Articles | Coin Trading: Distinguishing Between Value and Price

The value of a coin versus its price differs considerably. The two are usually interchanged, but they actually have different meanings and represent different concepts. The price of a particular coin is its price tag when it is bought from a coin dealer. It is basically its retail price. The coin's value, however, is the price by which a collector can sell it to a dealer.

The price of a coin is determined by various factors. This includes the coin's grade and type, its rarity, the demand for it, and its market availability. The Red Book is the most popular coin collecting price guide. However, the prices listed here are not the actual prices that a collector can get for his coins. This is because the value of a coin is significantly less than the price listed in the Book. Naturally, dealers have to profit from trading the coin, and so will buy it cheap and sell it high.

Red Book prices are retail prices set by dealers. However, it is not the only book around. The Handbook of U.S. Coins, which is also known as the Blue Book, lists the wholesale values of coins. In contrast to the Red Book, it lists the prices of coins which the collector can expect to get when selling his coins to a dealer. The discrepancy between Red Book prices and Blue Book prices is that the former usually has double the prices listed in the latter.

The prices of coins which mainly derive their value from bullion are typically higher by seventy five to eighty five percent. This is because their values are based on their gold content instead of their rarity. Contemporary Double Eagle coins and American Eagle coins are notable examples.

On the other hand, one can use the Red Book prices when the coins are to be insured in case of loss. This Book is used because the coins are being appraised for their replacement value. Insuring them for possible loss will thus require their retail or Red Book prices, not their wholesale price.

Sometimes, a dealer may overlook a coin and put it in the ten-dollar bin, even when that coin actually costs one hundred dollars. This is a rare treat for the coin collecting hunter and a mistake on the part of the dealer. However, one can more commonly find numerous twenty-dollar coins priced at ten dollars. This only means that the dealer's stock for this kind of coin is too many, and that he wants to liquefy his assets by selling them cheap. In that way, he can use the cash to buy more tradable coins.

One may think that this is a bargain, but the fact that the coins are being sold cheap means that they are not in demand, and the coin collecting buyer may consequently realize that his investment is so hard to sell back. The coins may have a high intrinsic value, but because of a lesser demand for them, they do not move in the market too much. Having both Red and Blue Books will keep one appraised of the true value of a coin in the marketplace.