Ever wonder how a small coin can sell for hundreds of dollars? Or why a single piece of paper can be worth thousands? Keep reading to find out.
“Never judge a book by its cover”— a common saying used to caution people against making quick assumptions from a first glance. As a good rule of thumb to live by in general, it just so happens that this motto also applies nicely when talking about the differences between a coin’s face value and its true worth.
Distinguishing between face vs. intrinsic value can be particularly confusing with coins because one is not necessarily always greater than the other. For instance, the face value of a 2014 American Gold Eagle is $50, but the coin is actually worth over $1,400. Conversely, a U.S. dollar coin has a face value of $1, yet its metal content would actually only be worth about 10 cents if you were to melt it down.
While the lines between the face value of a coin and its actual worth can sometimes be blurred, understanding the differences between the two is an important lesson for both collectors and investors alike.
Face value is the written, stamped, or printed value located on the coin or currency itself. The face value is assigned by the government to denominate a coin’s price as a form of legal tender. Coins that do not carry status as legal tender are called rounds, and they do not have a face value.
Figuring out a coin’s face value is usually as simple as looking on the obverse (front) or reverse (back) side of the coin. For example, if you look at the back of a standard U.S. penny it will read “One Cent;” a nickel will say “Five Cents;” a dime…well, you get the picture. This is the coin’s face value, or what it is worth as a form of currency.
Paper currency works the same way. The materials used to make a dollar bill aren’t worth anything—however it is assigned a face value so that you can exchange that piece of paper for goods. Until the Great Depression, all paper money in the U.S. was backed by gold. The practice of direct convertibility of the U.S. dollar to gold was officially removed under President Nixon, but advocates of the Gold Standard still believe we should go back to this system since gold is a precious metal and carries intrinsic value.
Read our blog post “Closing the U.S. Gold Window – 40 Years of Worldwide Paper Money” to learn more about the fall of the Gold Standard and rise of fiat currency.
Actual (Intrinsic) Value
While a coin’s face value is easy to determine, calculating its actual worth requires a greater knowledge of several key factors, such as:
- Melt value (the base worth of the metal contained in the coin)
- Historic value
- Aesthetic features
- Mint year
- Grade or condition of the coin
- Scarcity or rarity
The actual value of a coin is not something you can see at first glance, but rather a combination of qualities that a knowledgeable coin expert can identify. For instance, a novice collector might see a pre-1965 Washington quarter and spend it in the next snack machine they see, but someone who knows that dated junk silver coins contain 90% silver would be smart to hold onto the quarter as an investment since it is worth way more than its face value. Learn more about pre-1965 90% junk silver coins.
Visit the Provident Metal’s Knowledge Center to learn more about how to determine the actual value of a collectible coin.
Make a Long Term Investment
In conclusion, thinking about a coin like a book can be an easy way to remember the differences between face value and actual worth. The coin’s face value is the cover, while all of the other factors that go into determining its intrinsic worth are the pages that make the coin more or less valuable.
If you are interested in making an investment that will last, then back up your financial assets by investing in precious metals today. Bars and coins made of gold, silver, platinum and palladium have intrinsic value, which will bring stability to your portfolio by offsetting the unpredictable ups and downs of paper currency.