Learning How to Grade – Part 2
By Peter Mosiondz, Jr.
The grade of a coin is the single most important ingredient to its value.
Before proceeding with this installment, I’ll repeat what I said last time. Make sure that The American Numismatic Association’s Grading Standards for United States Coins, now in its sixth edition, is the first book you buy. In fact buy this book before spending any money on coins. It’s that important. Its modest price for the wealth of information contained in its pages makes it an absolute “best buy” in the coin hobby. And make sure that you read the introductory section.
When we stated that the coin’s grade is the single most important component in determining its value, we were not ignoring the supply and demand factors. When we talk about grading being vital to a specific coin we are referring to the grades within a particular date and denomination. For example, we have the 1884-S Silver Dollar which is not a scarce coin. Over three million were minted. It is readily available in grades ranging from Very Fine to About Uncirculated. But it is a comparative rarity in Mint State, or Uncirculated grades. You might spend about $50 or so for a nice Extremely Fine specimen, however if MS-65 is your game, I hope you have about a quarter of a million dollars available for the coin. Now we can understand why the grade of a coin is the key ingredient to value. Without knowing the intricacies of grading and what constitutes a given grade, it is easy to be fleeced by an unscrupulous seller who over-grades by raising the coin’s true grade up a notch or two. In the case of the 1884-S Silver Dollar the unwary may be tricked into accepting a nice bright AU-58 coin for a Mint State example.
Similar comparisons can be made in just about every series of coins. The basic rule of thumb is that the higher the grade, the higher the value. Expanding upon this thought we can say that the higher the grade, the higher the demand. But oftentimes that demand does not emanate from the coin collector. It stems in large measure from the investor who cares solely about future appreciation in value. Add to this the many pension plans that are adding rare coins in high grades to their portfolios and the picture becomes clearer. As for me I prefer the circulated grades. But it’s what matters to you that is important. It is also important to reiterate that the higher grades demand higher expenditures. That is why learning how to grade is so critical.
Now comes the time to talk about the actual grading process. We can not go into each circulated grade for each series and denomination spelling out just what constitutes acceptance for every grade. To do so would require a book length feature. The ANA book handles this extremely well. I could not add anything to their clear and concise descriptions of each grade for each series. Instead we’ll focus on the development of grading standards, their nuances and some generalities of the various circulated grades. Then in our next segment we’ll talk about the various uncirculated grades.
Basically a coin is either circulated or uncirculated. Sounds simple doesn’t it? There can be no other determination. We are referring to coins struck expressly for commerce, or to circulate as a medium of exchange. Our discussion on coin grading omits Proof coins. Why is that? Glad you asked. Proof is not a grade. It is a method of manufacture. These coins are made specifically for sale to collectors and never
intended to be released into ordinary channels of commerce. For someone to state that “My coin grades Proof-65” would be a misnomer. The correct statement would be “I have a Proof-65 example of that coin.” There are differences in Proof coins that are results of blemishes or handling.
If a coin is a circulated example, one that is worn to some degree from being in circulation, there are several grading descriptions to apply dependent on the amount of wear that is exhibited. These representations include;
About Good (AG-3) – A coin that is very heavily worn. The date may be barely noticeable, showing perhaps two or three digits, and portions of the lettering are worn smooth.
Good (G-4) – Although heavily worn, the date and lettering are visible but details may be flat in certain areas.
Very Good (VG-8) – A well worn coin whose main features are clear and bold, although somewhat flat.
Fine (F-12) – The wear is moderate and even and the entire design is bold. Exhibits an overall pleasing appearance.
Very Fine (VF-20) – Moderate wear on the high points of the design. All details are clear.
Choice Very Fine (VF-30) – Light even wear on the surfaces and the highest points of the design and surfaces. The lettering is sharp. Years ago I was not in favour of this grade but I have come to accept it and understand its need.
Extremely Fine (EF-40) – Light wear throughout. All design features are sharp and well defined. A trace of mint luster may be present.
Choice Extremely Fine (EF-45) – Very light overall wear on the very highest points of the design. All features are very sharp. The lettering is crisp. Some mint luster should be evident.
About Uncirculated (AU-50) – Traces of light wear are evident on the very highest design points. At least one-half of the mint lustre should be present.
Choice About Uncirculated (AU-55) – Slight evidence of friction (rub or handling) on the very highest design points. Most of the mint luster is present.
Very Choice About Uncirculated (AU-58) – The barest evidence of friction (rub or handling) on the very highest design point. All of the mint luster is present.
You will encounter several other “in-between” grades such as Good-6 (G-6) or Fine-15 (F-15) to mention just two examples. Personally I can not subscribe to these subtle differences. The choice is yours however.
Now what do all of these numbers mean and how were they developed?
A numerical grading system for United States Large Cents was developed by Dr. William Sheldon slightly more than 60 years ago. The doctor was an aficionado of early copper coins. His system was intended to indicate the value of any Large Cents in the various grades. For example, each date and variety was assigned a “basal value” or what the piece may expect to be sold for in the worst possible grade, or Poor-1. Based on his system, if a coin had a basal value of $2 then a Good (G-4) example would sell for $8; a Very Fine (VF-20) example would fetch $40 and so on. The system worked surprisingly well during its inception but in a year or two became severely outdated. As more and more emphasis was being placed on the Uncirculated (or Mint State) grades the system went by the wayside only to be resurrected again about ten years after its introduction.
Some dealers, led by the venerable Abe Kosoff began using the grading system and terminology in their auction catalogs and fixed price lists. It was thought that when describing a coin that was clearly better than a typical Very Fine specimen, for example, that the grade of Very Fine (VF-30), or Choice Very Fine, made much more sense in their efforts to convey a clearer image of the coin to a prospective buyer. In a few years the system caught on throughout North America and was eventually adopted for all United States coinage despite the fact that the numerical valuation multipliers are meaningless today.
Why not a system employing a scale of one to 100? By the time that the Sheldon system caught on universally many tens of thousands of coins resided in holders that were graded according to the Sheldon scale. If such a renumbering project would have taken place complete chaos would have reigned. More to the point, the actual number being used is not the issue. It is the grade that really matters. So the Sheldon system, already in use for a few decades, was to remain in place.
Collectors have grown fond of saying VF-20 as a slang term for typical Very Fine. No matter what we call the coin we must know how to arrive at the coin’s proper grade.
In our concluding installment of learning how to grade we’ll talk about the components that we use in arriving at the grade we assign an uncirculated coin. These include wear, marks, surface blemishes, luster and other factors.
Originally Appeared in Canadian Coin News