Higher Denominations Exponentially More Expensive

Discussion in 'World Coins' started by 1934 Wreath Crown, Aug 22, 2018.

  1. 1934 Wreath Crown

    1934 Wreath Crown Well-Known Member

    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!!
     
    Chris B likes this.
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  3. Chris B

    Chris B Well-Known Member

    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.
     
  4. GDJMSP

    GDJMSP Numismatist Moderator

    I would readily agree that this is what most collectors "hope" to have happen. And there are even a substantial number of collectors where investment IS their primary purpose in collecting. In fact I believe most collectors EXPECT to make money on their collection.

    Again, I would agree that no one collects "intending" to lose money on their collection. But I only say that because intention or intending means that is their purpose for collecting.

    That said, reality is that 95% or more of collectors DO lose money on their collections when those collections are eventually sold. But it is not that they intended for that to happen, but rather that they were completely unaware that it was almost a certainty that that was going to be the outcome.

    I agree with some of it. For example, yes, the larger denomination coins are more expensive than their smaller counterparts - as a general rule. But as you noted there are exceptions. Something I don't agree with would be your comments regarding mintage numbers, but I do understand your thinking. A great many collectors, and I'm hesitant to put it this way but I don't know any other way TO put it, are of the opinion that high or low mintage numbers equate to value. But that is most definitely not the case ! In point of fact mintage numbers rarely have anything at all to do with the value of a coin - except in a very few cases. The thing that plays a large part in determining value is how many examples of a coin exist NOW, not how many were originally made. And this is always coupled with the popularity of the coin in question.

    For example, mintage numbers are always a relative issue, as in what's high and what's low. In some cases a few thousand would be high, even very high. In others a hundred thousand would be low, some very low. And the time period in question also plays a part in determining mintage numbers, though few are aware of that fact, and why it plays a large part. In a great many time periods it was current bullion flows that determined the mintage numbers of given coins. In other words, if there was very little gold available during a given time period then there would be very few gold coins, of any denomination, minted during that same time period. But the very next year there may be a great many of them.

    Bottom line, it is the number extant and popularity that play the largest parts in determining the value of a given coin.

    Mine personally ? No, but then that's largely because mine was rather eclectic to say the least. I only ever bought coins because I liked them, not because of their value or rarity. Though I will readily admit that rarity can make them more desirable - but that's only assuming that I liked them to begin with. For example, a coin could be among the rarest in the world, and cheap, but I wouldn't buy it if I didn't like it.

    In all honesty there's no telling. But it will be whichever ones where somebody drives up their popularity. And in those cases scarcity will have nothing to do with it.

    Now some might be sitting there saying to themselves and how does somebody do THAT ? Well, it's a lot easier than you might think. Sometimes it happens on coin forums just like this one. Somebody starts posting pictures of a coin and talking about them that very few people collect, and the coins can be common or scarce. But because people have never been exposed to this coin they are quite simply unfamiliar with it. But once they see it, they decide they like it. And if it's inexpensive to begin with they'll start buying them. And once they do then they'll start posting pictures and talking about them. And then others do the same thing. And pretty soon the bandwagon effect is created.

    Think it doesn't happen ? Well ya better think again because it's happened several times just in the few years that this forum,and others like it, have existed.
     
    medoraman likes this.
  5. Chris B

    Chris B Well-Known Member

    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.
     
  6. GDJMSP

    GDJMSP Numismatist Moderator

    Now then, regarding the investment issue and that larger denomination examples might make better choices for investment purposes. If I've said it once I've said it a million times - coins are arguably just about the worst investment one could ever make. But even aside from that, large denomination examples have another aspect that must be considered - liquidity. Simply because they are more expensive there are smaller, often much smaller, numbers of collectors who would even be capable of buying them let alone be willing to buy them. And when it comes to investments - that is not a good thing ! And then there's the fact that high dollar coins can and often do lose up to half, or more, or their value in just a month or two if and when the market takes a turn. And when it comes to investments - that is not a good thing !

    Conversely, the smaller denomination coins may only lose 10-20% of their value during the same market turn. So purely from an investment point of view it's not hard to see which is the better option. But as I said, coins are terrible, worse than terrible, investments to begin with.
     
    medoraman likes this.
  7. Hiddendragon

    Hiddendragon World coin collector

    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.
     
    Numismat likes this.
  8. Numismat

    Numismat World coin enthusiast Supporter

    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).
     
  9. V. Kurt Bellman

    V. Kurt Bellman Guardian of The Farce, & Dead-Eye Master

    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.
     
    Numismat likes this.
  10. medoraman

    medoraman Supporter! Supporter

    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.
     
    TypeCoin971793 likes this.
  11. medoraman

    medoraman Supporter! Supporter

    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. :)
     
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  12. GDJMSP

    GDJMSP Numismatist Moderator

    Yeah, I know it does, but believe it or not it's not some number I just pulled out of the air. The very same number has been published in the numismatic press several times over the years in articles written by some of the most respected names there are. My personal experience with selling 2 of my own collections, as well as those of every person I have known over the course of my entire life who sold their collections, and just about every person I've seen post about selling their collections on this forum and others - all of those things confirm that number.

    For those who do manage to show a profit when they sell their collections, usually it's nothing more than a matter of pure luck. Timing mostly, they get lucky and manage to sell at or near a market peak after having bought near lows.

    And of course the market cycles are also a factor that must be considered because a lot of folks buy coins when the market is rising or near a peak. And pretty much all of those folks are doomed to a loss because of it. And the two big bull markets we've had in the last 35 years - those alone cover a whole lot of collectors who bought during those periods.

    As I have posted before, to show a profit on your coin collection there 5 things that you need to do, and you have to get all of them right.

    1 - buy the right coin(s)
    2 - buy at the right price
    3 - buy at the right time
    4 - sell at the right time
    5 - sell at the right price

    Get just one wrong, and you won't make a profit.
     
    TypeCoin971793 and Numismat like this.
  13. V. Kurt Bellman

    V. Kurt Bellman Guardian of The Farce, & Dead-Eye Master

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

    GDJMSP Numismatist Moderator

    Chris B likes this.
  15. medoraman

    medoraman Supporter! Supporter

    ...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.
     
  16. 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?
     
  17. gxseries

    gxseries Coin Collector

    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.
     
  18. 1934 Wreath Crown

    1934 Wreath Crown Well-Known Member

    I've noticed that in most cases 2 guineas command a much higher premium. Almost in line with a quintuple sovereign or guinea.
     
  19. 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.
     
  20. 1934 Wreath Crown

    1934 Wreath Crown Well-Known Member

    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;):D:p
     
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