Beware The Overhang

"Overhang" is a hidden or unknown supply of a particular coin that threatens the value of existing coins of the same type. The threat from overhang is that a rare coin will become common overnight and/or that the value will drop when the overhang is revealed.

The 1903-O Silver Dollar is a perfect example of how overhang can affect prices and rarity. In 1962, coin collectors thought the 1903-O was a great rarity, despite official records indicating a mintage of over 4 million coins. In 1962, very few 1903-O's existed - in any grade. Collectors assumed that the vast majority of 1903-O Silver Dollars had fallen victim to the Pittman Act in 1918 (which caused the destruction of over 270 million silver dollars). Thus, collectors were happy to pay the going rate to add this rarity to their collections, blissfully unaware that an overhang of hundreds of thousands of Uncirculated 1903-O Silver Dollars lay dormant in the vaults of the U.S. Treasury. Once the Treasury released the hoard, the price of the 1903-O fell from $1,500 to less than $20.

Similar (but less dramatic) situations occurred with 1859-O Silver Dollars, 1860-O Silver Dollars and most of the Morgan Silver Dollars struck at the Carson City mint. Large hoards of these coins were found in Treasury vaults and eventually released into circulation or sold at premiums to the general public. When the Redfield Hoard of silver dollars was revealed in the 1970's, dealers feared that the overhang of so many coins would depress the Silver Dollar market both immediately and in the future. However, in the case of the Redfield Hoard, the distributors of the hoard prevented long-term price suppression by carefully controlling the way the coins entered the market. Their actions turned the overhang (normally a negative) into a stimulation of the coin market (a definite positive).

Sometimes, overhang is unpredictable and unexpected. The discovery of the shipwrecks of the S.S. Central America, the S.S. Republic, and the S.S. Brother Jonathan brought many rare and previously expensive gold coins to the market more than a century after they went to the bottom of the sea. Prices dropped dramatically when these coins entered the market. However, now that collectors have absorbed these coins, the overhang has disappeared and prices have begun to rise again.

The trouble with overhangs is that we usually don't know of their existence until it's too late. However, if we stayed away from buying a coin because of a fear of a possible overhang, we'd probably never buy another one. In fact, the goal of this article is not to instill fear but to simply make collectors aware of overhang possibilities so that they may make a more informed decision.

Are other overhangs out there waiting to be discovered? Could be. I've heard rumors of a hoard of hundreds of Uncirculated 1652 Massachusetts silver coins. Supposedly, Col. Green had a hoard of 200 Uncirculated (some Prooflike) 1796 Quarter Dollars - if so, the vast majority of them have yet to show up in the population reports. What if a bag of 1927-D Double Eagles was found in a Swiss vault next week?

Clearly, overhangs add an element of risk and excitement to many coin purchases. On the other hand, hoards of rare coins coming onto the market create wonderful opportunities for collectors to own rare coins that they could not otherwise have afforded. In today's broad-based coin market, most overhangs have only a short-term impact on prices. The appetite for rare coins and fresh deals means that overhangs don't hang around too long!