If you're going to collect or invest in rare coins you should know up front that the most controversial subject in Numismatics is grading. The Subject is ALWAYS hotly debated amongst even the most experienced collectors, dealers and investors. This debate has raged ever since the very first dealer had the audacity to charge more for one rare coin than for another of the same type, date and Mint mark simply because the second coin was nicer than the first. But when you think about it the very nature of man is to preference quality.

The current grading standards used by the major grading services assign a numeric assessment of a coins degree of preservation. Controversy and disagreements over the grade of a coin can be cantankerous because a slight difference in the grade of a coin can mean hundreds, thousands even tens of thousands of dollars in the price of a coin. A huge difference in the value of a coin can rest on the placement of one or two marks or surface abrasions, the attractiveness of a coins luster or even strike, all of which are subjective, and measured by the "eye of the beholder".

Making grading even harder to understand: Since grading is based on subjective interpretation of a "market standard" it has and will likely continue to evolve and change. Grading for example was much more liberal in the 1970's than the 1980's as the rare coin market grew and became more popular. A Choice Uncirculated MS65 coin graded in 1979 may only meet a "market standard" of Select Uncirculated in 2004.

The grade of a rare coin should measure the amount of wear, bag marks, abrasions and other surface degradation a coin has received after leaving the coining press. The more wear, bag marks and abrasions a coin has received, the less it is worth compared to other specimens of the same coin with less wear, bag marks and abrasions.

Coins that have not been circulated are called Uncirculated or Mint State. These coins have no wear. But Uncirculated/Mint State coins are NOT easy to grade. In fact, the subtle differences in the quality of high quality coins can make determining the Uncirculated/Mint State grade of a coin much more difficult to determine.  

Someone without numismatic experience might think, it seems perfectly logical that a coin that has received less wear is worth more than one that has received more wear. However, if a coin has no wear and has not seen circulated an inexperienced observer may well wonder how its possible that one Uncirculated coin could possible be worth 50, 100 even 500 times what a another of the same type and date is worth. After all to the untrained eye the coins could look exactly alike.

Uncirculated coins are graded on a graduated scale Mint State preservation which includes 11 levels (from Mint State 60 to Mint State 70 i.e. MS60- MS70). The grade is determined by such factors as bag and contact marks, luster, toning, strike and comparative eye appeal.  and — depending on the grading standard being used — the strength of the strike and toning. Since all these are subjective, controversy rages.

Third-party grading services like PCGS, NGC, ICG and others were started by concerned dealers who were determined to establish a universal market standard. PCGS for example established a grading set that toured the United States demonstrating its interpretation of what the "market standard" should be. PCGS also published a grading guide, in 1998, the first of the private grading services to do so.

The nuts and bolts of grading

A coin is theoretically perfect when it is struck and leaves the mints press. The very second a coin is struck at the mint it is pushed from the surface of the anvil die, falling bin of other coins. When a coin fall into the bin is almost always hit coins previously struck that are lying in the bin. So, with in seconds of being struck a rare coin can be damaged or marred. Then, as the coins are bundled into bags or other bins for shipment to commercial counting rooms and banks, the coins often scrape, scratch and bump each other creating bag marks, surface abrasions, rim nicks and scratches.

Contact marks

The collisions between coins create a variety of surface marks called "contact marks" or "bag marks." A contact mark may range in severity from a light, minor disruption of the coins surface to a large, heavy scrape. Generally, the bigger and heavier the coin, the larger and more unsightly the contact marks, due to the heavier weight of the coins.

The location of contact marks plays a major role in determining at what level of Mint State a coin may be categorized. For example, marks that are clearly visible in the field of a coin, or on the cheeks, chin or forehead of a Liberty Head device are more distracting than marks of equal severity hidden in curls of Liberty's hair or the wing feathers of the eagle found on the reverse of many U.S. coins.

The size of contact marks also plays a role in determining the proper Mint State level. Larger marks, of course, are more distracting than smaller marks. Remember, however, that a contact mark 1 millimeter long is less distracting on a
large coin such as a silver dollar (diameter of 38.1 millimeters) than it is on a smaller coin such as a silver half dime (diameter of 15.5 mm).

The number of contact marks also plays a significant role in determining the proper level of a Mint State coin. A coin with numerous contact marks is less appealing to the eye than a coin with one or two distracting marks. The diameter of the coin plays a role here too. A silver dollar with five contact marks scattered across its surfaces may be judged appealing; a much smaller half dime with five contact marks may be judged less appealing, since the half dime has a smaller surface area in which the marks appear.

Luster

Another factor involved in determining the level of Mint State and high-level circulated grades is luster. "Luster is simply the way light reflects from the microscopic flow lines of a coin," according to ANACS grader-authenticator Michael Fahey in "Basic Grading," a reprint from his series of articles in the American Numismatic Associations The Numismatist. James L. Halperin, author of the Numismatic Certification Institutes The NCI Grading Guide, defines luster as, "The brightness of a coin which results from the way in which it reflects light."

Luster is imparted to the surfaces of a coin at the moment of striking. The immense pressures used in the coining process create flow lines, the microscopic lines that trace the paths the metal took while filling the crevices of the die that compose the designs.

A coin with full luster is generally one that has a bright, shiny surface (although toning, to be discussed later, may obscure full luster), caused by the light reflecting off the surface of the coin. If the luster has been disturbed, the light reflects from the surface of the coin differently; the coin may appear dull.

Circulation wear erases the microscopic flow lines that cause the luster. Heavy cleaning or cleaning with a substance that removes a microscopic layer of the surface metal will also damage the flow lines and disrupt or eliminate the luster of a coin.

A Mint State coin cannot be lackluster. At best, an Uncirculated coin without full luster can be no higher than Mint State 63 under the American Numismatic Association grading standards. High-level circulated coins may show small patches of luster in protected areas.

Wear vs. friction

Once a coin enters the channels of commerce, it begins to receive wear. An individual reaches into his pocket to pull out some change and his fingers rub across the surfaces of the coin, creating wear. A coin is thrown into a cash register drawer where it bumps against other coins, creating more wear. A dime is used as an impromptu screwdriver, damaging the edge and creating more wear.

The amount of wear a coin receives determines its grade among the circulated grade levels. The high points of a design are usually the first to depict wear, since they are the most exposed. Then the raised inscriptions and date depict wear, and finally, the flat fields.

Circulation wear erases design details, ultimately to the point where the design features are only slightly visible to the naked eye. The separate curls of hair tend to merge, the eagles feathers are rubbed away and the inscriptions begin to disappear into the fields.

Coins with only the slightest hint of wear are called About Uncirculated, a term that, if studied closely, defies logic. A coin is either Uncirculated or it is not. Then, in descending order, are Extremely Fine, Very Fine, Fine, Very Good, Good, About Good, Fair (and many years ago, Poor). Graders use several levels for some of the higher circulated grades to denote, for example, an Extremely Fine coin of higher quality than another legitimate Extremely Fine coin (EF-45 vs. EF-40).

Many hobbyists differentiate between circulation wear and another form of wear labeled "friction." According to Halperin, friction is "A disturbance which appears either on the high points of a coin or in the fields, as a result of that coin rubbing against other projections." It is often referred to as cabinet friction, a term applied to the minute wear a coin received when sliding back and forth in the drawer of a cabinet used for storage by earlier numismatists.

According to some grading services, friction does disturb the luster of the coin, but it should not disturb the metal underneath. If it does, the disturbance falls into the category of wear, they believe.

Strike

Strike is "The sharpness of detail which the coin had when it was Mint State," according to Halperin; Fahey defines it as "the evenness and fullness of metal-flow into all the crevices of a die."

The amount of pressure used to strike a coin controls the sharpness of a strike. Design elements may also affect the
strike; if two large design features are centered on both sides of the same coin, there may not be enough metal to flow into every little crevice of the design, thus leaving some details weak and ill-defined.

A coin with a sharp strike has sharp design details. For example, the curls of hair on Libertys head are strong and distinct. The feathers on the eagles wings and breast are clearly visible. All of the other design details, legends and other elements are sharp and well defined.

A coin with a weak strike has weak and ill-defined design details. It may look worn, since design details are missing from the high points of a coin. However, luster is unimpaired. Lower striking pressures may not force the metal into the deepest crevices on the die (the highest point on the coin); thus, the weaker design details.

Grading services, dealers and collectors consider strike an important part of a coins grade. An Uncirculated coin relatively free of marks and with full luster may still be placed at the lower end of the Mint State scale if it has a weak strike.

Strike affects the value of a coin. A coin with a sharp strike will generally have a higher value than a coin with a weak strike, all other factors being equal.

Toning and color

As a coin ages, the original color changes in reaction to the environment. The original red of copper coins becomes brown (or green). Silver coins may tone into any color of the rainbow, depending on environmental factors. Gold is a more stable metal and even when immersed in seawater for centuries, generally shows little change in tone and color.

Many years ago, toned coins, particularly silver coins, were judged unattractive. Silver coins were "dipped," placed into a chemical solution that removed the toning and restored the shiny surface by stripping away the outer surface of the silver or the dirt.

However, attractively toned coins have become more appreciated from an aesthetic viewpoint. A silver dollar with rainbow toning may bring a considerable premium because of its coloration. Still, coins that exhibit bright white, original surfaces are prized (although because of the speed with which silver tones, some question whether any coins of a particular age can retain their original surfaces). Coins that exhibit unattractive toning (referred to as tarnish) are considered to be of lesser quality.

Because attractively toned coins often bring higher prices, some unscrupulous individuals (called "coin doctors") have devised ways of artificially toning coins. Some use the bluing materials used by gunsmiths. Others bake their coins in ovens using various substances to impart different colors. Some chemically treat coins.

Novices will find it difficult to judge between natural toning and artificial toning. Experience is important here. An individual who has looked at a large number of coins will find that he can determine at a glance whether the toning is natural or whether it has been artificially generated. Collectors should not pay a premium for an artificially toned coin.

Other factors

There are other factors that may not necessarily affect the grade but may affect the value. Among these factors are die scratches, not to be confused with "hairline" scratches. Die scratches are thin raised lines on a coin, resulting from minute scratches in the surface of the die. A hairline is a thin scratch scraped into the surface of a coin inflicted after the coin is struck.

A close examination of a coins surface through a magnifying glass should indicate whether a line on a coin is raised, and thus a die scratch, or incused, making it a hairline scratch.

Hairlines tend to affect the value more than die scratches. Most grading services, however, will lower the grade of a coin for more extensive, distracting die scratches.

Adjustment marks are often found on older U.S. silver and gold coins. Planchets (unstruck coins) were individually weighed before striking. If found to be a little overweight, the excess gold or silver was filed away. The striking pressures often did not obliterate the adjustment marks, which may resemble a series of parallel grooves. Adjustment marks may affect both the grade and the value.

It's very subjective but "Eye Appeal" can have an impact on grade and price

All of the factors mentioned earlier are ultimately considered when graders, dealers and collectors decide on the "eye appeal" of a coin. Eye appeal relates to the overall attractiveness of a coin and ultimately determines its value. A potential buyer, whether he is a dealer, collector or investor, decides just how attractive he believes the coin to be.

Judging eye appeal is again purely subjective action. For example, a coin could have a strong strike and full details, possess full luster and have few large, distracting contact marks and still not have eye appeal if it has toned to an unattractive color.

When examining a coin, a buyer must decide for himself just how "pretty" the coin is and whether its attractiveness warrants the price being asked. Only the buyer can decide the eye appeal. Aesthetic judgments differ from person to person.

Even professional numismatists can have legitimate differences of opinion over a coins grade. Grading is subjective, not objective.

As a collectors or investor you should know that grading standards can change and have changed over time several times. Standards sometimes tighten up, with a coin once considered Mint State 65 now considered MS-64. Standards can also loosen, with an MS-64 coin grading MS-65 under the looser standards. This can be troublesome, especially if a novice buys a coin graded by even a professional service like PCGS during a period of loose standards; even if the slab is marked as MS-65, current standards might consider the coin no higher than MS-64. That's why it is vital that collectors learn how to grade coins, in order to protect them selves when buying coins. I always say to even experienced collectors...buy the coin not the holder, pay more for premium quality.

Some basics you should know!

Proof: Traditionally, Proof describes a method of manufacture, not a grade. However, since numerals are often assigned to Proof coins, there are different qualities of Proof coins; in effect, different grades. A circulated Proof is often called an "impaired Proof." When abbreviated, Proof generally appears as PF.

Brilliant Proof coins are struck on highly polished planchets, using slower, high-pressure presses; coins are struck two or more times to bring up greater detail in the design.

Mint State and Uncirculated: The two terms are interchangeable and describe a coin that has no wear. To qualify as Mint State, a coin must not have any level of wear. Even the slightest amount of wear will drop the coin into the About Uncirculated level. (Coins described by some dealers as "Borderline Uncirculated" have wear and are actually About Uncirculated. New collectors should be aware of this fact and not pay a Brilliant ) Mint State is most often used with numerals. Mint State is abbreviated as MS.

The numerical Mint State system so widely used in the current rare coin market is based on a system created by Dr. William H. Sheldon for the U.S. large cents of 1793 to 1814. When the numerical system began to spread to other series, three levels of Mint State were used: Mint State 60, for an Uncirculated coin of average luster, strike and marks; MS-65, an Uncirculated coin of above average quality; and MS-70, a perfect coin as regards luster, strike and marks. All 11 numbers are now used from MS-60 to MS-70.

Uncirculated is usually abbreviated as Unc. It often appears as Brilliant Uncirculated, abbreviated as BU. Sometimes used with numerals, generally as Unc. 60, and so on. Some dealers use a plus sign to indicate a coin better than one level of Mint State, but not as good as the next level.

About Uncirculated: This is a coin with only the barest traces of wear on the highest points of the design. It is abbreviated AU and often appears with numerals as AU-50, AU-55 and AU-58. The term has gained acceptance despite seeming inconsistency. Some people in the hobby still say that no coin can be About Uncirculated — it is either Uncirculated or it is not. Some use Almost Uncirculated, although all major U.S. grading guides use "About." The AU-58 grade has been described as an MS-63 coin with just the slightest hint of wear. It should have fewer contact marks than lower level Mint State coins: MS-60, MS-61 and MS-62. It may be more attractive and more valuable than these lower Mint State coins.

Extremely Fine: Light overall wear on highest points, but with all design elements sharp and clear, distinguishes this grade. Most hobbyists abbreviate it as EF, although a few use XF. It appears as EF-40 and EF-45.

Very Fine: The coin has light to moderate even wear on surface and high points of design. Abbreviated VF, it appears with numerals as VF-20 and VF-30. The abbreviations VF-25 and VF-35 are infrequently used.

Fine: The wear is considerable although the entire design is still strong and visible. It is abbreviated as F-12.

Very Good: The design and surface are well worn, and main features are clear but flat. Abbreviated as VG, it is used with numerals as VG-8 and VG-10.

Good: Design and surface are heavily worn, with some details weak and many details flat. It is abbreviated only when used with numerals, G-4; G-6 is infrequently used. Ironically, a coin in Good condition is not a "good" coin to collect; a Good coin is generally the lowest collectible grade.

About Good: The design is heavily worn with surface fading into rim and many details are weak or missing. Abbreviated as AG, it is used with a numeral as AG-3. Few coins are collectible in About Good condition. Dealers also use the terms Fair and Fair 3 to describe a coin in this state of preservation.