In Search of the Perfect Grading Scheme

In Search of the Perfect Grading Scheme

By Dr. Sol Taylor
"Making Cents"
Saturday, September 8, 2007

hen the first "Red Book" ("A Guide Book of United States Coins") was published in 1946, most coins had two grades — especially the 20th century issues — generally Extra Fine and Uncirculated. Lower grades often were of little or no value over face.
    In early, pre-World War II coin catalogues, including auction catalogs, most coins were given one of the following abbreviated descriptions: Fair — well worn but barely identifiable as to type and date; Good — well worn but basic details readable; Fine — high features visible; Very Fine — average wear but all features showing; Extra Fine — slightly circulated; About Uncirculated — hints of mint luster, but evidence of use; and Uncirculated or mint condition. In the early price lists, coins often were ranked as "Uncirculated" and "Brilliant Uncirculated."
    As coin prices started their meteoric rise in the early 1970s, it was necessary to codify these fine points for each series so buyers, sellers and dealers were all on the same page, so to speak. An early grading system initiated by Brown and Dunn in the 1960s included a strip of photos for each coin series, showing examples of the various grades.
    These black-and-white guides were barely adequate for the needs of the consumer, investor and even dealer of coins. A more detailed grading guide that developed in the same period using line drawings by James Ruddy was of some use, but it never addressed the fine points of the coins that were in mint condition.
    At the American Numismatic Association convention in Los Angeles in 1975, the ANA selected a blue-ribbon panel of collectors and dealers to set out plans for a grading service and a uniform grading yardstick for the industry. Headed by Abe Kosoff and Kenneth Bressett, some 15 people met at the convention hotel, the Airport Marriott, several times to map out a grading solution — or at least a guideline for the grading of coins.
    The first objective was to establish a grading service, which became the American Numismatic Association Certification Service (ANACS). The ANA would select persons to provide the expertise and set up educational programs to define the grading guidelines. I was appointed to conduct the grading seminars at the ANA’s Summer Seminars in Colorado Springs in 1975, 1976 and 1977. Abe Kosoff and Myron Kliman developed a detailed grading book for each United States coin series.
    ANACS officially started operation in 1975 and not only graded coins submitted but authenticated them, as well. Thus any ANACS-graded coin was also certified as genuine. At first, ANACS only authenticated coins and did not grade them. They received a fair number of altered and counterfeit coins — now as their educational resource collection. Future ANA president Virgil Hancock, had been conducting counterfeit detection seminars at that time and his workshops included those altered and counterfeit pieces submitted to ANACS or donated to ANA.
    ANACS would provide each submission with a certificate and a high-resolution black and white photo of each side and a numerical grade. The early adopted numerical grading was based on the 1-70 system, in use with the Early American Coppers collectors. The grades are generally: 1-Poor, 2-Fair, 4-6 Good, 8-10 Very Ggood, 12-Fine, 20-30 Very Fine, 40-45 Extra Ffine, 50-55 About Uncirculated, and 60-70 Mint State. Thus a typical ANACS certificate might read, 1909-S VDB Lincoln Cent XF40/45, indicating that the reverse was slightly better than the obverse
    A revolutionary concept in grading emerged in the mid-1980s when the Professional Coin Grading Service of Newport Beach, Calif., came out with the coin capsule, also known as the "slab." PCGS also fine-tuned the grading numbers so that only one grade was assigned, even if one side was better than the other.
    Also, as the need for better-defined Mint State grades was considered, additional numbers were assigned from MS60 to MS70 (likewise from PF60 to PF70 for proof coins). By the mid 1990s, each unit of Mint State had been defined by grading sets, photos and descriptions for each coin series.
    Thus, some silver dollars which earlier were "Mint State" now became "MS61" or "MS64," based on widely accepted standards provided by the experts in the field.
    By the early 1990s, several other grading services came on line, and the tussle of standards became legal issues in some cases as one service would call a coin "MS65" while rival services would call the same coin an "MS63." Some newer services would assign super grades such as "MS69" and even "MS70" to many coins that would grade several points lower by ANACS or PCGS’ main rival, Numismatic Guaranty Corporation (NGC). Since the market value of the super grades would be multiples of the MS65 grade, some collectors chose the higher grading services only to find out their resale value was far less than expected. A lawsuit was filed by one of the services alleging some customers and rival firms were maligning their practices. The suit was settled a few years ago.
    The issue of whether the "choice uncirculated" silver dollar you bought in 1960 is still "choice uncirculated" today is still a problem. Many coins sold at auction and by major firms 30 or more years ago are often not meeting today's grading standards as accepted by the majority of collectors and dealers.
    Unfortunately, coins purchased more than 40 years ago sometimes even include altered and counterfeit coins. Dealers in 1960 often lacked the resources to properly identify an altered 1893-S silver dollar or a counterfeit $3 gold piece. Examples of these two and many others reside in the ANA collection and go on display each year at the Summer Seminar on Counterfeit Detection headed up by dealer and former ANA president, Robert Campbell. One of the finer groups of counterfeits in the collection is a complete set of Indian Head $2.50 gold pieces — all counterfeits, and darned good ones at that. I examined them carefully and thought they were genuine.
    The perfect grading guide has yet to be developed, but generally accepted practices will still favor the major grading services that ascribe a grade to a slabbed coin.
    In some cases, a customer will buy a coin graded MS64 thinking it might actually reach MS65 if submitted to another service. This crossover practice has no doubt upped the point value of a good number of coins — but still a tiny fraction of the 10 million (or more) coins that have been slabbed since 1985.
    For example, I had examined the unique 1959-D wheat back cent some 20 years ago and believed it was an AU coin. So did the first service to slab the coin. It was later resubmitted to another service and came back as MS63. In this case it hardly mattered, as the coin is unique. But if the coin were a 1901 silver dollar, the first value would be under $150 and the second value about $5,000. The search for the extra point (and dollar value) is an ongoing issue in the grading wars. Collectors who prefer well-used coins have a lot less problem with grading.
    If you collect expensive and-or rare coins, stick to the major grading services — every dealer can tell you which ones — and learn to discern the finer points of each series that you collect. Buy the best grade you can afford and get a guarantee that the grade you paid for is the grade you got. Also, learn to be an expert in the coins you collect and examine many of them before you start buying. Recruit some experts who also know the series and compare notes.
    Education is a valuable and necessary tool in the grading battles.

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.