Rarity of Coins

Coin prices are a function of supply and demand. The intrinsic worth of a coin will define a minimum bullion value of a coin, but that is often much smaller than the numismatic premium. The market value of a coin is based on how many coins are available and how many persons wish to have one for their collection. Prices decline when dealers need to sell their large stock to a smaller number of buyers, and may rise again when insufficient quantities are available to meet the demand of new collectors. Dealers who need to cover expenses and make a profit typically buy coins at wholesale prices which are about 70% of the Retail prices published in price guides (like for example Krause), at which they sell to most collectors. Auction Houses typically charge both the buyer and the seller 10-15% of the sale price leading to similer transaction costs.

Collectors and investors may therefore be unable to get their money back, unless they sell on a internet Auction like ebay directly to another collector bypassing a dealer altogether. However Ebay also has has a transaction cost when you consider ebay fees (5% to seller) and the time you take to reply buyer queries etc. I have never sold on ebay, and would rather sell any coins I do not need to a dealer at a coin show. Collectors would however prefer to purchase from a reputable dealer who would guarantee the authenticity of the coins, give reasonable opinions on grades, and usually share expertise with customers.

Stephen Album in a post to SACG summarized the value of a rare coin with the brilliant dealer insight

1. If there are two known and three collectors, you've got a winner!
2. If there are three known and two collectors, throw one coin in the river!

The price based basic economics of Supply and demand

• The Supply: Number of coins available in a market
• The Demand: Number of collectors in that market interested in buying that coin.
• The Price: In an ideal case is the just above the 2nd highest purchase value placed on that coin by an interested collector.

So the best place to buy or sell a rare coin will be different. I suspect for high-value rare items Auction-Houses still get better prices since many major collectors don't buy on the Internet, but for low value items ebay is probably better because of the larger number of collectors who are on that market. However for common lower value items, the number on the market would also increase by demand and bring the price down. So higher value rare coins may sell on ebay for a relative bargain if they appear on this market, although they rarely do, and rare lower value coins could sell for a higher price.

The value of a coin can be increased by a larger collector interest which can be generated by good marketing. It is only coins available on market and number of collectors known to that market interested in buying that governs the price on that market. E-bay auctions in one way that could establish a price of an item. However the price of an item on the Ebay market which is governed by the number of items of that type on sale on ebay and the number of collectors interested in buying item who are looking for item or happen to see item for auction during the 10-days or less of Auction. I have seen item get no bids and sell for double the opening bid price when re-listed. So single price sold on ebay is probably unreliable. Price on a reserve price auction is also unreliable some many don't bid on that type of Auction, where they feel reserve is probably too high to bother about bidding. The same item put on a Live Auction would probably sell for a different price which could be higher or lower depending on the supply and demand on that market.

Since the number of collectors of coins of Lanka is far less than for those who collect British or US coins, a Lankan coin of similar rarity would probably be less expensive. The colonial era coins do have collector interest in addition to Topical coins with say images of Animals.

The rarity scale is based on the number of known examples. It can be also useful to compares rarity with appearance in market place.

• C - Common - always available in any numismatic market.
• N - Normal - probably available in Local numismatic market.
• S - scarce but probably available in national numismatic market.
• R - Rare but probably available in global numismatic market place
• RR - Very Rare with only an occasional appearance on the market every few years.
• RRR - Extremely Rare and only appears on the market about once every ten years or more.
• RRRR - unique or nearly so, with 1-3 known.

There seems to have been about one very large south-Asian collection which goes on the Auction block every decade which would bring the rarest examples to the market. I wonder how many such large collections exist world wide.

The US mints over six hundred million coins of each in the state quarter series. With intensive marketing of this series in 2000 it became very popular and uncirculated 1999 quarters sold for over 4 times the face value. US Mint increased the Mintage to meet the demand which peaked with an issue of over 1.5 billion of the Virginia quarter in October 2000. It is now back to normal as the collecting craze could not been sustained after the intensive marketing was stopped. US mint issued 805K silver Proof sets in 1999 which sell in 2002 for over three times the issue price. So dealers purchased many of 2000 and US mint kept selling them for 2 years with 966K issued and they sell at below the issue price. So dealers didn't hoard many 2001 Silver proof sets with 850K issued, they too started to sell for two times the issue price in 2002 October. In this case I suspect the market is being manupilated by holding on to stock to make a profit. Few colletibles sustain an elevated level of interest for even few years, much less than the decade used to release the state quarters.

In 2002 the new Euro became a similar craze and the limited issues of under 100 thousand coins non-circulating coins from each of the smaller principalities like Vatican, San Marino, Monaco (and Andorra?) became rare collectors items among the million European Euro collectors.
However after 20 years the Royal Mint issued 100K gold sovereigns for the 50th Jubilee of the queen with a Shield reverse used for the first time in UK after 130 years. Sold by the Royal Mint for GBP72.5 (US$105), I purchased one from a dealer in US for $89, 5 months after they were released not much more than the bullion value of $75. Interestingly they were selling on ebay for $115 around the same time. Clearly indicating that more interested buyers looked in ebay than in Coin Magazines. The fact that 100K Gold sovereigns shows no demand unlike Euro issues of less than 100K just indicates far much less collectors of Gold coins rather Euros although some of the Euro collectors are willing to pay much more than the weight of Euro in gold ($75) for them. A Vatican Euro coin sold in 2002 May for $93 on ebay. All this makes an very interesting study of supply, demand and marketing.

I was lucky to win a rare Lankan TRIAL coin on ebay for $50. I know of only 3 of these coins available to collectors. The market value of this coin is probably $100. If the same coin was from US it would probably sell for 500 times or more.

A dealer once told me that a mint of 2000 coins will not make a Lankan coin rare since there are not that many serious collectors on Lankan coins which is probably true. He asked me about the Lankan 50th Annivarsary of Independence Rs1000/- coin since he knew more collectors who looking for coins with Cats. This is also probanly the reason for the relative increase in value of Ceylon coins with Elephants.

See also Rarity and the value of ancient Roman Coins by Warren Esty.

Please E-mail me any comments.

This web page is posted on LakdivaCoins a web site for numismatic information on Coins and Tokens that circulated in Lanka.