The numismatic grade of a coin depends on three factors: the date and mintmark of the coin, the mintage/population of the coin, and its condition or finish. A seemingly small or insignificant flaw can go a long way in affecting a coin’s value. The best way to validate the quality of a coin is to assign a grade to the coin. Through obtaining knowledge about grading, one can accurately define the grade of the coin.
If one is not comfortable with their grading skills, there are two important considerations. Know the coin dealer from whom you have purchased the coin. A reliable dealer will stand behind what they have sold and they will accurately grade their coins. But they will have certified coins that have been graded through an independent and reliable third party.
Any reputable dealer who sells you coins will determine the grade of the coin and hence its value through coin grading, a process which not only helps determine the numerical grade of the coin, it also determines the value of the coin. The grading process is subjective, meaning that they are subjective elements to grading a coin. Strike (how fully the details of the coin are struck), luster (how the coin reflects light back into your eyes), and eye appeal (how attractive a coin is to your personal standards) are all subjective to the personal likes and dislikes of the viewer.
Professional Coin Grading Service
In the United States, grading companies are ranked into three main tiers based on their reputation for consistent and reliable evaluations and acceptance in the numismatic marketplace. Certified coins by the two top-tiered grading services command the highest premiums in the numismatic marketplace. The Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC) are rated as “Superior” by the Professional Numismatics Guild.
Coins graded by PCGS or NGC are accepted in the marketplace at their stated grade. The middle tiered grading service ANACS has been in existence the longest but their grading is considered to be acceptable. ANACS graded coins generally trade at lower premiums than PCGS or NGC graded coins. All of the other companies not mentioned above are considered in the lowest-tier of grading services. Coins graded by any other company will likely be devalued because of inconsistent or looser grading standards. When choosing a grading service it’s best to choose one of the top-tiered companies PCGS or NGC.
The grade is how numismatists determine the coins “state of preservation”. Graded coins have been relevant in the United States since coins were starting to be collected in the mid-19 Century. Coins fit into one of four categories. Poor (well worn with outlines but no details), Good (much wear but details present), Very Fine (lots of details but some wear) and New (no wear and all details present.
Graded coins remained relatively unchanged for 100 years. In 1949, Dr. William Sheldon stated that there were many additional “states of preservation” of coins. Sheldon developed a system of grading coins on a scale from 1 to 70, with “1” representing a Poor coin lacking virtually all details to “70” representing a “Perfect” coin. The upper portion of the Sheldon scale is for Uncirculated coins grading from 60 to 70. The Uncirculated coins have no wear and are graded based on the severity, number, and location of marks and imperfections. This served the numismatic community well for 30 years. In the mid-1980s a group of coin dealers decided to form an independent third-party coin certification service. The main idea was to standardize grading among dealers and to bring consensus grading to the marketplace.
When a dealer submits a coin to a grading service it is graded by at least two experts. The two experts must independently agree on the coin’s condition. If they disagree, a third expert, a finalizer, will review it. After grading a coin is “slabbed” (encapsulated in tamper-resistant plastic with the coin’s consensus grade printed on a tag inside the slab). Companies use encapsulating technology for long-term storage and protection of the coins.
Not all coin purchasers need certification and not all coins are worth the time and expense that certification may add to the cost of the coin. If you are a seasoned coin purchaser you have seen many coins and you can compare any coin offering to other coins within your collection. If the cost of the coin is modest then the cost for this additional certification may be unnecessary and undesirable. Costs for certification may run from $15 to more than $100 per coin depending on the coin value and the time frame in which the dealer wants it returned to them. So coins of modest value may not demand certification. As an experienced purchaser, you are likely collecting these items and placing them in albums with other similarly graded coins.
Again, coin certification is likely not desirable in that instance. If you cannot locate a professional and reliable coin dealer then coin certification may be desirable. If you cannot find a dealer who will stand behind what they sell coin certification may be desirable. As the buyer, you need to determine if the additional expense is justified and you are comfortable with the additional expense. Even if you are a seasoned collector certification is certainly advisable for expensive acquisitions. That decision is ultimately up to the buyer.
PCGS vs NGC
PCGS and NGC both maintain an online census or population report of coins they have graded. These reports help determine whether a coin is rare or common in certified grades. Through NGC or PCGS certification coins receive a unique serial number for identification purposes. PCGS and NGC coin grades can also be further qualified with additional scrutiny from the Certified Acceptance Corporation (CAC). CAC reviews only NGC graded coins of PCGS graded coins and if they agree with the grade they affix a small sticker to the slab to attest to their acceptance of the grade. This is done as you might imagine for an additional fee.
Thanks to a respected coin grade scale and a reputation for reliability PCGS graded coins recognize high values in the marketplace. The company offers the PCGS price guide as a comprehensive list of PCGS coin values for PCGS-graded coins, PCGS certification with a money-back guarantee, and the PCGS photograde online, a tool to approximate the grade of a coin.
The NGC is the official grading service of the American Numismatic Association and the Professional Numismatists Guild establishing NGC coin grading as an industry standard. Other distinctions include the NGC Collectors Society, an online resource and community where members can discuss NGC coin values and NGC coin prices. Members of the NGC Collectors Society pay an annual fee so that they can directly submit coins for NGC certification. There is an NGC grading scale with a special star designation for coins with exceptional eye appeal, increasing NGC coin values, and an NGC certification number that can be verified online along with NGC Price Guide Values.
Increasing NGC or PCGS Values
Collectors who want to possibly further increase their NGC or PCGS coin values may seek an acceptance certification through the Certified Acceptance Corporation (CAC). CAC has a stickered rating system for coins already graded by PCGS and NGC. Coins receiving a green or gold sticker from CAC may trade for premiums sometimes fetching more than the PCGS price or NGC price listed on their respective websites.
The rare coin world really changed in 1986 with the creation of Professional Coin Grading Service (PCGS) and in 1987 with Numismatic Guaranty Corporation (NGC). These two grading authentication services came to be accepted due to the fact that they were backed by a network of dealers who promised to buy coins by posting sight-unseen bids. This arms-length grading afforded consumers a level of objectivity. They no longer had to accept dealer claims of a coin’s grade and ultimately its value.
This grading process was not and still is not without problems and disputes but no one can say that it hasn’t changed the market for the better especially where consumer confidence is concerned. One look at current coin values vs pre-grading levels will confirm this advancement.
In 2008 the Certified Acceptance Corporation (CAC) was founded by a highly respected professional who had the unique position of having been a founder of both PCGS and NGC. The advent of CAC has added further refinement to the grading process along with a substantial amount of confidence among consumers. Many hundreds of millions of dollars in rare coins have traded with the CAC sticker affixed.
The Pcgs, NGC, and CAC
Today, PCGS, NGC, and CAC are served by an extensive network of dealers who act as submission centers for the public and non-member dealers. These dealers get no direct compensation in doing so other than to network with possible client customers and help them submit their coins for certification. Further, that acts as filters for screening out coins that are not suitable for the expense of third-party grading.
Many coins are returned ungraded by the grading service due to a variety of issues that include being counterfeit or not genuine, improper cleaning, physical or environmental damage, contaminants that prevent encapsulation (but could be expertly removed), a number of lesser issues that prevent assigning a grade.
The services that these companies provide begin with authentication. Many coins are counterfeit, altered, or doctored in an attempt to deceive coin collectors. Depending on the coin, the evaluator will employ several different methods to determine if the coin is authentic. If the coin is not genuine, it will be returned to the submitter in a plastic bag with an identification tag indicating its questionable authenticity. This plastic bag is commonly known as a “body bag”. If the coin is authentic but has been damaged, doctored, or altered in some way (e.g., cleaned, scratched, etc.) the coin will be encapsulated as “authentic” but not assigned a grade.
Next, a grade is assigned to the coin by the first evaluator. The coin is then passed to another evaluator for his grading opinion without the knowledge of the first evaluator’s grade. Most commonly, if the two agree on the grade the coin is assigned that grade. If the two evaluators do not agree, the coin is sent to a “finalizer” that will agree with one of the two grades.
If the attribution of die varieties is requested, the coin may be sent to a specialist for evaluation. Most commonly this comprises VAM attribution of Morgan dollars. Although new die varieties are being discovered every day, the grading services only recognize the most popular varieties. The third-party grading services list which decidess varieties they will issue attribution services for. However, if a major variety is discovered in a popular series of coins, the grading service may recognize the coin as the “Discovery Coin.” Discovery Coins will carry a premium over and above all other die variety coins submitted.
Finally, the coin is encapsulated in an inert plastic container (a.k.a slab) that will identify the coin type, date, mint, grade, and variety attribution (if requested) of the slabbed coins. The encapsulated containers are tamper-evident and include security features to prevent the plastic containers from also being counterfeited by unscrupulous people who may feel they have a rare coin.
Why Do People Get Coins Graded With PCGS Or NGC?
Coins are based on their rarity and condition. The nicer the condition, the more the coin is worth. If a dealer is selling a coin then he wants the buyer to think the coin is as high grade as possible because then he can charge more. Most collectors don’t have the experience to know exactly what a coin will grade. Back in the old days the buyer just had to take the dealer at his word and often times dealers made tremendous profits by misrepresenting graded coins.
Coin grading companies came into existence in the 1980s. They offer unbiased opinions on the graded coins. The two largest grading companies, NGC and PCGS have graded almost 70 million graded coins since they opened about 30 years ago. They don’t appraise the coins or assign them a value. The graders simply give the coins a numerical grade and it is then up to the numismatic market to decide what the graded coins are worth.
In order to send a coin to NGC or PCGS, you must first pay to be a member of their submission club. Annual membership starts at $39 or $69 and goes up from there based on what service level you require. The more valuable the US coins are the more it costs to have the grading service. Grading a common coin worth $150 costs $20. Grading a rare coin which is bullion worth $50,000 costs $125. It is a much better value to get expensive coins graded than it is to get common coins graded for the coin market.
That is why you see most coins worth over $5,000 in PCGS holders and why you don’t see a lot of low graded coins. When determining if the cost of grading makes sense you also need to factor in shipping and insurance expenses to get the coin to the grading service and back. Shipping times can be up to one week each way and the grading service will probably have the coin in their possession for at least a couple of weeks. So while sometimes grading can be a great decision you still want to make sure the time and money involved are going to pay off.
The biggest misconception about the grading companies is that paying for a grading service makes the coin automatically worth more than if it were ungraded. As an example, if among your world coins you have a nice-looking XF barber quarter it doesn’t become worth more just because PCGS calls it an XF 40 and puts it in a holder. All that does is make the coin easier to sell. There are extreme levels where a coin gets an especially high grade and it is suddenly worth much more than if it was ungraded. However, the majority of coins are graded just so the buyer and seller can comfortably agree to a value based on prior sales prices of coins in the same grade.
Whether pricing a coin graded by PCGS or NGC on eBay may strengthen its value it may not be worth it in the long run. Grading companies offer their grading services for a fee and NGC graded coins may not make them worth more than they would be. Or they might. PCGS and NGC both offer a highly respected grading service and it is up to the seller to decide whether it is worth the amount to use the grading service. What the American Numismatic Association thinks of the grading service would be interesting to know.
The fact is that the Numismatic Guaranty Corporation (NGC) is the largest competitor of the PCGS and the official grading company of the American Numismatic Association since 1985. The Professional Coin Grading Service (PCGS) has multiple branches in Europe and Asia and its reach makes it the world leader in coin grading and numismatics.