News and Analysis of scarce coins, coin markets, and the coin collecting community #49
A Weekly Column by Greg Reynolds
While I often write about topics of interest to knowledgeable collectors, today's column is aimed at beginners and at other collectors who buy “Choice” or “Gem Uncirculated” uncertified coins. I am concerned that some advertisers in widely read 'print' coin publications are selling uncertified coins as 'Choice' (implied or thought to be MS-63 or higher), Very Choice (thought to grade MS-64), or Gem Uncirculated (thought to be MS-65 or higher) that do NOT come close to qualifying for such grades. Put simply, I wonder if many “Choice” or “Gem” uncertified coins would not receive equivalent grades if submitted to the PCGS or the NGC, AND would be regarded as overgraded by most leading, expert graders?
From advertisements in a recent issue of a widely read coin magazine, I have selected a few examples, which I honestly believe to be well representative of a large phenomenon of the advertising of uncertified “Choice” or “Gem” pre-1935 U.S. coins. I am not criticizing this particular magazine. Besides, there are similar advertisements in at least one other widely read periodical.
The topic of questionably graded uncertified coins is of tremendous importance. Many buyers will eventually submit such coins to the PCGS or the NGC. Others will eventually show them to grading experts and/or leading dealers in the mainstream, perhaps at major coin conventions. In many cases, though not necessarily of the advertised coins mentioned in this column, buyers of “Choice” or “Gem” uncertified coins will eventually find out that they have been sold coins that are overgraded according to the views of experts in the mainstream. Consequently, many such buyers of pre-1935, uncertified, supposedly 'Choice' U.S. coins will stop collecting or will voice negative remarks about coin collecting to their friends. It is really important for coin buyers to become educated to a reasonable extent before ordering coins that are listed in advertisements.
As for why I limit this discussion to pre-1935 coins, please see my two part series on 1933/34 being the dividing line between classic and modern U.S. coinage. I address the topic of collecting modern coins in another recent column. (As always, clickable links are in blue.)
As for those readers who are very unfamiliar with coin markets, please read my columns on Basics for Beginners, Advice for Beginning and Intermediate Collectors, and the PCGS SecurePlus Program (part 1). It is my intention, though, for this column to be easily understandable and to be beneficial to beginning and intermediate collectors.
I. Choice & Gem, PCGS & NGC
In the mainstream of the coin business, for a pre-1935 'mint state' (uncirculated) U.S. coin to qualify for a certain grade, at a MINIMUM, it must be certified as such by the PCGS or the NGC, or be likely to be so certified IF submitted. For a coin to be accepted by knowledgeable collectors and leading dealers as grading 'MS-65,' 'Gem Uncirculated,' it is necessary, though not always sufficient, for the PCGS or the NGC to grade it as MS-65 or to be likely to do so IF it were to be submitted. Likewise, in the mainstream, a 'Choice Uncirculated' coin must meet PCGS or NGC criteria for grading MS-63 or higher.
Even if the PCGS or the NGC grades a coin as a Gem, MS-65 or higher, all experts may not accept it as such. Yes, I have seen coins that are PCGS or NGC graded MS-65 that I do not really believe should grade MS-65. I have never, though, seen a PCGS or NGC graded MS-61 or -62 coin that I believe truly grades MS-65. If such a coin exists, it would be an anomaly. To understand a rule, it is best not to be distracted by rare exceptions.
If both the PCGS and the NGC, on more than one occasion, assign a grade less than MS-65 or even less than MS-64 to a coin, then it is extremely unlikely that experts in the mainstream of the coin collecting community will regard such a coin as being a Gem, grading MS-65 or higher. Moreover, some dealers represent coins as Gems that the PCGS or the NGC would never even grade at all, let alone as MS-65. There are a lot of pre-1935 U.S. coins that have problems that are too serious for them to even qualify for numerical grades from the PCGS or the NGC. Some rejected coins, though, are borderline cases.
The imperfections and inconsistencies of the PCGS and the NGC are beside the point here. No one should ever expect a grading service to be anywhere near perfectly consistent. A consideration here is the possibility that several dealers, with large advertising budgets, sell uncertified coins at grades that are significantly or even far above the grades that the same coins, if submitted, would receive from the PCGS or the NGC.
For decades, MS-65 has been another term for the Gem Uncirculated grade; 'Very Choice' Uncirculated means MS-64, and “Choice Uncirculated” refers to coins that grade MS-63 or higher. The numerical grades MS-63, MS-64 and MS-65 have been gradually replacing corresponding adjectives over a period of decades, though the adjectives and the numbers are sometimes employed together. Most any honest coin expert in the mainstream would agree that MS-63 and Choice Uncirculated (or Choice BU) typically mean the same thing. MS-64 and 'Very Choice Uncirculated' are also synonymous.
The 'Gem' grades are a little more complicated as 65, 66, 67, 68 and 69 are all Gem grades. At some point, usually at 67, the term 'Superb' is employed in addition to the term 'Gem.' Almost all honest, leading experts agree, however, that a Gem Uncirculated (or Gem BU) coin must grade AT LEAST MS-65! It is otherwise not a 'Gem'! Therefore, if a dealer, in an advertisement, offers a U.S. coin as “Gem Brilliant Uncirculated,” many readers are likely to think that the coin is being represented as grading at least MS-65, even if the respective advertiser's terms of sale disclaims any correlation with numerical grades.
II. “Gem” 1934-D Quarter for $179!
In the April issue of a widely read coin magazine, on page 61, a “Gem Brilliant Uncirculated” 1934-D Quarter is being offered for “$179.00.” According to this advertisement, the 1934-D is on “a list of better dates that offers a great investment potential.”
The Numismedia.com price guide lists a wholesale value of $725 for MS-65 grade 1934-D quarters, and a retail value above $900! In the Oct. 2010 CoinFest Auction, in Stamford, Heritage sold two PCGS certified MS-65 1934-D quarters, one for $546.25, and the other for $661.25. Plus, at the same event, an NGC graded MS-65 1934-D realized $690.
The five PCGS or NGC graded MS-65 1934-D quarters that Heritage auctioned in 2010 realized prices in the range of $546.25 to $690. Furthermore, on Jan. 31, 2011, the Goldbergs auctioned a PCGS graded MS-65 1934-D for $690. Currently, the PCGS retail guide value is $1100. How are collectors to interpret a “Gem” 1934-D quarter being offered in this magazine for $179?
Is it likely that the 1934-D being offered on p. 61 would not be graded MS-65 if submitted to the PCGS or the NGC? What, though, would this 1934-D quarter grade if it were to be submitted? Even a MS-64 grade 1934-D would have a wholesale value of more than $179. In Sept. 2009, Stack's auctioned an NGC graded MS-64 1934-D for $345.
The PCGS price guide indicates that a MS-60 grade 1934-D would have a retail value well above $200. Would the coin being offered grade as high as MS-60 if it were submitted to the PCGS? I do not know. This, though, is the kind of question that a collector who reads such an ad should consider in his or her mind.
III. “Gem” 1902 Morgan for $44.95!
Could the just discussed price of “$179” for a “Gem Brilliant Uncirculated” 1934-D quarter be a typesetting error or a mis-understanding? Consider that, in the very same advertisement, three Philadelphia Mint Morgan silver dollars, all in “Gem Brilliant Uncirculated” condition, are being offered, a 1902 for “$44.95,” a 1903 for “$57.50” and a 1904 for “$67.50.”
In March and so far in April 2011, Heritage has auctioned six 1902 Morgans that are PCGS or NGC certified MS-65 for prices in the range of $345 to $488.75. On Jan. 31, 2011, the Goldbergs auctioned a PCGS graded MS-65 1902 Morgan for $426. Accepted price guides value these in the range of $300 to $550.
Even a MS-64 1902 Morgan is worth more than $100. Over the last six months, Heritage has auctioned several PCGS or NGC graded MS-63 1902 Morgans for prices ranging from $84 to $126.50. In the coin collecting community, a “MS-63” grade coin is considered “Choice,” not “Gem Brilliant Uncirculated.” Would the coin offered in this advertisement as “Gem Brilliant Uncirculated” grade as high as MS-63 if it were submitted to the PCGS? I do not know.
The 1903, at $57.50, and 1904 Morgans in the same advertisement lend themselves to the same kind of comments. I would be surprised if a collector could buy, for “$57.50,” a 1903 Morgan that is widely accepted as a 'Gem,' one that either the PCGS or the NGC would ever grade as MS-65! I cannot bring myself to comment on a price of “$67.50” for a “Gem” 1904 Morgan.
Consider another advertisement, from a different dealer, in the same magazine, on page 47, which lists prices for Morgan silver dollars in “VCH/GEM” among other grades. Presumably, “VCH/GEM” refers to coins that grade either “Very Choice Uncirculated, MS-64, or Gem Uncirculated, MS-65. In the coin collecting community, the letters “VCH/GEM” in this context would certainly be interpreted as meaning MS-64 to MS-65 grades, or at least MS-64!
In this ad on p. 47, a 1902 Morgan in “VCH/GEM” is priced at “$65.00”! Yet, MS-63 grade 1902 Morgans recently realized from $84 to $126 in Heritage auctions. Could it be true that the coin being offered would not even grade MS-62, if it were submitted to the PCGS or the NGC? I do not know. I wonder about the offering of an uncertified 1902 Morgan that is said to grade “VCH/Gem” for a MS-62 level price.
IV. “CH BU” 1893 Columbian for $29!
The same dealer, in the same advertisement on page 47, offers a “CH BU” 1893 Columbian Half Dollar for $29. For a coin to be widely accepted as 'Choice Uncirculated,' it must grade MS-63 or higher by experts in the mainstream.
In fairness to this advertiser on p. 47, I point out that the ad does state that “grading is based on our own company standards; we don't use the number grading system.” Do beginning collectors understand the possible implications or consequences of such a statement? How would others grade the 1893 Columbian Half that is said by this advertiser to be “CH BU”?
Over the last six months, Heritage has auctioned two NGC graded MS-63 1893 Columbian Halves, one in November for $115 and one in February for $69. On the same day in Feb., Heritage sold a PCGS graded MS-63 1893 Columbian for $138.00. The Numismedia.com retail price estimate is $77 and the PCGS retail value is $85. Back in June 2010, Stack's auctioned a PCGS graded MS-63 1893 Columbian for $69.
It needs to be mentioned that it costs money to have a coin certified. In theory, it could be argued that it is not cost-effective for a “Choice,” MS-63 grade, 1893 Columbian to be submitted to the PCGS or the NGC. There are at least two flaws in this argument. First, the increase in market value as a consequence of certification, and the resulting increase in liquidity, would probably cover the cost of certification, even for a MS-63 1893 Columbian. Secondly, there was a time when MS-63 grade Columbian Half Dollars were worth substantially more than their current values and my guess is that it was then definitely efficient for MS-63 Columbians to be submitted to the PCGS or the NGC. Indeed, the PCGS reports having graded more than fifteen hundred 1893 Columbian Half Dollars as MS-63, and the NGC has graded more than one thousand.
Many Columbian Half Dollars that are not certified failed to receive at least a MS-63 grade from the PCGS or the NGC or obviously would be unlikely to be assigned a MS-63 or higher grade. Collectors who are interested in a 'Choice' 1893 Columbian Half are advised to buy one that is graded MS-63 by the PCGS or the NGC.
V. “Select Unc.” Gold Dollar for $300!
In still another ad in this same magazine, on page 33, at least one Type One Gold Dollar in “Select BU” is being offered for “$300.” Presumably, the seller is claiming that it is a brilliant uncirculated coin that grades from MS-61 to MS-63. After all, if it graded just MS-60, there would be nothing “Select” about it. An uncirculated coin can have a lot of contact marks and medium scratches and still truly grade MS-60.
It is important to remember that many U.S. gold coins have such serious problems that they do not even qualify for numerical grades from the PCGS or the NGC. The 'no grade' coins include those that have been polished, heavily scratched, harshly cleaned, treated with chemicals, etc. Unsurprisingly, U.S. gold coins that the PCGS and the NGC refuse to grade are often sold uncertified. I am not assuming, though, that the coin being offered in this ad is a coin that would not receive a numerical grade if submitted to the PCGS or the NGC. I have never seen it. It is important, though, to consider realistic possibilities. It makes sense to think about the characteristics that this coin might possess, as buyers who read advertisements should think before effecting purchases.
Gold Dollars are around the size of dimes and are generally acquired by people who are interested in coins, rather than by buyers who are focus on gold as a precious metal. Type One Gold Dollars were minted from 1849 to 1854, and a few dates are not particularly rare.
A non-rare Type One Gold Dollar, such as an 1852, in MS-61 grade is valued at $655 by the PCGS retail price guide and at $650 by Numismedia.com. Is it hard to believe that a dealer would be advertising one, in a widely read coin magazine, for $300?
Yes, it is hard to believe. It will occasionally happen, however, that a non-certified Type One Gold Dollar is purchased for around $300 and then is graded MS-61 by the PCGS or the NGC. A focus on an exception, however, would deflect attention from the rule that most Type One Gold Dollars that are sold for around $300 in the current market environment have no chance of ever grading MS-61 or higher by the PCGS or the NGC.
In fairness to the firm that advertises a “Select Unc.” Type One Gold Dollar for “$300,” I mention that this firm states, in the ad in question, that 'grading is based on twenty-six years of experience.' I am not impressed by such a statement. In the coin community, the best graders are not necessarily the graders who have the most experience. Indeed, one of the sharpest graders in the nation is under thirty-five. The development of grading skills involves experience, determination, positive influences from experts, and a natural aptitude.
Most collectors should not attempt to become advanced grading experts. It is very helpful, though, for collectors to have some idea of the grading standards and criteria that are accepted by most coin experts. If a collector is considering buying a coin, which is being represented as “Select” Uncirculated, the collector should think about whether most experts would grade this coin as MS-61 or higher. Examining relevant coins that have been graded MS-61 and thereabouts by the PCGS or the NGC may be helpful to such a collector.
VI. Who is to say what a coin grades?
So far, I have raised the issue of advertised prices that may be 'too good to be true,' in terms of the prices and grading criteria that prevail in the mainstream. Unfortunately, mainstream publications sometimes accept advertisements from dealers who are clearly outside of the mainstream in relation to grading and selling practices.
Is it legal for a dealer to grade and sell a coin as 'Choice Uncirculated' if he knows that almost all recognized experts would not grade it higher than MS-61 or not even higher than AU-55? Suppose that the coin was judged ungradable by both the PCGS and the NGC. I am not putting forth a legal opinion here. The advertisements that I cited above may embody business practices that are clearly legal. I am not suggesting otherwise and I am not accusing anyone of wrongdoing.
My overall point is not about asking prices for advertised, uncertified coins. Instead, I am asserting that collectors should buy coins that are certified by the PCGS or the NGC and should think very carefully about uncertified pre-1935 U.S. coins that are said to (or implied to) grade MS-63 or higher, or are represented as being of 'Choice' or 'Gem' grades. Even when advertised prices seem fair for the claimed grades, such uncertified coins will often be overgraded in terms of the grading standards and criteria that are widely accepted in the mainstream of the coin collecting community.
I concede that, for some pre-1935 coins that grade MS-63 or higher, the costs of certification outweigh the benefits. Curiously, though, many such coins are already in PCGS or NGC holders, partly because it was cost-effective for them to be certified in past eras. In any event, my suggestion is to avoid uncertified 'Choice' uncirculated pre-1935 coins.
For those who collect circulated coins that are valued at less than $250 each, it is important to learn how to grade them. Grading circulated coins is less difficult than grading uncirculated coins. Even so, grading circulated coins is not really easy. Collectors should ask questions of experts and practice.
For those who are collecting scarce or rare coins that are valued at more than $250 each, circulated or uncirculated, buy only coins that are PCGS or NGC certified, Of course, I am not asserting that all PCGS or NGC certified coins are desirable. Buying PCGS or NGC certified coins involves much less risk than buying uncertified coins.
PCGS and NGC certified coins are traded at prices that are commensurate with the grades that are stated on the printed inserts (labels) in the respective holders. Even if the coin inside has been doctored or is just mistakenly overgraded, a PCGS or NGC holder has value, often considerable value. Stickers from the CAC have value as well.
As for choosing among PCGS or NGC certified coins, there is a need to learn and ask questions of experts. Please read my articles on natural toning and on the widening gap between coins that are 'high end' or 'low end' for their respective certified grades.
While there are subjective elements involved in all collecting pursuits, the field of rare U.S. coins is relatively objective. Yes, there will always be disagreements regarding grading, quality, the greatness of individual coin issues, and the importance of particular collections. Such disagreements, however, tend to fall within understandable, logical boundaries. On the whole, there is tremendous agreement on notions relating to quality, tradition, collecting logic and the greatness of specific coins. Beginning collectors should seek the advice of experts in the mainstream and should be very cautious about buying pre-1935 U.S. coins that are uncirculated AND uncertified.
©2011 Greg Reynolds
Editors Note: The images used to illustrate this article are all raw coins but are Not images of the actual coins described within the article. Images are included for illustrative purposes only.