How coin grading works

In Coin collecting, Coin grading is the process ofaccomplish was largely ridding the marketplace of
determining the grade or condition of a coin, theinferior counterfeits. Unfortunately, some better
key factor in its value as a collector's item.counterfeits have since come into being, further
Overviewjustifying the need for professional authentication
Coin grading has evolved over the years to ain a counterfeit-authentication arms race.
system of finer and finer grade distinctions,Grading services
particularly when talking about US coins. In theAs of 2006, there are four prevalent coin grading
beginning, people collected ancients and thereservices, which in addition to PCGS, include NGC
were two grades, new and used.(Numismatic Guaranty Corporation), ANACS, and
This evolved for a time to the letter gradingICG, though ICG is sometimes criticized for its
system beginning with the lowest gradegrading of modern coins. There are subtle
– Basal State (also Poor (PO)), thenvariation in the grades assigned by each of these
continuing Fair (Fr), Almost Good (AG), Good (G),major services, and prospective buyers are
Very Good (VG), Fine (F), Very Fine (VF), Extraencouraged to seek professional or expert advice
Fine (EF or XF), Almost or About Uncirculatedbefore making any important rare coin purchase.
(AU), Uncirculated (Unc) and up to Brilliant orAn interesting contender among grading services
Beautiful Uncirculated (BU). Gem Uncirculated waswas Compugrade. They sought (ultimately
roughly equivalent in usage to BU at that time.unsuccessfully) to remove the human from the
William H. Sheldon in his book Penny Whimsy isloop, and have a computer grade their coins. It is
credited with coming up with the Sheldon Scale inuncertain whether this technology was ever
the 1950s, a numeric system going from 1-70. Itsuccessfully employed. Ultimately people decided
was intended to reflect that the relative value ofthat computers weren't very consistent in their
a 1794 Large Cent, which was then worth $1 ingrading of coins and they lost favor.
Basal State and $60 in Uncirculated MS-60. ThusComplexity
yet another non-decimal system was born.It is difficult to imagine that there will be yet finer
This numerical system was used primarily withindistinctions in grading in the future, yet it's already
the community of large copper collectors (a veryhappening. Series specific strike distinctions such
specialized part of numismatics that often has itsas FSB (Fully Split Bands) for Mercury and
own ideas about things compared to the rest ofRoosevelt Dimes, FBL (Full Bell Lines) for Franklin
the coin collecting community) until the mid 1980s.Half Dollars, FH (Full Head) for Standing Liberty
DistinctionsQuarters, 5 and 6 step Jefferson Nickels and so
In 1986, PCGS (Professional Coin Grading Service)forth are creating rarities out of coins formerly
was incorporated. They authenticated, graded andthought of as common.
encapsulated coins in a protective hard plastic shell.The depth of mirrors on proof coinage has led to
They used a combination of the two olderterms of distinction such as Cameo, Deep Cameo,
systems putting letters and numbers together soUltra Cameo and so forth. Also, uncirculated coins
that the grades became BS-1 (or PO-1), FR-2,are sometimes deemed Mirror Proof-like and
AG-3, G-4, G-6, VG-8, VG-10, F-12, F-15, VF-20,Deep mirror Proof-like.
VF-25, VF-30, VF-35, XF-40, XF-45, AU-50,People are bidding up coins based upon their
AU-53, AU-55, AU-58, MS-60, MS-61, MS-62,population rarity (several grading services publish
MS-63, MS-64, MS-65, MS-66, MS-67, MS-68,population reports letting you know how many
MS-69 and MS-70. They also issued limitedtimes they've granted a particular grade to a
guarantees for the value of coins they hadparticular coin), and these other fine distinctions,
graded.and clever marketing by both the grading services
The march to finer and finer distinction had takenand numismatic firms. Ultimately, some of these
another huge step. Along side this scale was aschemes will prove popular over time, and others
similar one for proof coins PR-01 through PR-70will turn out to be market bubbles. It's impossible
that was roughly equivalent to the MS scale,to say which will stand the test of time in the
except for proof coins. This is important as ineyes of collectors and investors.
some issues distinguishing between mint state (forWith all of these factors to consider, and the
commerce) and proof coins is very difficult anddistinction between grades being so fine in many
specialized and the price differences can be largecases, it becomes more and more difficult for the
in favor of either MS or PR.average collector to keep up. The general public is
The idea was to make coins easily tradable on aneven less likely to understand this explosion of
open market. However, because they usedgrades and the subsequent valuations.
technical grading rather than market grading thereNevertheless, there are many good books and
are limits to their system, particularly in relatingweb sites that can assist in determining the
the grade directly to a value. One thing PCGS didapproximate grade of coins.