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Gold and silver prices have been on an incredible run in recent months. Gold is well over $4,300 an ounce, and silver over $51, as of the time of this writing.
If you own gold or silver bullion, that’s great news of course! But what about the values of other coins, or your coin collection as a whole? What’s the relationship between precious metal prices and coin values? Let’s dig in.
The first concept to understand is the intrinsic value of an item may be different than the collector value.
Intrinsic value refers to the inherent value of something. In the gold and silver world, that’s usually the melt value of that item. For example, a 1/2 oz American Gold Eagle has an intrinsic value of approximately 1/2 an ounce of gold. Intrinsic value largely ignores factors like condition and rarity, and instead looks only at the value of the basic components of an item (like the gold a coin contains, or the diamond + platinum a ring contains).
Collector value refers to the price someone is actually willing to pay for an item, and it includes factors like rarity and condition. For example, a very rare penny might be worth thousands of dollars – even though the intrinsic value is only a few cents.
Where it gets a little confusing is that sometimes both valuation metrics come into play. For instance, you might have a rare date American Silver Eagle. The intrinsic value of that coin might only be approximately the value of 1 ounce of silver – but a collector might be willing to pay substantially more due to the item’s rarity. Even in that situation, an increase in the price of silver would lead to that coin gaining value.
This might seem obvious, but it’s worth clarifying: When the price of gold or silver rises, the prices of any coins containing gold or silver will also rise at approximately the same rate. This is particularly true for bullion coins, which contain a high purity of gold or silver.
In some cases, rising PM prices will lead to decreased bullion premiums, but the underlying value will still increase at a similar rate.
The “premium” refers to the amount above or below spot price that bullion is bought or sold for. It varies by item. For instance, a 1oz American Silver Eagle may be sold for $5-$8 over spot, while a generic 1oz silver round might be sold for just $1 over spot.
Also important to note is that dealers may slightly decrease their buy rates during times where prices are increasing rapidly. For instance, if your coin shop usually pays spot for gold, you may find that they offer more like 98% or 99% of spot during times when gold prices are spiking.
The bullion market is complex, but ultimately it’s based on supply and demand. So it all depends on your dealer, local supply/demand trends, and what’s going on in the overall bullion market.
When it comes to non-bullion coins that don’t contain substantial amounts of precious metals, their values are largely unaffected by changes in the spot markets. This is because numismatic coin values are almost exclusively based on collector value – not intrinsic value.
Rare coins can be considered their own asset class, and their prices move independently of gold, silver, stocks or real estate. With that said, sometimes as gold prices spike, more people and investors gain interest in the broader world of gold and coin investing – which could lead to a bump in the price of rare coins.
Whether you’re looking to buy or sell, it’s imperative to work with a trusted partner. Whether it’s coins, gold, silver, or jewelry, we hope that you’ll choose Bellevue Rare Coins for your next transaction. We’ve been Seattle’s trusted coin and gold dealer since 1979 – and we now have convenient locations in Bellevue, Issaquah, Lynnwood and Tacoma. Get in touch today – we look forward to hearing from you!
