent Nickels alone. Factor in inflation over the years and some of these coins are practically free!!

When deciding what to collect or how to spend your numismatic dollars, you should carefully consider true rarity. The NGC Census isan excellent tool and should be carefully studied by anyone making a purchase decision. This population report tells the story of what has been graded, but not what might be graded. The following are a few suggestions of what should be considered:

1. Common coins only become more common. My guess is that in the years to come, a lot more 1881-S silver dollars will be graded and enter the rare coin market. The same can be said for a lot of United States coins.
2. Be careful when buying first or last year issues. Many of these were saved at the time of issue and small hoards turn up on occasion. Recently, it has been reported that a large group of 1912-S Liberty nickels entered the market. The price for Gem examples dropped dramatically.
3. A lot of collectors buy coins at the top end of the grade range for registry set collecting. This is an exciting way to collect coins, but when the population for a coin increases, the prices can be adversely affected. This should be carefully considered.
4. Auction records can also be a great way to study the true rarity of an issue. If a coin rarely shows up at auction, your chances are much better that demand will outpace supply over the long term.
5. Generic gold coins have become very common for many issues. Collector demand will struggle to keep pace with supply. Prices for generic gold are at historic lows from a premium standpoint, but should probably be considered a bullion investment.

Regardless of your numismatic budget, spending your money on coins with true rarity will pay in the long run. Supply will be much less likely to outpace demand. This can be applied to nearly every series. Several years ago, one of my clients took this advice when deciding what to collect. He was considering the idea of assembling a Type set of United States coinage. Instead of buying the best possible condition coin for each Type, he decided to buy the rarest issue he could afford for each Type. The idea being that the demand from collectors would outpace supply for these rare issues over time. His strategy worked beautifully and his collection was not only fun to assemble but also a great investment.

As I have mentioned many times, seek the advice of a numismatic mentor that can help you when deciding what true rarity really means and how to apply this to your collecting strategy. A lot of coins may seem like great bargains at current prices. They are probably bargain prices because of oversupply. I personally think you would be better off with a few very rare coins than boxes of common coins at great prices. Do your research and I’m sure you will come to the same conclusion.

Questions about the rare coin market? Send them to wmr@ngccoin.com.

Jeff Garrett bio