Coin grading is the process of determining the grade or condition of a coin, typically on the internationally accepted, ‘Sheldon Coin Grading Scale’ of 1 to 70. As the number increases, so does the coin’s condition (and typically the coin’s demand and price).
“Seventy is perfect and flawless with absolutely no imperfections, no fine scratches, no hairlines at all,” says John Rothans, Chief Master Numismatist at U.S. Money Reserve. “That’s basically the top, top, A +++ of the coin grading scale.”
At the facilities of one of the most widely revered coin grading services, the Professional Coin Grading Service (PCGS), a series of graders first study a coin’s characteristics and physical condition. Then, each grader enters independent determinations into a computer database until a consensus is reached and the final grade is assigned, reports PCGS.
What are graded coins?
Graded coins have been examined and evaluated by trained experts. Certified coins are independently graded on the Sheldon Scale for their condition and preserved in sonically sealed plastic cases. They carry a numismatic value in addition to the metal’s melt value.
Bullion coins typically aren’t graded, but they can be. “Bullion” refers to “precious metals in bulk form.” The market price of a bullion coin is based primarily on its weight in gold or silver, not necessarily its rarity or condition.
The terms “proof” and “specimen” may be used to denote a coin’s grade, but note that these terms can also describe the coin’s type or appearance:
Proof coins are struck multiple times with special dies, which gives them sharp details with a frosted finish against a shiny, mirror-like background.
Specimen, or burnished, coins are struck only one or two times and feature a brilliant image against a matte-like background.
Mint State coins have been given a specific MS grade and feature the same finish as circulated issues of the coin, but are not intended for regular distribution.
Why does coin grading matter?
In addition to rarity and mintage, the grade of a coin can also play a big role in its overall potential. As the PCGS notes, this idea coincides with the basis of Sheldon’s theory, “that a ’70’ would be worth 70 times as much as a ‘1.’”
“Over the longer haul, you’re typically going to see better returns in the certified graded pieces and in the low population pieces,” advises U.S. Money Reserve’s Alan Luckett.
He goes on to explain that “it’s not unlike if you or I had a 1965 Mustang in showroom condition with 200 miles on it. You go to auctions now, and you see that car that we could’ve bought for $3,000 in 1965 or 1966. The car now sells for $250,0000. Why? It’s still a ’65/‘66 Mustang. It sells for that because there aren’t any of them in that flawless condition.”
Buying certified coins: Can graded coins work for you?
Buying and holding certified coins, is one of the best ways to put graded coins to work for you. When compared to bullion coins, certified coins can help you further minimize risk and maximize reward over a long period of time.
Why is that?
While the price of a bullion coin is primarily determined by the spot price of the precious metal and the coin’s weight, the price of a certified coin is also tied to its availability and condition. These latter two are relatively “known” factors with little unpredictability. The spot price of gold can be a little less predictable.
Accordingly, certified coins have shown to not be subject to the same level of spot price volatility as bullion coins. When economic conditions start seesawing, you could see the price of a certified coin fluctuate less than that of a bullion coin.
Due to their rarity, grading, and insulation from spot market volatility, certified coins can achieve greater potential when held for longer periods of time. Their scarcity and grade naturally allow for increased profit potential, but their scarcity also means that there are only so many coins available for purchase.
Certification provides confidence that allows you to put more trust in the product you are buying and selling.