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Perfect Timing and the High Price of Silver



I could not have chosen a better time to start a high-grade Morgan Dollar collection than now. In addition, there is evidence to show that the value of low-grade, common date Morgan Dollars and the value of silver are joined at the hip.

There has never been a better time for me to start a high-grade Morgan Dollar collection than now. Since I started collecting MS-65 and 66 Morgan Dollars in January, I have seen a monthly rise in the value of my collection, and more specifically my MS-66 coins. With five MS-66 Morgan Dollars in a collection of 17 to date, I was hoping to buy one more MS-66 for my collection. However, because the value of high-grade, common date Morgan Dollars has risen so dramatically, I will have to forgo that and finish my collection of 22 coins with MS-65 examples. Time and time again, my strategy of buying the tough coins first has paid off.

Naturally, this begs to question why the sudden rise in value. I believe the answer lies directly and indirectly in the rising price of silver. Before the advent of bullion coins, people looked to old United States silver dollars as a means to buy silver because of their high silver content. At $40/oz., the silver value in a dollar is about $31. Presently, there is evidence showing a direct correlation between the silver spot price and low-grade, common date Morgan Dollars.

For the sake of argument, I?ll use an 1879-S Morgan Dollar to illustrate a trend that is shared with all other common date silver dollars. As of 4/1/11, Numismedia Fair Market Value lists a G-4, 1879-S silver dollar at $32.20, or a mere $2.28 above the silver spot price of $37.91/ounce. Interestingly, the same coin on 11/1/10 with silver at $24.66/oz. was worth $16.85 (FMV 5/1/10 through 11/1/10) or in other words, $2.22 below the silver spot price. Today most collectors will not pay $32.20 for a G-4 silver dollar when they could own an AU-58 example for $37.95. These two market factors (low collector demand and high silver demand) combine to make melting low-grade silver dollars much more profitable.

The high price of silver has broad implications for the coin market. Where the values of silver coins are not directly influenced by the silver spot price, they are indirectly. However, scarce and rare date coins have different market influences. For instance, I own a VG-10, 1895-O silver dollar worth $253 FMV. A year ago, this coin was worth $276, and the current value has not changed since 8/10. Therefore, silver market corrections have little bearing on the value of scarce and rare coins.

An example of a coin indirectly influenced by the price of silver is my MS-66, 1879-S Morgan Dollar. This coin, like the lower grade coins had no appreciable change in value through much of last year. Starting in December of last year at $275, this coin is now valued at $356. This coin, like my 1895-O Morgan Dollar has numismatic value well beyond that of silver content. However, it is visibly clear that the current rise in silver is creating more demand for high-grade common dates. If this coin simply tracked the silver spot price, its value would only be between $290 and $300. Relatively inexpensive high-grade coins combine to offer a collector an aesthetically pleasing coin with a good potential for growth. Obviously, if there is a correction in the silver market, the value of my coin will go down some but the hope is that there will be a higher benchmark price before it reaches its previous levels.

Of course, all this value is only on paper, and I will not see a real profit unless I sell. Since I do not intend to sell my collection anytime soon, I will settle for the paper value and enjoy the ride. Things should be interesting in the coming months. It is an exciting time to be a coin collector!




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