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What Are Graded Coins and How Are They Graded?

In the academic world, grading can have a bolstering or degrading affect on one’s sense of self-value, and the role of “grading” plays a similarly strong role in determining the value of your rare, numismatic collection pieces. That is because the role grading plays in determining the value of your coins is paramount to determining an exact accounting of that collection’s ultimate value, so it is the most important arrow in your quiver to guarantee that you never leave any money on the table when buying or selling your gold and silver coinage.

That being said, learning how to grade properly is about as much art as science with a premium placed on experience, so while you cannot expect to immediately master the practice, it is a mastery that pays huge dividends over the cost of your investing career. Superior grading skills allows you to pinpoint your coin’s value, which allows you to know what to pay at the coin dealer and avoid being ripped off when parsing through your buying options for gold and silver coins.

What is Grading?

At its most basic level, grading seeks to determine the amount of wear a coin has endured since its mint release. As such, rather than viewing the coins appearance overall, the grading process looks at the subtle indications of wear as the building blocks towards establishing an accurate appraisal for each coin. When worn, a coin exhibits telltale signs that are identifiable on the highpoints. For instance, when grading silver coinage or rounds, a dull graying of the metal will indicate friction while gold wearing presents as a dark, dull sheen of the metallic surface. Remember, because coin grading is a determination of the coin’s value based on how much wear is present or absent, the process ignores such factors as dents, holes, nicks, and scratches.

Design as an Indicator of Grading

One of the things that makes coin collecting, and investing, so exciting is the level or artistry that mints bring to the table in terms of design. Beautifully conceived and flawlessly wrought, these delicate designs suffer from wear vulnerabilities. As an example, high relief coins will show signs of wear in advance of other areas, and shallow engraving will lose their luster quicker than their more deeply etched counterparts will demonstrate. Isolating these high impact areas will allow for grading of both circulated and uncirculated coins in your collection to arrive at an accurate appraisal.

The Importance of Grading

With the shear number of coins, both circulated and uncirculated, available for purchase on the precious metal market, proper grading provides a starting point and benchmark for understanding a coin’s condition as it relates to the amount of wear it’s been subject to since release. Perhaps it is part of the human condition, but we need to categorize large amounts of data into more manageable portion, and grading gives us a label to begin our organizing efforts.

As an example, not all Morgan Dollars are created equal when it comes to the conditions in which they were stored, and any resultant environmental degradation that might accompany improper storage. While it is possible to gather a general idea of the value of coin based on coin’s popularity, demand for a particular series, and overall supply, the grading score measures the value attached to a specific coin.

graded-coinsImage courtesy of PCGS.com

The American Numismatic Association Grading System

As mentioned, coin grading is more art than science, and the somewhat subjective nature of the exercise requires years of experience to accomplish correctly. That does not mean you should delay your mastery of the skill. Guiding your efforts is the American Numismatic Association Grading System, which is an extremely detailed breakdown of potential conditions of wear. Indeed, it greatly exceeds the scope of this article to broach the myriad of terms and definitions that are used to help capture the appropriate grade of a particular coin. In terms of benchmarks however, the following four terms are an excellent starting point for understanding your coin’s grade.

Learning the grading process is the first step towards autonomy in your coin-collecting career, so beginning to master the skill at the earliest possible point in your career will deliver the highest dividends.

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