The systematic collecting of coins for their rarity and historical value didn't actually begin until the 16th century, when the resurgence of interest in Greek and Roman cultures gave rise to coin collecting as a popular and prestigious hobby among wealthy Europeans.
By the late 1590's, this hobby had become extremely popular among the nobility, and the first coin catalog was created. One of the first known coin auctions was held in Leyden, Holland in 1598.
Since then, numismatic, or rare, coins have attracted such diverse enthusiasts as John Quincy Adams, Cornelius Vanderbilt, Enrico Caruso, Theodore Roosevelt, Buddy Ebsen, Chris Schenkel, and Wayne Gretzky. Today, coin collecting has gained a worldwide following.
It is estimated that there are 7-10 million coin collectors in the United States alone... and that there are perhaps four to five times as many collectors around the world! Coin collecting is widely recognized as one of the most rewarding hobbies in the world -- once known as "the hobby of kings," it is now called "the king of hobbies."
Some of the world's greatest coin collections are now housed in museums. The Smithsonian Institution in Washington, D.C., the Metropolitan Museum of Art in New York City, as well as the great city museums of London, Paris, Vienna, and Berlin boast tremendous collections of world coinage.
Because coins have now been minted for more than 2,500 years, today's coin enthusiast has an almost inexhaustible range of collecting choices available: Ancient coins, rare U.S. coins, modern proof coins, and bullion issues are just a few examples.
As with any investment or collectible, the value of a rare coin is established in a free marketplace by investor and collector activity. The size and intensity of that activity is influenced by three major criteria: (1) An issue's rarity; (2) The demand for a coin or set of coins; and (3) A coin's condition or quality.
The rarity of a particular coin helps to determine its value. Because many collectors and investors prize the scarcer issues and target them for acquisition, they naturally bid up the prices of those coins.
Demand comes from two primary areas: (1) Collectors, who build lifelong collections of coins with no intent to sell, and (2) Investors, who buy coins in order to earn a profit. Some important factors that can create strong demand for a coin include rarity, historical significance, quality and a successful investment track record.
The overwhelming majority of minted U.S. coins were circulated. Many coins were lost through attrition and others were damaged by use, thus eliminating any potential for numismatic value. The few surviving uncirculated coins are in a much more pristine condition.
Investment quality coins are primarily those coins rated in the 11 uncirculated grades, 60 and above, on the American Numismatic Association's 70 point grading scale. A coin's grade is a measure of its condition or state of preservation. The higher the grade, the better the condition.
Uncirculated coins fall into two broad categories: Proof (PF or PR) and Mint State (MS). Mint State coins were originally meant for circulation but never were circulated, so they remain in the same condition today as when they were minted. Proof coins were never meant for circulation, thus they received very careful handling and were specially struck at least twice on highly polished planchets.
The beauty of a coin can attract collectors as well as investors, and therefore increase demand for a particular coin or set. This increased demand can result in rising values. Eye appeal is affected by several factors including the beauty of a coin's design, the minting process used, the fullness and sharpness of its strike, the toning, the brilliance of its luster and the amount of wear and number of blemishes on the coin's surface.