Grading Uncirculated U.S. Coins

The subjectivity of grading and the trend toward more classifications becomes more acute when venturing into uncirculated, or mint-state, coins. A minute difference between one or two grade points can mean a difference in value of hundreds or even thousands of dollars. In addition, the standards are more difficult to articulate in writing and illustrate through drawings or photographs. Thus, the possibilities for differences of opinion on one or two grade points increase in uncirculated coins.

Back in Dr. George Heath’s day and continuing through the 1960s, a coin was either uncirculated or it wasn’t. Little distinction was made between uncirculated coins of varying condition, largely because there was little if any difference in value. When Numismatic News introduced its value guide in 1962 (the forerunner of today’s Coin Market section in the News), it listed only one grade of uncirculated for Morgan dollars.

But as collectible coins increased in value and buyers of uncirculated coins became more picky, distinctions within uncirculated grade started to surface. In 1975 Numismatic News still listed only one uncirculated grade in Coin Market, but added this note: “Uncirculated and proof specimens in especially choice condition will also command proportionately higher premiums than these listed.”

The first edition of the ANA guide listed two grades of uncirculated, MS-60 and MS-65, in addition to the theoretical but non-existent MS-70 (a flawless coin). MS-60 was described as “typical uncirculated” and MS-65 as “choice uncirculated.” Numismatic News adopted both designations for Coin Market. In 1981, when the second edition of the ANA grading guide was released, MS-67 and MS-63 were added. In 1985 Numismatic News started listing six grades of uncirculated for Morgan dollars: MS-60, MS-63, MS-65, MS-65+, and MS-63 prooflike.

Then in 1986, a new entity appeared that has changed the nature of grading and trading uncirculated coins ever since. A group of dealers led by David Hall of Newport Beach, Calif., formed the Professional Coin Grading Service. For a fee, collectors could submit a coin through an authorized PCGS dealer and receive back a professional opinion of its grade.

The concept was not new; the ANA had operated an authentication service since 1972 and a grading service since 1979. A collector or dealer could submit a coin directly to the service and receive a certificate giving the service’s opinion on authenticity and grade. The grading service was the source of near constant debate among dealers and ANA officials. Dealers charged that ANA graders were too young and inexperienced, and that their grading was inconsistent.

Grading stability was a problem throughout the coin business in the early 1980s, not just with the ANA service. Standards among uncirculated grades would tighten during a bear market and loosen during a bull market. As a result, a coin graded MS-65 in a bull market may have commanded only MS-63 during a bear market.

PCGS created several innovations in the grading business in response to these problems:

1. Coins could be submitted through PCGS-authorized dealers only.

2. Each coin would be graded by at least three members of a panel of “top graders,” all prominent dealers in the business. (Since then, however, PCGS does not allow its graders to also deal in coins.)

3. After grading, the coin would be encapsulated in an inert, hard-plastic holder with a serial number and the grade indicated on the holder.

4. PCGS-member dealers pledged to make a market in PCGS-graded coins and honor the grades assigned.

5. In one of the most far-reaching moves, PCGS said it would use all 11 increments of uncirculated on the 70-point numerical scale: MS-60, MS-61, MS-62, MS-63, MS-64, MS-65, MS-66, MS-67, MS-68, MS-69, and MS-70.

Numerous other commercial grading services followed in the steps of PCGS and third-party grading is an accepted part of the hobby.

How should a collector approach the buying and grading of uncirculated coins? Collecting uncirculated coins worth thousands of dollars implies a higher level of numismatic expertise by the buyer. Those buyers without that level of expertise should cut their teeth on more inexpensive coins, just as today’s experienced collectors did. Inexperienced collectors can start toward that level by studying the guidelines for mint-state coins in the ANA grading guide and looking at lots of coins at shows and shops.

Study the condition and eye appeal of a coin and compare it to other coins of the same series. Then compare prices. Do the more expensive coins look better? If so, why? Start to make your own judgments concerning relationships between condition and value. Experience remains the best teacher in the field of grading.

Because proof coins are struck by a special process using polished blanks, they receive their own grading designation. A coin does not start out being a proof and then become mint state if it becomes worn. Once a proof coin, always a proof coin.

In the ANA system, proof grades use the same numbers as circulated and uncirculated grades, and the amount of wear on the coin corresponds to those grades. But the number is preceded by the word “proof.” For example, Proof-65, Proof-55, Proof-45, and so on. In addition, the ANA says a proof coin with many marks, scratches or other defects should be called an “impaired proof.”