Coin grading

In coin collecting, coin grading is the process of determining the grade or condition of a coin, one of the key factors in its value as a collector's item.

Overview

Coin grading has evolved over the years to a system of finer and finer grade distinctions, particularly when talking about US coins. In the beginning, people collected ancients and there were two grades, new and used.

This evolved for a time to the letter grading system beginning with the lowest grade – Basal State (also Poor (PO)), then continuing Fair (Fr), About or Almost Good (AG), Good (G), Very Good (VG), Fine (F), Very Fine (VF), Extra Fine (EF or XF), Almost or About Uncirculated (AU), Uncirculated (Unc) and up to Brilliant or Beautiful Uncirculated (BU). Gem Uncirculated was roughly equivalent in usage to BU at that time.

The British grading system is similar, except that 'Good' and 'Very Good' are 'Poor' and 'Fair' respectively. The word 'Good' used to describe a coin under the British grading system is usually an indication that it is at the higher end of its grading classification, e.g. a 'Good Fine' coin will be in a better condition than a coin that is merely 'Fine'.

William H. Sheldon in his book Penny Whimsy is credited with coming up with the Sheldon Scale in the 1950s, a numeric system going from 1-70. It was intended to be a reflection of the relative value of a 1794 Large Cent, which was then worth $1 in Basal State and $70 in Uncirculated MS-70.

This numerical system was used primarily within the community of large copper coin collectors (a very specialized part of numismatics that often has its own ideas about quality and grading compared to the rest of the coin collecting community) until the mid 1980s.

Distinctions

In 1986, PCGS (Professional Coin Grading Service) was incorporated. They authenticated, graded and encapsulated coins in a protective hard plastic shell. They used a combination of the two older systems putting letters and numbers together so that the grades became BS-1 (or PO-1), FR-2, AG-3, G-4, G-6, VG-8, VG-10, F-12, F-15, VF-20, VF-25, VF-30, VF-35, XF-40, XF-45, AU-50, AU-53, AU-55, AU-58, MS-60, MS-61, MS-62, MS-63, MS-64, MS-65, MS-66, MS-67, MS-68, MS-69 and MS-70. They also issued limited guarantees for the value of coins they had graded.

The march to finer and finer distinction had taken another huge step. Alongside this scale was a similar one for proof coins PR-01 or PF-01 through PR-70 or PF-70 that was roughly equivalent to the MS scale, except for proof coins. This is important as in some issues distinguishing between mint state (for commerce) and proof coins is very difficult and specialized and the price differences can be large in favor of either MS or PR/PF.

The idea was to make coins easily tradable on an open market. However, because they used technical grading rather than market grading there are limits to their system, particularly in relating the grade directly to a value. One thing PCGS did accomplish was largely ridding the marketplace of inferior counterfeit coins. Unfortunately, some better counterfeits have since come into being, further justifying the need for professional authentication in a counterfeit-authentication arms race.

Grading services

As of 2008, there are three prevalent coin grading services: PCGS, NGC, and ANACS. There are subtle variations in the grades assigned by each of these major services, and prospective buyers are encouraged to seek professional or expert advice before making any important rare coin purchases.

An interesting contender among grading services was Compugrade. In 1990 Henry Merton was awarded United States Patent Number 4,899,392: Method and System for Objectively Grading and Identifying Coins, Feb. 6, 1990. Compugrade’s computers evaluated mint luster, physical damage to the coin and other conditions that detracted from the quality of 'Mint State.' Compugrade also patented a ‘tamper-proof’ slab to hold the coins that they graded. However, a ‘coup’ by members of Compugrade’s board of directors caused Henry Merton to telephone the Editor of Coin World to ask her to publish the letter that he had filed with her. That letter acknowledged assistance from numismatists who had not signed release forms for their contribution of information to the writing of the patent. That letter to the editor ‘wiped out’ Compugrade’s exclusivity by placing the patent in the public domain, which was Merton’s intent.

In the May 26 2003 edition of Coin World, the hobby newspaper had announced they had contracted investigators to conduct a year-long, comparative study of PCGS, ACCGS.org, NGC along with several other grading services, each know as a TPG or Third Party Grader. In their investigation, Coin World sent several of the same coins were sent to each grading service over the course of a year, each coin being graded by all Third Party Graders sent to. The findings were; "In no case did the grading services agree on the grade of any given coin, and in some cases the difference in grading was as much as seven points off". By way of example, a finding published by Coin World involved one case where ACCGS had graded a coin as "cleaned", which lowers the coin value, Additionally the coin had been graded several grades lower than PCGS while PCGS had not noted the same coin was "in fact, cleaned". It is standard in U.S. numismatics to grade coins on a point-scale from 1 (poor) to 70 (perfect)and to note if a coin has been cleaned or poorly mishandled, or in some cases, to reject it for encapsulation.

In September 2004, members of the American Numismatic Association (ANA) reported seeing counterfeit NGC PCGS holders (also known as "slabs") at the Long Beach Coin Show. Members of the Beverly Hills Coin Club,(BHCC) an affiliate club-member of the ANA, had reported counterfeit coin slabs as early as December 3, 1998. As a direct result, BHCC partnered with ACCGS, manned by unpaid club volunteers, as a pre-certification service for coins and to "guarantee the authenticity of slabs or Third Party Grader holders". More counterfeit PCGS and NGC holders were reported on eBay in 2005 and later years, but NCG did not address the problem until 2008, after high-quality counterfeit holders had been seen and purchased on eBay. Numismatic Guaranty Corporation (NGC) published the following acknowledgment on January 7, 2008:

"NGC has identified and confirmed that (counterfeit replicas) of its holder has been produced.......The holder has been seen housing counterfeit dollar or foreign crown size coins. While the enclosed coins are also counterfeit, the label information matches the coin type enclosed. The label information is copied from actual NGC certification labels, and the certification information therefore will match the NGC database. Most frequently, Trade Dollars and Bust Dollars are found, although Flowing Hair Dollars and foreign coins have also been seen. A range of grades is also represented."

NGC and PCGS counterfeit holders have been reported in eBay forums and more may be reported by other firms and individuals. The PCGS website notes that they "anticipate that authentic coins will eventually be placed into counterfeit holders". Third party graders are taking measures to resist counterfeiting, however, counterfeit holders may multiply and improve over time. Numismatic Guaranty Corporation and PCGS offer no reimbursement liability for the prices paid for coins in their counterfeit holders. Both firms have online links to verify the holder numbers. However, many buyers may not be computer users or may be unaware of such links. Caution is advised when purchasing coins in PCGS and Numismatic Guaranty Corporation holders as the seller can disclaim liability due to the "third party" nature of the counterfeit holder. Additionally, it may be too late to request refunds from eBay sellers before holders can be verified as counterfeits. Many coins are posted on eBay and through other venues "as is" and therefore with no return privileges.

Complexity

It is difficult to imagine that there will be yet finer distinctions in grading in the future, yet it's already happening. Series-specific strike distinctions such as FSB (Fully Split Bands) for Mercury and Roosevelt Dimes, FBL (Full Bell Lines) for Franklin Half Dollars, FH (Full Head) for Standing Liberty Quarters, 5 and 6 step Jefferson Nickels and so forth are creating condition rarities out of coins formerly thought of as common.

The depth of mirrors on proof coinage has led to terms of distinction such as Cameo, Deep Cameo, Ultra Cameo and so forth. Also, uncirculated coins are sometimes deemed Mirror Proof-like and Deep Mirror Proof-like.

People are bidding up coins based upon their population rarity (several grading services publish population reports letting collectors know how many times they've granted a particular grade to a particular coin), and these other fine distinctions, and clever marketing by both the grading services and numismatic firms. Ultimately, some of these schemes will prove popular over time, and others will turn out to be market bubbles. It's impossible to say which will stand the test of time in the eyes of collectors and investors.

With all of these factors to consider, and the distinction between grades being so fine in many cases, it becomes more and more difficult for the average collector to keep up. The general public is even less likely to understand this explosion of grades and the subsequent valuations. Nevertheless, there are many good books and web sites that can assist in determining the approximate grade of coins.

See also

• Coin collecting
• Numismatics
• Exonumia
• Troy weight (The system used with coins and precious metals. One troy ounce (ozt) is exactly 31.1034768 grams, about 10 percent more than the avoirdupois ounce, which is exactly 28.349523125 g.)