Coin grading
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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.
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[edit] 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.
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.
[edit] 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[1]. 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 counterfeits. Unfortunately, some better counterfeits have since come into being, further justifying the need for professional authentication in a counterfeit-authentication arms race.
[edit] Grading services
As of 2006, there are four prevalent coin grading services, which in addition to PCGS, include NGC (Numismatic Guaranty Corporation), ANACS, and ICG. There are subtle variation 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 purchase.
An interesting contender among grading services was Compugrade. They sought (ultimately unsuccessfully) to remove the human from the loop, and have a computer grade their coins. It is uncertain whether this technology was ever successfully employed. Ultimately people decided that computers weren't very consistent in their grading of coins and they lost favor.
[edit] 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.
[edit] See also
[edit] References
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