The Finer Points of Coin Grading

By Dr. Sol Taylor
"Making Cents"
The Signal
Saturday, April 23, 2005

t the American Numismatic Association Convention in Los Angeles in 1975, I had the honor of serving on the first ANA grading committee. Its mission was to establish a grading guide and standard system for the grading of United States coins.
    The chairman, Abe Kosoff, and about 15 other numismatic experts met for several days, and the final outcome was the establishment of the American Numismatic Association Certification Service. ANACS would hire and train graders to determine if submitted coins were genuine, and assign a grade to each coin based on the long-standing system then in use.
    That system evolved some 100 years earlier to generally categorize coins by their condition: poor, fair, good, very good, fine, very fine, extra fine, about uncirculated, uncirculated, and brilliant uncirculated.
    By the early 1970s, it was evident that sellers often enhanced their grading designations while undercutting grades of coins offered to them for purchase. In addition, many methods were employed to enhance the appearance of coins; for example, uncirculated coins with tarnish were either chemically treated to look new, or wire-brushed for that satiny mint finish. Circulated coins were often cleaned, reworked to bring out worn details, or wire-brushed (also called "whizzing"). The situation got so severe that at many coin shows, dealers who displayed some of these enhanced coins were sent home, rather than allow an unsuspecting public to buy overgraded — and thus overpriced — coins.
    Some years earlier, under the guidance of the late Dr. William Sheldon, the Early American Coppers Society established its own grading system which included number ratings along with adjectival grading terms. They included: poor-1, fair 2-3, good 4-6, very good 6-8, fine 10-12, very fine 15-30, extra fine 40-45, about uncirculated 50-55, and uncirculated 60-70. In reality, only the very brightest and original mint specimens ever were assigned numerical grades of MS-65 (mint state).
    In addition, color terms were assigned to further describe and grade the early copper coins (1793-1857). These include: RD for full mint red or copper color; RB, a mixture of red and brown with varying degrees of each; and BN for brown, no red or copper color, but with mint sheen. Circulated coins were not assigned colors since they were basically all brown, or darker tones.
    ANACS adopted the numerical system and, for each coin submitted, assigned a grade for each side. Thus a typical coin such as a mint-state Indian head cent might be assigned "1909 MS65RD/65RD," indicating both sides are of equal mint red color. The coin was photographed, and the photo was incorporated into a certificate indicating the grading information and its owner. A few years later, the certificate was upgraded to include a color photo of the coin, making the match more reliable.
    In 1985, the Professional Coin Grading Service of Newport Beach developed a sonically sealed plastic slab (about 2.5 by 4 inches) to include the coin and an insert with the description and grade. These holders became known as "slabs," and the process became known as "encapsulation." These slabs have undergone several generations of change to incorporate tamper-proofing, higher security for the coin against the elements, and stronger non-reactive materials.
    Soon thereafter, other services joined the grading business, and even ANACS abandoned its certificate program in favor of slabs.
    What the encapsulation process has done so far is certify some 10 million coins. This eliminates (for the most part) arguments over whether a coin was enhanced, tampered with, or even whether it is genuine. The services guarantee that the coins they slab are genuine; they reject altered, suspicious or known counterfeits.
    Even coins with PVC stains are often rejected — PVC is the residue from coin holders commonly used in the 1960s to 80s. Although the PVC stain is removable, the result is often an altered or chemically treated coin. Most services — and there are about 10 active grading services now — will not certify such enhanced coins.
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    Several publications track the sales records of certified coins, and some grading services get better prices for their coins than others. This is a factor of the public's view of reliability. The three leading services today, by volume, are: PCGS, Numismatic Guaranty Corp. (NGC) and ANACS. Each has a distinctive design and process in making slabs. They are all about the same size.
    Since the late 1990s, grades previously not used — above MS65 — started to appear, and more and more coins at the high end are being awarded grades of MS66, MS67, MS68 and even MS70.
    A process called "grade inflation" appears to have encouraged coins that were certified in the past to be resubmitted in the chance of getting another point or two. For some coins, the extra point or two in grade could mean thousands of dollars in value. Some rare coins that were once AU55 have become MS63. Many examples exist.
    Grading is an ongoing process with fine-tuning and adjustments being made as more coins are examined and rejected for tampering. Some grading services issue periodic reports of "population data" for the coins they have graded. If a coin is graded as MS66 and none of that variety has received a higher grade, it would appear for sale as MS66 4/0, indicating only four have been graded this high and none higher.
    This would enhance its value significantly. Any coin designated as "1/0" has the highest value; not only is it unique, but there is none better. For example, the 1926-S Lincoln cent is fairly scarce, but certainly not rare. In MS65RD, however, there is only one certified and none better; thus at the last sale, it went for more than $36,000.
    Grading requires education, a good loupe, reference books, and examination of many coins. This is especially true for coins rated as "uncirculated." For coins graded "extra fine" or lower, the fine points are less daunting and less expensive.

    Dr. Sol Taylor of Sherman Oaks is president of the Society of Lincoln Cent Collectors and author of The Standard Guide to the Lincoln Cent. Click here for ordering information.