Circulated or Uncirculated? Proof or No Proof?
Numismatic coins fall into one of two basic categories for quality: circulated and uncirculated. Circulated coins exhibit wear, whereas uncirculated coins do not. Uncirculated coins tend to be more valuable, causing investors and serious collectors to focus their efforts on acquiring the uncirculated alone. Numismatists are trained to identify coins as circulated or uncirculated.
“Proof” is another key concept in coin grading. A proof coin is one that is struck at least twice with specially prepared dies and planchets, and under higher-than-normal pressure to ensure a full, sharp strike. Proof coins are more scarce and tend to be more valuable than other rare coins, drawing special attention from investors and collectors. Some proof coins are deemed circulated because they have been held by investors and collectors.
Many proofs are also cameo proofs, meaning the area of the die that creates the coin background, or field, is highly polished, while the area of the die used to create the raise images is sandblasted. The end result is a coin with a mirror-like field and a frosty devise — a highly coveted effect for any collection.
Since rare coin quality varies widely, numismatists have adopted several coin-grading methods to assign more specific levels of quality to rare coins. The overwhelmingly popular method to use is the American Numismatic Association (ANA) grading scale.
The ANA grading scale divides circulated and uncirculated coins into 24 grades: 13 circulated grades and 11 uncirculated grades. The lowest circulated coin grade is Poor-1, and the highest circulated grade is Very Choice About Uncirculated-58. The lowest uncirculated coin grade is MS-60 (MS is short for “Mint State”), with the highest being MS-70, or a perfect coin.
How Coins are Graded
When a trained, certified numismatist inspects a coin to apply a personal interpretation of ANA grading criteria, he or she examines details such as:
- Mint luster
- Placement and depth of bag marks
- Strike strength
- Other factors
The ANA grading scale was limited for years to the grades of MS-60, MS-65, and MS-70 for uncirculated coins. More recently, however, numismatists began seeing a need for additional grading classifications, due to the increasing price differences between similar coins in the three former grades. The ANA eventually approved the use of all grade numbers between MS-60 and MS-70, resulting in the 11-point grading scale that is used today.
An ANA grading can dramatically affect a coin’s future value appreciation. High-grade coins typically outperform their lower-grade counterparts in terms of investment performance.
Several independent organizations exist for the sole purpose of grading coins, including the highly reputable Professional Coin Grading Service (PCGS) or Numismatic Guaranty Corporation (NGC). For a nominal fee, individuals can submit a coin for grading, which will be returned certified, graded and sealed in a tamper-evident plastic container known as a “slab.”
Dealers themselves graded rare coins prior to the mid-1980s, raising serious conflict of interest issues that often resulted in fraudulent grading. The third-party grading services were established in response to this fraud, developing standards and practices that are now widely accepted. These organizations neither buy nor sell coins, so there are no conflicts of interest.
More than three million coins have been graded by third-party organizations to date, and the benefits they have brought to the rare coin industry are tremendous. Among the most important are standardized grading, improved liquidity, safe long-term storage, and guaranteed grading and authenticity to protect investors and collectors from fraud.