Getting started in numismatics

Young or old, affluent or not, all sorts of people find coin collecting an accessible hobby. Many famous collectors started as children or young adults, and this is also the kind of hobby and vocation that gets passed to generations within families and shared with friends. Because studying numismatics also involves learning about history, politics, art and much more, this hobby has educational value. Of course, coin collectors also find this hobby exciting and sometimes, profitable. The first step for novice coin collectors usually includes learning the language of coin collecting. Special terms describe a coin's condition, type and appearance. Mastery of basic terms opens the door to gaining more knowledge.


 

collectionStart Your Collection

Learning coin terminology and acquiring basic collecting knowledge are important first steps for those entering the numismatic hobby.

 

 


 

historyCoin History

From the U.S. Mint’s first facilities, to the discovery of the Saddle Ridge Hoard, read about the historical places, people and events that have shaped numismatics.

 

 


 

metalsPrecious Metals

Bullion investing and coin collecting go hand in hand. Learn all about the basics of investing and the many different bullion coins available.

 

 


 

coinsKnow Your U.S. Coins

What’s so special about the Morgan dollar? How many different types of Lincoln cents have there been? Get familiar with all U.S. coins, past and present.

 

 

Making coins come alive

The very first American colonists had little need for coins in the wilderness. They bartered with trade goods, Native American wampumand tobacco. As civilization grew, the British did not always give the Americans permission to mint their own coins, but the colonists found alternative sources of coins and on occasion, struck coins without royal authority. For example, the Massachusetts Bay Colony set up its own mint in Boston in 1652 during a period when England lacked a king and continued striking 1652-dated silver coins for decades. Thus, early examples of U.S. Colonial coins were born. In April of 1792, the U.S. Mint was established in Philadelphia, the nation's capital at the time.

Numismatics, the studying of coins, and the collecting of coins both stand apart from investing in coins for their bullion value. Still, the bullion value of most collectible coins still needs to get considered. Even today, the U.S. Mint and mints of other nations’ produce bullion coins that are different from regular coins intended for currency. Through much of history, coins derived most of their value from their metal content. While people used coins as currency for thousands of years, the practice might have been closer to trading small bits of copper, silver, gold and other precious metals. However, as gold and silver rose in value, the intrinsic worth of the precious metals in the coins began to exceed their face value. In the U.S., for example, the replacement of 90 percent silver coins with base metal coins began in 1965.

Learning about U.S. coins means learning about the history of the country. Very often, decisions about a coin's content, value and design were made because of political, economic or social events of the time that they were minted. In some cases, political figures or mint executives even made decisions because of favoritism, nepotism or personal competitions — and learning these details makes old coins come alive.

Numismatic

How does the bullion market work?: Precious metals basics

The bullion coin market differs from the numismatic market to which many collectors are accustomed. The bullion coin market operates in a tier system structured something like a pyramid, with the issuing authority at the top. The issuing government produces and then distributes the coins in large quantity through a narrow system of large distributors. Dis­tributors in turn sell to wholesalers, who sell to a network of retailers, who then sell to the public. There is, of course, nothing to prevent a distributor or wholesaler from also being a retailer.

At each step down on the pyramid, the field widens. Let’s say, hypothetically, a government sells to 10 distributors. Each distributor sells to 10 wholesalers, for a total of 100 wholesalers. Each wholesaler then sells to 10 retailers, for a total of 1,000 retailers. The tiered distribution system is often referred to as the “pipeline.” 

MORE: CoinWorld.com's precious metals basics

The most important function of the distribution system is in providing a buy-back market. Bullion coins are investments; investments must have a degree of liquidity. 

Governments sell coins into the pipeline but will not buy them back. Selling the bullion coins through a network of private dealers enables a ready two-way market. 

Large distributors absorb buy-backs while at the same time they hedge their positions in the marketplace and hold the coins until the market turns favorable. A small dealer, such as a coin shop or local bank, would place a serious strain on its liquidity if it were compelled to buy and hold coins from an investor taking a profit. And investors would not likely purchase coins for investment that could not be resold for profit.

The above is an excerpt from the eighth edition of the Coin World Almanac, published by Amos Media Company in 2011.


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