Silver coins dealers and coin collectors of contemporary United States silver coins received some welcome news from the US Mint in January 2012. The Mint announced a substantial ten percent reduction in the price of some of its most popular numismatic coins, including the American Eagle Silver Dollar. The official explanation for this price cur quoted falling silver prices as a reason, although an improvement in the minting process was also given due credit. The good sales figures for silver eagles in 2011 suggest that a lack of coin collector demand was not a factor behind the Mint’s decision.

Silver coin dealers and collectors are both buyers and sellers
While this hot coin news item from the US Mint was sure to please the coin collector looking for silver coins for sale, how about the coin collectors interested in selling silver coins from their collections? It is easy to forget that it is common for a coin collector to be a seller as well as a buyer, for instance, selling duplicate coins and using the money raised to fill in gaps in their collection. Silver coin dealers are also often coin collectors and so rising prices are not an unmixed blessing. When viewed from these different perspectives satisfaction with price changes might depend on whether the coin collector is wearing their buyer or seller hat that day. Nonetheless, when it comes to the decision whether to buy or sell collector coins now or later the dealer or collector is certainly influenced by what they think is happening on the market. Does it make sense to take this lowering of silver coin as a sign that we have entered a buyer’s market?

The difficulty of predicting short-term silver price changes
Silver is well known as a precious metal prone to larger variations in value than gold. A number of factors contribute to this instability. The industrial uses of silver provide an important additional source of demand for the metal beyond the better-known demands from the jewelry trade and the minting of silver numismatic coins. There are also serious doubts about whether the silver supplies available today can meet existing and anticipated demand levels. This makes it all the more difficult to understand the approximate 40% decline in silver values from the high reached in April 2011.

Although silver lacks the reputation of gold as a safe investment in times when the business and financial sectors appear to be carrying high risks, prices are definitely influenced by wider economic factors. Silver prices share with gold bullion prices a susceptibility to changes in foreign exchange rates and interest rates, and signs of economic recovery. For example, the strengthening of the US dollar in the second half of 2011 is likely to have contributed to the decline in silver prices but it is hard to determine to what extent.

There is also a significant body of opinion in the coin collector community that believes the price of silver is seriously undervalued at the moment and the imbalance between supply and demand are likely to lead to a major silver price increase. The decline in silver prices in 2011 is blamed on speculators or government policies rather than being a reflection of the true state of supply and demand for silver bullion.

Sound advice for the silver coin collector
With many different factors influencing silver bullion prices it is not sensible to base coin purchasing or selling decisions on a firm conviction that prices are following a long-term trend. The coin collector who spends a fortune at silver coin dealers with the hope of making a good profit from a quick resell is likely to be disappointed. In contrast, the coin collector who buys silver coins to complete their collection, or because they are attracted by a numismatic coin’s design or historical significance, is not going to be disturbed by short-term silver price changes. If they plan on keeping their American Eagle Silver Dollars (or other silver coins) for a number of years they stand an excellent chance of making good gains on this investment.

As the year 2011 drew to a close an interesting item of American coin news captured the attention of the world’s media. At a sale run by Blanchard and Co, New Orleans numismatic coins and bullion dealers, one of the most famous rare US coins from the period prior to the establishment of the US Mint brought in a record $7,000,000 price.

The item of rare currency in question, the Brasher Doubloon, was minted in 1787 by a goldsmith named Ephraim Brasher. This gold coin’s claim to fame is not just due to the fact that it fetched one of the highest prices ever paid for US gold coins, but it ranks high in the list of numismatic coins of historical importance. Ephraim Basher was a neighbor of America’s first President, George Washington, and it is known that Washington patronized his business. Brasher was also employed by the American government as an assayer of coin values with this trademark “EB” initials stamped on early American coins recognized as a sign that the coins were genuinely worth their face value.

The story of the Brasher Doubloon
Despite its high profile in international coin news, many details about why the coin was minted and the man who produced it are shrouded in the proverbial mists of early American history. The period prior to the opening of the US Mint in 1792 was characterized by numismatic confusion with a variety of different European and British coins of various denominations in circulation. The Bank of New York issued standard coin value and weight information for foreign coins but the activities of counterfeiters and coin clippers seriously damaged public confidence in the country’s coinage.

As an aside, while coin counterfeiters are still a concern today, the coin clipper has disappeared with the use of milled edges and legends around the edge of coins. The coin clippers made their illicit gain by clipping the edge off gold coins. They put these coins back into circulation at their original value and sold the gold clippings. The potential gains and the poor state of law enforcement in this era meant that there were enough people tempted by the gains of gold coin clipping even though they might face the death penalty if they were caught.

Understandably, great value was placed on US gold coins whose coin value was beyond dispute. Ephraim Brasher’s reputation as an honest businessman and his mastery of the goldsmith’s skills led the American government to engage his services as an assayer of coin values. His good name and public confidence in his mark were also presumably a factor in his decision to mint this doubloon in 1787. He engraved no value on the 26.66g gold coin but historians believe it had a purchasing power of about $15. This was a vast sum for the time. You would have to multiply it at least a hundred times to give an idea of its purchasing power in terms of today’s dollar value. This high coin value was obviously more suitable for major business transactions rather than daily shopping. However, with just five or so coins known to us, perhaps it was minted as an example of the goldsmith’s craft rather than for regular circulation? Nobody is certain why Brasher produced it.

Rising value of US gold coins
In addition to the historical interest, the Brasher doubloon’s record sale price indicates how the extent gold prices and rare currency prices have multiplied over recent years. Back in 1979 a Brasher doubloon was sold for $725,000 and even allowing for the change in value of currency the price increase over 30 years remains impressive. While the identity of the buyer remains secret it was revealed that the purchaser was an investment house. This also can be seen as a sign of how investors are now relating to rare currency similar to the way they relate to paintings and other works of art—items that are virtually guaranteed to continue to rise in value and provide a level of security that the worlds of business and finance seem unable to match.