How exactly is the value of a rare coin determined?
. Supply/Rarity – How many currently survive.
. Demand – The number of collector/investors seeking that coin.
. Precious Metal Content – How much pure gold, silver, etc. does it contain.
. Quality – the grade or state of preservation of the coin. Is it a worn down clunker or a gem that looks like it just rolled of the presses.
This last point brings up a pivotal issue. Prior to 1986, liquidity in the rare coin market faced a major obstacle. There was no uniformity to grading standards. This lead to a great deal of “back and forth” between buyer and seller.
With the emergence of guaranteed third party certification of rare coins sight-unseen trading became possible. This opened a whole new dimension to the industry. One in which collectors, dealers and investors could freely participate in the numismatic marketplace with a previously unknown level of confidence. This in turn provided for the participation of major brokerage firms which greatly expanded the market base.
The two internationally accepted firms that certify coins are the Professional Coin Grading Service (PCGS) and the Numismatic Guarantee Corporation (NGC). These companies have removed much of the uncertainty in determining a coins grade and they have helped establish a worldwide network of thousands of dealers where certified coins are freely traded and instantly liquid.