Steve Duke Presents Tradio Gems: Coin Collecting

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[audio:|titles=Coin Collecting ]

Steve Duke:
You know it’s funny, coins and stamps are similar. A lot of people just save stuff, they save bulk. I’ve run over to houses like that and there might be $4,000 or $5,000 just in the face value and there might be a handful of stuff that has any real premium to it, because people just basically were hoarders. I don’t think everybody is, but I have my hand up. I know I am.

Ken Lovejoy:
Yeah, you are a hoarder. Collector…

And stamps, a lot of people too would buy sheets of stamps every time they would come out in the hopes that this would eventually escalate in value. They bring them to the shop, stuff even from the ‘40s and ‘50s. I just look at the stuff and I’ll tell people these are what we call ‘lick ‘em and stick ‘em.’ You just take them and use them for postage. There are a handful of good stamps that have appreciated in modern times. There are a handful of good coins that have appreciated in modern times, but the majority of it is common stuff.

Well, our phone lines are open and it’s about 9:30. Actually, one of our callers started us off here. We’re going to talk about coins and at Westchester Gold & Diamonds we do buy a lot of coins. We buy collections, we buy individual coins and the one thing that will happen constantly is people will come in and they’ll say “You know I’ve got these coins and don’t try and rip me off because I’ve already looked them up on the Internet.” I’ll go okay.

They’ll show me a silver dollar and say “What are you paying for this?” You’ll tell them well right now we’re paying $27 for that because that’s a common date silver dollar. “Oh, no, it’s not. I looked it up on the Internet and these are selling for $2,000.” You just kind of look at them and you try and be civil. You try to hold your tongue.

Usually what I’ll do is I’ll walk in the back and I’ll pull out 30 or 40 of them with the same particular date. I’ll put them on the counter and I’ll say well, if you’d like to give me $29 a piece you could take all of these and then sell them on the Internet for $2,000 each. They’ll kind of look at you with a quizzical look and go “Well, why are you being so generous?” I’ll go because whatever you looked up wasn’t that particular coin or if it was that particular date it was in a different condition than what you have. Again, they get that puzzled look on their face and they’ll go “Well, what do you mean?”

Basically, when we look at coins, a large portion of coins that are out there right now have silver and gold content. Silver is high, gold is high and if you look at the book value, depending on what kind of book you’re looking at, you’ll find that a lot of times the silver content or the gold content is actually worth more than the coin value. You go well, how is this possible? Well, the books were written with a lower silver price or a lower gold price and when silver and gold are both low then a lot of the coins have what we call a numismatic value.

Numismatic refers to the fact that that’s the hobby where people actually collect coins and someone who deals in coins in a numismatist. We talk about condition, there’s a scale called the Sheldon Scale. This is a sliding scale starting at 1 and it goes all the way up to 70. Yeah, it sounds a little complicated but it’s really not. It all refers to the condition of your particular coin.

When people come in and they have what we call a large cent, a one cent piece, these were coined all the way from the 1790s into the late 1800s. You can barely make out what it is. You’ll see a little head on it, you’ll see a portion of the date and when you flip it over you might be able to read a piece of where it says United States of America. This is in really bad condition. Everything else is pretty worn flat and people will say “Well, heck, it’s from the 1800s.” Well, I can understand that, but what you have to understand is there were millions, not hundreds or thousands, millions of these coins printed and because they were unusual or odd people put them away. They stuck them away because it was something you don’t see every day.

So you’ll find that if it’s unusual, if it’s different, whether a person is a real collector or not, they stashed it somewhere and it was handed down over the generations. I’ve seen people come in with old change purses and things, little notes from grandma that said ‘This is a coin that I got when I was a child. Hold on to it. It will be worth a lot of money.’ When they come in they find that in that kind of condition it’s worth anywhere between $1 to $5, not a whole lot of money.

Now, that same coin could come in and you’d be able to read the date. You’d be able to see all the hairlines. You’d be able to read the United States of America on the backside of it. You’ll see all the detail on it. Now that coin could turnaround and start to be instead of $1 to $5, it could be a $25 to $1,000 coin, depending on the condition.

Now, some of the different categories of conditions that we actually grade coins are, number one, would be in poor condition. This is the one you could barely tell it’s a coin. You’ll have what we call the planchet, which is a piece of metal that they actually stamp a coin on. It could be made out of copper. It could be made out of nickel. It could be made out of silver. You can barely see any detail or design on it at all. That’s going to be in poor condition.

A lot of times when you first start collecting coins you buy a book. It has all these holes in it and the first thing we do is I’m going to get all these holes filled. You’ll find that it doesn’t matter what condition that coin is in. If it’s in poor condition and you can at least see part of the date you put it in that hole. You’re no different than maybe your dad was or your mom or your uncle or your grandfather, they had the same idea. They’re going to fill as many holes up as they can because this is their hobby. They’re not doing it as an investment; they’re doing it because it’s fun.

Back in the ‘50s, coin collecting was huge. I mean just monstrous. You could go through regular change and pull a lot of good coins out of change. You could go to the bank and we used to get rolls and rolls of pennies and go through them looking for a 1909-S VDB or a 1931-S penny or a 1922 Plain. Believe it or not, you could actually find some of these coins in everyday change. Nowadays, it’s gotten so commercial you’re not going to find them.

I constantly have people from the bank that will come in and some older person was disposing of coins that they had lying around. They’re just “I’m tired of these silver dollars. They take up so much space.” They turned them in for a dollar. They could have turned around, come over to the shop and gotten anywhere between $20 to $30 a piece for them, minimum.

So if you have stuff like that that’s kicking around, don’t just run to the bank with it. Stop and see us at Westchester Gold & Diamonds, we’re happy to look at that stuff. If it’s good, we’ll tell you. If it’s not good, you can always take it to the bank.

Now, the next condition after poor is fair condition. This is where you can see a little bit more of the detail. Then it gets into what we call good condition. Now you can tell it’s a coin. You can tell a little bit of detail. It’s starting to look better and better. Then we have what we call very good condition. Good to very good is like the first category that dealers will really look at a coin and it starts to have some kind of collectable value to it. Unless it’s an extremely rare coin, unless it’s good to very good, it’s not going to have much premium at all. Regardless of whether it’s silver or gold, again, it’s going to have the silver or gold content but very little numismatic value.

Now we get into fine condition and I talked about what we call the Sheldon Scale. Basically, what this means is if you have a coin and it’s in at least fine condition and it happens to be a rare coin, you can send it to some of the independent grading companies out there. The three that are most known by anybody who really deals in coins is going to be PCGS, NGC or ANA.

These are the three independent graders that hold more credence than any other company out there. Since coins have become a big collectible and a big money collectible, we find that there are a lot of different companies that have jumped up and copied these grading companies. Why would they do that? Here’s a little lesson on why they would do this.

Number one, a lot of times people look at these coins. They may see it on Home Shoppers Club. This is a great example. They sit there and they say these are all Silver Eagles and it’s the complete set of Silver Eagle coins. They’re all graded by ICG and they’re all MS-70 coins. You’re a collector. You’ve looked at stuff and you go “MS-70 is the best. That’s the highest condition you could possibly have. These coins are all graded MS-70 and the set is only $500. I went on the Internet and I saw an MS-70 in that particular year and it’s selling for $300 by itself. I’m going to buy this. This is a great deal.”

Well, now you’ve bought the set. Your economic standing changed a little bit and now it’s time to turnaround and cash that in. You know you only paid $500 for the set and it should be worth a lot of money. “They probably screwed up when they sold it on television and they sold two or three thousand sets. They didn’t know what they were doing.”

No, they did know what they were doing because none of these coins were graded by a recognized company that had any kind of resalable value to them. Which means when you took it to a dealer, the dealer will look at these coins and he said to you “These are all graded coins. They’re what we call slabbed, which means they are encapsulated in a clear plastic holder. It tells the date, it tells the condition and it protects the surface of the coin and they’re now worth about a dollar over the silver content.” “Well, what do you mean? You’re crazy! These are MS-70s.”

They may be graded MS-70s in somebody else’s world, but a coin dealer who’s worth his salt is going to say to you “They’re not graded by PCGS, they’re not graded by NGC, they’re not graded by ANA and in the real coin world they’re not going to have that MS-70 grading because no one will accept the ICG grading.” So all of a sudden you’re saying to yourself “Well, he’s trying to rip me off.” Then you take it to another dealer and you’re going “He’s trying to rip me off.”

It never occurs to the people out there who are not that knowledgeable yet until they’ve bought this set and they’ve found out that it’s not the dealers who ripped them off it was the company on television. You didn’t do your homework. You didn’t learn enough. Like I’ve talked about on collectibles, if you’re going to invest any serious money in collectibles you need to get a little information. You need to get some knowledge before you jump in with both feet because you can get hurt in a real hurry, especially in the coin market.

So I’m sitting here saying to you MS-70. What am I talking about? Okay, on this scale it started from 1 to 70 and when you get to a coin that’s what we call in fine condition, this is the lowest grade that you really want to get a coin slabbed in. This is called an MS-70. The MS stands for mint state. What we’re talking about is if you can visualize a coin coming from the mint and being circulated, put in everybody’s pocket and spent and sold and spent and sold.

This is a coin that’s been circulated, so this is going to have a lot of wear and tear on it. This is going to be lower down in the mint state. Ideally, an MS-70 is a coin that’s absolutely beautiful. It has no microscopic scratches. It’s perfect. The detail is wonderful on it. It’s free of all blemishes. This is an MS-70 coin. Now, that’s pretty hard to find in a coin that’s been circulated, something that was printed in the 1920s, but they’re out there.

Now, an MS-60 is what we call an uncirculated coin. This coin doesn’t have to be beautiful. It could be ugly. It’s a coin that when we look at it doesn’t have what we call a whole lot of eye appeal, but all the details are just like it came from the mint. It could have some scratches on it. These are what we call contact marks.

You have to understand when these coins are printed at the mint they’re on a conveyor belt. The planchet, which is the piece of metal that they’re stamped on, comes in, it goes between two dies, they’re stamped and it comes back out. There are thousands and thousands of coins printed at a time. They’re put in bags and they’re sent to the mint through the banks, wherever. These coins get scratched up, but they don’t have any wear and tear on them. They’re what we call contact marks from other coins.

Back in the early ‘80s, the mint actually found all kinds of Carson City silver dollars in thousand dollar bags in their vaults. They turned around and put these in special boxes, made them available to the public and sold them at a premium. A lot of these coins have appreciated dramatically in value and they’re listed as uncirculated coins. Now, what happens is a lot of these coins have scratches. They’re really ugly, but they are uncirculated.

There are different degrees of uncirculated. So an MS-60 quality coin is one that hasn’t been circulated, but it’s not particularly pretty. When we say eye appeal, what I mean is does it look nice. Does it look pretty? Is it free of blemishes? Yes that sounds pretty kooky, but a lot of coin collectors are kooky. They’re willing to spend their hard-earned money to buy the best they possibly can.

There are different degrees. From MS-60 we get MS-61, 62. When we get to an MS-63 there’s a dramatic jump from an uncirculated coin to an MS-63, which is an uncirculated coin but starts to have some nice eye appeal. Then there’s MS-64, which jumps up quite a bit. MS-65 is sort of like a threshold. This is a really beautiful coin and it’s a rare condition. It’s almost perfect, but not quite there. Then from 65 we go to 66, 67, 68, 69 and to a 70.

When you see an MS-70 graded coin, this is a perfect coin. That’s a pretty unusual thing, except what we have now are a lot of dealers who sit there and want to tap this new market, this market where people are touted to put their money from their IRA in coins. You can actually do this now. There are certain coins that you’re allowed to put in your IRA. They have to be graded. Most of them have to be proofed, but there are some higher-end coins that can be put in there as well.

So we have these dealers who buy all these coins brand new from the mint. They turnaround and they’ll send a thousand of these brand new coins that virtually are perfect because they’ve just come from the mint. They’re not circulated. The mint prints these as bouillon coins. When I say bouillon, what I mean is they print what we call Silver Eagles and they print Gold Eagles. These coins have no monetary value other than the value of the silver or gold content in them. They trade at a little bit of a premium above their spot gold or spot silver price.

What happens is we get a lot of these dealers and when we talk about dealers we’re talking about fellas who do this for a living. We’re not talking about guys who spend $1,000 or $100,000 on these new coins. They spend hundreds of thousands of dollars buying these new bouillon coins, whether it’s silver or gold, sending them to independent grading companies. Most of them don’t send them to PCGS or NGC or ANA, but the smarter guys do. What happens is if they get an MS-69, which is virtually a perfect coin, that’s great because now they can turnaround and sell that at a huge premium to people who don’t realize MS-69 in a modern bouillon coin means nothing.

I’m going to tell you probably 98 out of 100 coins that come right from the mint and get sent in to be slabbed and graded are going to grade MS-69. Not a big deal. Most of them are virtually perfect coins. You might get two of them that come out MS-70 and at MS-70, yes, there are people who will pay pretty good premiums for these MS-70 coins, but again if they’re graded by PCGS, NGC and ANA you’re probably going to get a premium on those coins. If they’re graded by some other company independently, one of the smaller companies, they will not carry that premium.

There are going to be companies that call you and say “We understand you’re a collector.” Well, you bought something on television and they turned around and that guy on television sold your phone number and American Express card number to these other companies. They will tout you that these are great investments. I’ve had people who bought one or two coins from these companies and the next thing they know they on a mailing list and every month these companies sent them coins. A lot of our older people out there don’t realize that they don’t have to pay for those coins. You just have to call your credit card company and say “Look, they sent me this without me agreeing to buy this from them” and send it back.

I talk about the fellas that came in the shop and they had billed his credit card $13,000 for these gold coins he had gotten. They weren’t graded by any of the large companies. They were graded by an independent company. They weren’t the grades they were supposed to be. When we went through to find out what they were worth, they were worth between $5,000 to $6,000 on a good day. He was panicked. “I can’t afford $13,000 for the coins.”

We got on the phone, we called the company. We called the credit card company, stopped payment on it and the coin company gave us a hard time. “You’re not going to send these coins back.” I said fine then, we’ll just keep them. We’ve already cancelled the credit card, so you can either give us a return authorization number or we’ll keep the coins. Eventually, they came around and said “Well, we’re not going to get stiffed for our coins. So, okay, here’s a return authorization number.” You can do this. I constantly have younger kids come in. Their mom and dad received these coins in the mail, what can they do. You can return those coins.

Collectible coins, the older coins, I’m talking about stuff from the early 1900s and 1800s and things, if they are slabbed and graded by independent companies, other than the three that I’ve told you about, they’re not going to bring the same kind of money as what you thought they would. Again, if you look on the Internet, you have to compare apples to apples and oranges to oranges. If you looked at an MS-65 silver dollar and it sold for $2,000 and you walk in with one that’s beat up, someone has carried it for years and years, it was a pocket piece, the fact that somebody offers you $25 or $27 for it they’re not ripping you off. You’re not comparing apples to apples. You have to compare condition to condition, rarity to rarity.

Now, don’t be fooled by just someone saying “Okay, I’m going to pay you $25 a piece for these silver dollars.” People bring them into Westchester Gold & Diamonds, we go through, we grade them and we look for rare dates. There are quite a few rare dates out there in silver dollars. Not so much in rare dates in the more common half dollars or quarters or nickels or dimes, but people will come in with a complete collection and go “Well, I know it’s worth a lot more money because it’s a complete collection.” Not really. Out of 70 coins that could be in a collection, only three or four of them are going to have real big premiums on those coins. We’re always happy to look through those and pay you a premium for them.

The biggest problem is a lot of people will get on the Internet, look at it and they don’t understand what they’re looking at. Condition is the most important thing. The company, if they happen to be graded, is the most important thing; what company did it. If you’re going to invest your hard-earned money and think you’re going to get a coin that’s going to appreciate over a period of time, know what you’re buying, understand the grading system and understand the dealer you’re dealing with.

There are lots of fellas that jumped in and, like I said, they buy gold and silver, last week they were selling shoes. They look at a book and they go “Oh, this is a rare date. I’m going to get $300 for this coin.’ They don’t understand the grading system. Deal with people who are knowledgeable. Deal with people who you can trust, people who know what they’re doing.

Don’t be afraid to get a couple different prices on your coins. We’re always happy to give you offers on your coins. Like I said, if we don’t offer enough, take them somewhere else. Shop around and get the best you can. We’ve been doing it for 37 years. We’re not going anywhere. We’re more than happy to give you a free evaluation and cash offer on those things.

I’m Steve Duke the owner of Westchester Gold & Diamonds. We’re talking a little bit today about coin collecting and grading. If you have questions, please stop in and see us. Ask for me, Steve Duke, I’m more than happy to sit down and go over what you have or help you add some coins to your investment portfolio.

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