US Coins

Melts have long-term effect on coin hobby, marketplace

Rising precious metals prices — specifically silver and gold — command attention in the numismatic arena because the vast majority of the classic (pre-1965) coins have an intrinsic value, based on the amount of silver or gold they contain. They also have a numismatic value, due to rarity (the number known or believed to have survived) and grade (condition or status of preservation evident).

The difference between the intrinsic value and the numismatic value is often called the "premium."

As silver and gold raced to record prices this year, coin market analysts began to note that premiums were evaporating for many collector coins, especially the common dates that have been the mainstay of collection building. And in recent weeks they have pointed out that this phenomenon is also beginning to affect the "better dates."

These observations indicate that many people, both in the collector community and in the general public, have decided to cash in on the rising precious metals market and are selling stashes and accumulations of coins for melt value.

We’ve seen silver and gold "rushes" like this before, perhaps the best direct comparison dating to the early 1980s.

What we don’t know at this time is how much higher the precious metals markets will move. But what we can deduce, based on what has occurred in previous "melts," is that in the future there are likely to be far fewer of the pre-1965 U.S. coins available to collect. And those coins that escape the furnaces will be more coveted and more expensive to purchase.

Anecdotal evidence suggests that a significant number of modern coins, such as the American Eagle silver and gold bullion coins and commemoratives, dating from years of large mintages that have not carried large collector premiums, are also being sold at melt values.

At this point we are not aware of any dealers or smelters who are keeping any records as to the volume of coins that are being melted, much less the denominations, design types and Mint marks.

Back in the early 1980s, Henry Merton kept a log and later published a book, The Big Silver Melt, that provided a small glimpse of coins (by denomination, date and Mint mark) being melted. Unfortunately the volume of coins he sold to smelters was not large enough to make generalizations applicable to the entire marketplace. Consequently it took years for numismatists to realize the rarity and availability of some coins after 1982.

In all likelihood, as we move forward, the collector community will face problems similar to those spawned by previous coin melts. Original, published mintages will become less important and there will be more reliance upon grading services’ reports of coins graded.

One of the most far-reaching consequences will be the greater barrier to entry that higher prices for the classic coins will create. That reality makes entry level programs such as the current America the Beautiful quarter dollars program even more important. The Federal Reserve Bank’s lack of cooperation in allowing these new coins to flow into commerce through local banks at face value as they are produced and released by the U.S. Mint will severely curtail the number of people exposed to the concept of collecting.

Today’s actions will affect our hobby and market in the future. n

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