Higher Denominations Exponentially More Expensive

When I first started collecting coins, in particular sovereigns, I remember reading on another forum that true sovereign collectors only collect the full Sovereign, that this made the full Sovereign more desirable and gave it a higher likelihood of being more valuable in the future. While monetary profit might not be the primary motive for many, I still maintain that most collectors would hope to have a valuable asset from their hobby (any collection) at the end of the day. I don’t think anyone collects anything with the intention of losing a large amount of money on it.

I must admit, the opinion of other more experienced collectors did influence my motive when I decided to make the full Sovereign the main focus of my collection. However, a few years ago I noticed that with the exception of very rare or desirable years or types, the larger denominations, in particular the quintuple Sovereign or Five Pound have proven to be much more sensible investments. The prices being achieved by the larger denomination coins far exceeds the extra precious metal content.

To me this seems quite logical as, generally, fewer numbers of the large denomination coins are minted. Furthermore, I have observed that this trend also seems to be true not only of the majority of Two and Five Guinea coins but also for other larger denomination world coins, be they modern or ancient.

I attribute this to the fact that not only were the larger denominations produced in smaller numbers but the ‘opportunity cost’ of holding or hoarding these would have been higher as well. I’m trying to get a few of the bigger denominations in my collection but many of the better grade older offerings are prohibitively priced. For now the more recent issues will have to do.

It would be interesting to hear the opinions and experiences of fellow CT members.
Do you agree with the above observations about the ‘bigger sibling’?
Did your collection criteria change direction for any particular reason?
Which countries/coinage do you expect to show an upward trend and why!!

 

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I collect German States Thalers and have considered getting into multiple Thalers but for the most part, they are out of my budget. Typically a nice pre-1871 Thaler can be had for $100-1000 but multiples quickly get over the $5000 mark. By reviewing some auction records you can see that 20-30 years ago that was not the case. It seems like there wasn't much if any premium for the larger pieces.

At some point, I plan on picking up at a nice example but that will probably be the extent of it.

 

Much like you, my taste is a bit eclectic. This can be beneficial at times. I have found that some scarce (I hate to say rare) coins can be picked up at a bargain price simply because there aren't enough collectors looking for them. It's the old supply and demand. If there are only 10 known specimens of a coin but only 1-2 want one that is definitely going to affect the price.

 

I collect more "entry level" coins, like what you can find in a dealer's junk box, but I agree that size definitely seems to matter. It's the big coins that catch a collector's eye. They have more room for a nice design and there's something appealing about holding a big coin in your hand. And dealers who are not knowledgeable about world coins tend to think the big ones are worth more. I'll see dealers who have junk bins of different price ranges tend to throw the common, bigger coins in the higher value bins because I think they assume people will pay more for them.

The other side of this is almost always the times I find a great deal in these junk bins is the small coins. They get overlooked by all but the most knowledgeable collectors, and that's where the value is found. Again, totally different level than what you're collecting, but I'm more likely to find a $10 coin for 25 cents in a value bin if it's small than if it's huge.

 

I guess this depends a lot on personal experience with people you know, but 95% seems outrageous. Maybe if talking about a common interest group of collectors who focused on an area that depreciated, but not in the general sense. Among people I know, or know of well enough, who sold their collections I'd estimate maybe 20% lost money, another 20% or so broke about even and the rest made profit (some a whole lot).

 

One of the great paradoxes of coin collecting is that if you actively SEEK to profit, you almost never will, but if you completely IGNORE profit, you will usually do quite well.

The sale of every major collection bears this out.

 

Very true. Those who pursue knowledge rather than profit tend to know the coin series extremely well, usually better than almost all dealers. Therefore they are in a better position to know true rarity, (either absolute or condition) and take advantage of this knowledge. Therefore, their collection tends to have more "innate value".

Those who collect for profit are not as knowledgable as the dealers, and therefore cannot ever overcome the MASSIVE buy/sell spread facing them in this hobby.

 

Are you taking into account simply inflation? I am not asking to take into account performance of an investment portfolio versus coins, (making the comparison even much worst), but just simple interest. Almost all "profit" from the vast majority of collections I have ever seen was simply due to precious metal appreciation, (which is a substitute for inflation). If you take out precious metal movements away, it is very rare to see a collection actually make money.

Think about it. Everyone overpays when they start out. They buys overpriced coins at times because they are in a mood and like it. What about the fakes? Those are all 100% losses. Couple this with the 30-50% disparity between buy price and sell price on most coins, and it is simply too much to overcome and "make a profit".

As a Finance and Accounting guy though, I would like to make a point. The POINT of coin collecting is not economic return. It is relaxation, enjoyment, and knowledge. If collectors understand THAT, then every one of them "makes a profit", since the enjoyment they get from collecting should be commensurate with what they spend. If that is true, then whatever the little bits of metal sell for when you part with them is effective ALL profit.

 

"94.37% of statistics you read on the Internet are completely made up."

 

...and this is to just calculate a simple profit, not accounting for inflation.

The sooner collectors simply acknowledge the fact they will lose money on their hobby, but that is ok because it is a fun hobby, the more fun they will have. Yes, it is fun to get a great buy. I bought a Cleopatra VII for $400 4 years ago that today would probably sell for $1400. However, once I paid commissions, etc I might get $1000. That, however, does not cover all of the other coins I just know would be sold at major losses, then I lose even more paying commissions, etc.

Coin collecting is just a fun, educational money sink. Do your best to get good deals, but realize in the end it will all be a money loss.

 

I would agree with the original post, at least as far as the quintuple sovereigns are concerned. Interestingly, though, I've managed to pick up some of the double sovereigns (1887, 1902, and even an impaired 1911) for not too much over the gold value of the coins. Perhaps the premium doesn't extend to the two pound coins as much as the five pound?

 

Most of the times, this is true. However with early Imperial Chinese and Russian coinage - the 3.6 mace or 50 kopek / half rouble have often been somewhat more expensive than the larger dollar counterpart. It just seems that the mintage figures in general are much less compared to other silver coinage. Not too sure if others have noticed.

 

I've noticed that in most cases 2 guineas command a much higher premium. Almost in line with a quintuple sovereign or guinea.

 

I am finding this to be the case with Chinese coins. I buy them because I like them and study them. But I am noticing a rapid price rise as more people get into the field and start collecting the same thing as I do. So right now, I am just trying to get stuff as quickly as possible before the prices rise to obscene levels as seen with early US coins. Any profit made off of my collection is purely coincidence, not intent.

Good rule.

 

Another rule I find works for me......Try to buy coins in another country (Auctions or dealers) where generally, the collectors might not be quite so knowledgeable about its desirability or rarity