Coin Grading is when a third-party certification service determines the condition, otherwise known as the grade, of a coin. There are many benefits to getting your collectible coins graded, but first, you must learn the basics of coin grading.
As coin collectors, we typically pay attention to the grade of a particular coin when it becomes available. The grade reflects the piece’s value, overall scarcity, and the price that should be paid for it.
Today, professional grading has been standardized. While low-value specimens may still be seen with grades given by individual collectors or dealers, many coins on the market have been certified by an unbiased third-party service. The two most prominent third-party grading companies are Numismatic Guaranty Corporation (NGC) and Professional Coin Grading Service (PCGS), which we will take a deep dive into later in this guide. Let’s start by taking a moment to define what a graded coin is.
What is a Graded Coin?
In simplest terms, a graded coin is any specimen graded by an unbiased third-party service. Part of this process includes encapsulation, which preserves the coin in its state at the time it was certified. The modern encapsulation methods and slabs used today are made of inert materials and are permanently sealed. They are the best way to preserve a coin in its current condition.
To illustrate what a certified coin is, here’s an example. Let’s say that you want to add a 1909-S Indian Head Cent to your collection. These coins are scarce, but you’re able to find a few specimens available. NGC has graded one of them About Uncirculated 58 (AU58). Another is housed in a 2 by 2 that is stapled shut with the grade Mint State 62 (MS62) hand-written on it. The third was recently found at an estate sale and appears to be in excellent condition, but it is currently being kept in a household plastic bag. Only the AU58 specimen that was graded by NGC is considered a graded or certified coin.
How Does Coin Grading Work?
The practice of grading coins is nothing new, but the methods and procedures used have improved greatly in the past few decades. As mentioned above, professional coin grading is standardized. Standards and examples can be found for use by any collector, but on the professional level, the standards are more clearly defined.
The primary focus of coin grading is to find all post-production flaws that are present on a specimen. In many cases, the main culprit of post-production flaws is wear from circulation and handling. For some of the top mistakes, you can make when collecting coins and how to avoid coin damage, keep reading this Info-Vault article.
Professional coin graders look for wear and damage. Damage could come from any number of sources, but the presence or absence of damage is a very significant factor in a coin’s grade. For more information on the nuances of coin grading, read this Info-Vault article.
When a coin is submitted to a grading service for certification, it is examined by a team of professionals rather than just one individual. These professionals each make their own observations independently as they look for wear, damage, and any other flaws. After each professional has observed the specimen, they write down the grade they believe it deserves. The final grade is determined by the individual grades given by each professional.
The Sheldon Coin Grading Scale
Regardless of who is grading a coin, the coin grading scale that they’re using is known as the Sheldon Scale. This scale has existed in various forms since the mid-1900s. The scale is named after its creator, William H. Sheldon.
The Sheldon scale ranges from 1 to 70, although not all individual points on the scale are used. The higher the grade, the better the condition of the coin. Coins that receive the lowest grades are barely recognizable due to wear or damage. Specimens that receive the very highest grades are actually free of imperfections.
What is the Highest Coin Grade?
The prefixes of coin grades vary since they are assigned by finish, such as MS (Mint State), PF (proof), SP (specimen), etc., but the highest grade that a coin can receive is a 70. More on finishes will come later in the Resource Center. In order for a coin to be certified with a 70 grade, it must be completely free of flaws when viewed with the naked eye or magnification.
On the note of prefixes let’s look at an example. If you’re looking at a Proof 70 (PF70) commemorative silver dollar and a Mint State 70 (MS70) commemorative silver dollar, both coins are certified in perfect condition. One has been assigned an MS prefix for Mint State because of its brilliant uncirculated finish and the other has been assigned a PF prefix because of its proof finish.
What are the Benefits of Coin Grading?
You may have noticed that certified coins come with a number of benefits. Let’s quickly review them before moving on. In addition to their practically universal acceptance among collectors and dealers, these slabbed coins are also the safest form of storage. They are the best equipped for this because of their sealed inert slabs. These slabs are also quite resistant to damage. In most cases, if you drop one on the floor you probably would not be able to tell after the fact.
Universal acceptance of a coin’s grade and significant protection are great benefits. However, sometimes, you just want a specimen that’s a little more dressed up than others like it. This is where signed labels, special labels, colored cores, and other options come into the picture. We will discuss these aspects of coin grading later on in the Resource Center.
Last but certainly not least, counterfeiting can still be a concern in the coin and bullion market. NGC and PCGS put plenty of effort into counterfeit prevention via the features of their slabs and labels. Creating a counterfeit NGC or PCGS slab that may be mistaken for the real thing is a daunting task for even the best counterfeiters. When you look at a certified coin being offered by a trusted coin and bullion dealer, you can be sure of its authenticity as well as its grade.
