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Monday, January 20, 2014

How to value graded and ungraded coins

how do you price this coin?

The price of an ancient coin has three major components:

1) Demand or Desirability.  With ancient coins, desirability has two major components. 

A) First, it is often a function of historical importance.  A Caesar or Alexander portrait is obviously fascinating as these are two of the most important figures in history.  A gold Croesus stater has obvious appeal as the first gold coin in history.  Beyond the obvious there are any number of historical factors that appeal to buyers from different countries for different reasons.

B) Second, there is beauty.  Ancient coins are works of art.  A dekadrachm signed by Kimon has obvious appeal.  Fine style portraits have obvious appeal.  Beyond the obvious, there are coins of every issue and denomination that were simply rendered by superior artists in ways that outclass all other coins of that particular issue.  These coins make look and grade similarly to many coins from the issue but can be valued many times greater than coins of pedestrian engraving styles.

2) Rarity.  This is difficult for collectors from World or US coins to appreciate, because even the most common issues in the Ancients world are extremely rare by US and World standards.  But understanding rarity is difficult as there are no population reports.  Often coins culled from fresh hoards appear to be far more common for a short period of time.  Then they disappear.  The same thing can happen when major collections are sold.  Other times, a coin rarely appears over many years, and sells at great prices at auction.  Then a small hoard is found and it is suddenly available.  To understand rarity you have to examine the market over many years.

3) Condition.  This is the provenance of grading - which brings up traditional grading versus Third Party Grading or slabbing.

A) Traditional grading values an overall appeal.  Good metal, die state, centering and strike are paramount.  Coins struck from "fresh dies" have a particular appeal as do coins struck from "good metal."  These factors are difficult to recognize without seeing thousands and thousands of coins. But connoisseurs still accord huge premiums to these factors.

B) Third party grading or slabbing brings are much needed uniformity to grading.  And even more important it weeds out a vast number of coins that are altered, repaired, tooled and outright fakes.  When buying ungraded coins, the collector is open to fantastic losses when fooled by artists of great talent who have altered or faked ancient coins.  A beautiful coin with just a bit of smoothing in the field might cost $25,000 at auction.  But once described as smoothed by NGC (the third party grading service) it might be worth a tenth of the original cost.  Therefor, there can be a huge premium for certified coins as it takes all the risk out of buying,

However, third party grading does not and can not distinguish die state and other factors.  Coins with die rust, double striking, die flaws can have the exact same grade as coins without these problems.  Similarly one fine style coin can be of much finer style than another.  No two coins are alike.  Even two coins with exactly the same grade can be vastly different.

The only way to understand valuation is to take all the above factors into account.  And learn to reconcile them over time.

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