What Coin Graders Look at When Grading Coins

The basic principals of coin grading are among the most important things that collectors must learn when they start their coin collecting journey. The ability to accurately grade coins is a skillset that one can develop only over time as patterns emerge through repeated exposure to coins and the various issues that are unique to each series. Some of these issues have to do with each coin’s unique characteristics, and some have to do with what collectors and dealers have done to the coins over a period of years.

As newcomers, we all make mistakes when evaluating coins, just as we all make assumptions about the factors that make up a coin’s grade. In this article, we highlight the key factors that professional coin graders look at when grading coins so that you can focus on learning what is important to a coin’s grade and put aside what is not.

Why Is It Important to Know How to Grade Coins?

Two key factors determine a coin’s value, rarity, and condition. At the upper end of the hobby, coin collecting is highly competitive as a limited number of exceptional coins survive and collectors bid against each other for the privilege of adding the “finest known” examples to their collections. For the rest of us, the interplay between rarity and condition is a major factor in how much a coin costs and how much a dealer will be willing to pay to buy the coin back.

When you understand the principles of coin grading, you are protecting your money and your coin investment. Many collectors rely on the grades assigned by third-party grading services when making purchasing decisions. These opinions, while highly valuable, do not tell the whole story of a coin’s desirability. This has been true since the dawn of the TPG era, which is why the old adage “buy the coin, not the holder” is as relevant today as it was 30 years ago.

Basic Coin Grading Principles

Even experienced coin graders don’t always agree on the grade of a coin. This is why third-party grading services developed a process where two or more experienced graders review and grade a coin and a finalizer reviews the coins and their assigned grades to insure that the assigned grade meets the standards of the grading service.

When first starting out, it may take you several minutes to grade each coin as you have not yet developed the pattern-recognition skills that will allow you to look for the coin’s most common problem areas. It is important to realize that the issues that impact a Morgan Dollar may not be present with a Lincoln Cent. Composition, size, weight, the methods of manufacture, characteristics of the design, and the age of the coin all impact a coin’s ability to survive in “as struck” condition. Because of this, professional graders have to store a tremendous amount of highly-specialized information. As someone new to grading, you will begin to pick up small details about each category of numismatic object once you have reviewed them yourself and applied best practices.

Before you can grade coins as accurately as the professionals, you must create an environment that is conducive to coin grading. To do so, you will want to observe the following:

Lighting: The shift towards LED lighting poses a problem for coin grading as experience has shown that a single incandescent light bulb at 75 or 100 watts in a table lamp offers the best lighting source for coin grading. Moreover, you want to be in a dark environment with the only source of lighting being the incandescent bulb. The reason for this is that you want to take advantage of the interplay between the coin and a single light source. This will allow you to see flaws that might otherwise go unnoticed.

Magnification: Unless you have perfect vision, magnification is necessary to accurately see the surface characteristics of a coin. The ideal magnification is between 5x and 7x range. Avoid over-magnification, as a coin’s grade is dependent on eye appeal and not the condition of its surfaces on a microscopic level. What you are looking for is clarity on issues that you might see with your naked eye.

The type of loupe we recommend you use is a Hastings Triplet-style loupe. This type of loupe is made by numerous manufacturers and bonds three lenses to virtually eliminate distortion at the outer edges of the loupe. A quality loupe can be acquired for $50 to $150.

How to Hold a Coin: Coins are highly susceptible to wear and damage from oils secreted by human skin. While gloves may reduce this risk, it is not practical to put on a clean pair of gloves every time you handle a coin. For these reasons, one should only hold a coin by its edges.

How to View Coins: After looking at the obverse and reverse of a coin with your naked eyes, you will want to view the coin under a loupe. Hold the loupe close to your eye and bring the coin toward the loupe until it is in focus. Once the coin is in focus, study the primary focal areas, the surrounding fields, and the rim.

Rotate the Coin: In both your naked-eye and magnified inspection of the coin, you will want to slowly and systematically wobble the coin so that you can visualize the way lights reflects off of the coin’s surface. Contact marks, wear, and planchet flaws that may be concealed when looking straight at a coin can be revealed by using this method. As you are wobbling the coin, rotate it clockwise and then counterclockwise to make sure that you catch flaws that are only visible when light is hitting the surface at a sideways angle.

Three Sides to a Coin: Much of the focus on coin grading deals with the coin’s obverse (front) and reverse (back), but the edge of the coin is also important. Wear or damage that is evident on the rim can negatively impact the coin’s overall grade. On the other hand, no coin has ever upgraded on the basis of its rims being in excellent condition.

Coin Storage: To protect your rare coin investment, it is critical that you learn the proper way to store your coins. Temperature-controlled environments with low humidity are optimal. Also, keep your coins away from chemicals that can react to coin metal, and avoid using PVC flips. Over time, the chemical compounds in PVC can break down and leave a corrosive residue on the surface of your coins. Avoid storing them near paper products as well, since paper emits low amounts of methane, sulphur, and carbon dioxide as it ages.

Key Terms to Know

Here are a few terms that beginner collectors must know in order to progress as coin graders.

Coin Features

Device: A device is any raised or incused design element that is imparted on the coin from the coin die. Typical devices found on U.S. coins are figures, inscriptions, dates, and mintmarks.

Field: The field is the flat surface area of a coin that does not contain the device. On a circulation strike coin, fields will often show die flow lines that are imparted at the moment the dies come into contact with the planchet, causing the metal to move in an outward direction.

Focal Area: A coin’s focal area is the area of a coin to which your eyes are naturally drawn. Focal areas carry tremendous weight when coin graders determine the grade. On a Morgan Dollar, for instance, the primary focal area is Miss Liberty’s face.

Coin Classifications

Business Strike: A business strike is a coin produced for circulation. These can be struck by hand or with high-speed coin presses. A business strike is a coin in its purest form: commercial legal tender.

Proof: A Proof is a coin that is made for either ceremonial purposes or for sale to coin collectors. Unlike a business strike, which is struck once, Proofs are struck multiple times at higher pressure, using specially prepared dies and blanks. Many Proofs exhibit mirror-like fields and frosted devices. Proof is a description of the coin’s method of manufacture, and not its grade. A Proof coin that has entered circulation, or has become damaged in some way, is referred to as an Impaired Proof; collectors tend to avoid Impaired Proofs.

Coin Conditions

Coins are graded on the 70-point Sheldon Scale. To learn about each grade, be sure to check out our in-depth CoinWeek Notes overview of the Sheldon Scale at the link above.

Mint State: A Mint State coin is one that is uncirculated but originally struck for commerce. Sometimes, numismatists refer to these coins as “Business Strikes”. Mint State coins show no wear and are graded MS60 to MS70.

Circulated Condition: A circulated coin is a business strike that exhibits signs of wear. Any sign of wear, no matter how light, puts the coin in the circulated condition category. On the Sheldon Scale, circulated grades from Poor to About Uncirculated. Numerically, this is spelled out PO01 to AU58.

Proof: As we mentioned before, Proof is a method of manufacture and not a grade. However, unimpaired Proofs will grade PR60 to PR70, depending on the quality of the strike and the coin’s state of preservation. A slightly mishandled coin that exhibits no wear may grade PR62 or PR63. Typically, this mishandling encompasses old cleaning or damage due to improper storage, not wear.

Impaired Proof: Any Proof coin that has been damaged, mishandled, or exhibits signs of circulation. As with circulation strikes, in the Sheldon Scale, impaired Proofs are graded PR01-PR58. It is highly unlikely that one will find an impaired Proof in the lower grades, as coins with this degree of wear are difficult to differentiate from circulation strikes.

How Grading Services Arrive at a Final Grade

Coin grading is highly subjective, even among experts, and third-party grading services are commercial enterprises. Because of these factors, two different grading philosophies have emerged: technical grading and commercial grading. These distinctions are important to know, even though, as a beginning grader, one will not be able to faithfully apply either standard to a coin in every circumstance.

The Sheldon Scale is used in technical grading and market grading. The practitioner of technical grading will put extra emphasis on the letter of the grading standard irrespective of how “nice” the coin is when compared to other coins on the market. The market grader will take the coin’s technical merits into account but err on the side of what the market will bear for such a coin. One reason why so many slightly impaired coins are graded in the 60-62 range is because the services believe that these coins are better than coins with slightly more obvious wear. In some cases, a gemmy AU58 coin will have far better eye appeal than a market-graded MS62.

Another factor to consider is that many coins have been “processed”, “conserved”, or “doctored” over the years – sometimes with the intent to save the coin from destruction and other times with the intent of making more money off of the coin’s sale. Many experts can tell when a coin has been cleaned, recolored, or repaired. If these alterations are minimally intrusive, the coin grading companies may apply market grading principles and give the coin a numerical grade. Coins that have been altered too much, however, will almost certainly be given details grades instead.

It is possible for graders to arrive at different conclusions on a coin’s grade each time they review the coin. Some coins truly fall in between two grades, and, given the profit motive that drives the industry, these coins will submitted multiple times in an effort to earn an upgrade. This is routine for the coin industry, and CAC, now a full-service grading company, entered the market as a stickering service in an effort to normalize the grading standards between PCGS and NGC and apply a more technically-focused grading philosophy. Again, grading is subjective, so even CAC does not always see coins the same way expert dealers or collectors do.

As you grade your own coins, you may arrive at different conclusions than the grading services. It is not uncommon for collectors to be harsher on their coins than the TPGs.

Because of the variance that exists within grades and the differences in strike characteristics, clarity, and color, it is important to understand that NOT ALL EQUALLY GRADED COINS ARE EQUAL!

How Much Weight Do Graders Place on the Obverse, Reverse, and Rim?

There may be three sides to a coin, but the three sides are not waited equally. As a general rule, 3/4 of the grade of a coin is determined by the coin’s obverse, with a primary focus on the focal areas. In this way, a coin grader largely arrives at what the coin’s condition is based on a careful review of the obverse and the grade can only go down based on the condition of the reverse. This weighting of one side over the other is not spelled out in grading manuals but is the reality of the market. Remember the term “market grading”?

The rim becomes an important factor in the coin’s grade only if there is something unusual about it, such as a cut or dent. Experienced collectors and dealers never ignore the rim!

Ways That Coin Metal Can Impact Grade

A coin’s composition can heavily impact its survivability. In the United States, there are five primary metals (or metal alloys) that have been used to strike coins: gold, silver, nickel, copper, and zinc-plated steel.

Gold and silver are softer metals that strike up better than nickel or copper-nickel clad alloys. This softness may make for better design detail when properly struck, but it shortens the amount of time a coin can remain in circulation before wearing down. Harder metals, like nickel, may make it more difficult to strike up the finer details of a coin and shorten the working lives of dies. For the United States Mint, this has always been a fine balancing act.

Traditionally, American gold and silver coins were struck with 10% copper added. The result of this copper, if not properly mixed, is spotting on the coin’s surface. For gold, this spotting appears as red dots. On silver, spots may appear as dark specks. The presence of these spots may negatively impact eye appeal, but they do not technical affect the grade.

For copper coins like Lincoln Cents, the highly reactive coin metal begins to tarnish the moment the planchets are made. This is a gradual process that may take dozens, even hundreds of years to complete. This change in color is why new pennies are bright orange, while older ones tend to be chocolate brown.

Silver coins and nickels tend to tone. Toning can negatively impact a coins eye appeal or it can help it, if the colors and toning pattern are attractive. We will talk more about toning later in this article.

The Four Pillars of Coin Grading

When grading a Mint State (a coin that grades from 60-70 on the Sheldon scale) or a Proof coin, the four most important elements are:

Contact Marks: sometimes referred to as “bag marks” (as coins were usually shipped and stored in bags) Gem or better coins exhibit few contact marks, while coins in typical Mint State my exhibit multiple bag marks in focal and non-focal areas. It is important to be able to differentiate contact marks from other types of scratches or graffiti – as these can render a coin ungradable.

Strike: How much of a coin’s design is imparted on a planchet is referred to as the strike. Fully-struck coins tend to be more desirable than coins with weak strikes. For 18th- and 19th-century coins, when full coins were not typical, strike weakness could be seen throughout the coin or only in certain areas.

Luster: Luster is the reflective quality of a coin’s surface. All coins exhibit some degree of luster when struck, but coins that exhibit superior luster stand out! Compare the highly lustrous 1881-S Morgan Dollar to the usually dull New Orleans issues.

Eye Appeal: Eye appeal is the most subjective element of coin grading. Eye appeal is how a coin looks to you. What impression does it leave with you? Do you like the strike, the luster, the color? Coins with great eye appeal sell for more than coins with typical or poor eye appeal.

Specific Coins and Their Designations

Along with a grade, some popular modern coin series are designated by the fullness of the strike.

Full Bell Lines (“FBL”): This is a designation that applies to Franklin Half Dollars if they meet certain criteria. To determine if there are full bell lines, you must look at the set of horizontal lines on the bell on the reverse. There are two sets of lines. One set is located at the base of the bell and the other set towards the middle. The horizontal lines must be at least 95% complete and unobstructed to qualify. This is determined without regard to the break in the lines resulting from the crack on the bell design itself. That break is supposed to be there.

Full Steps (“FS”): This applies to the Jefferson Nickel. This designation applies to the steps at the base of Monticello on the reverse. Full Steps can either be designated five steps (five of the steps are complete) or six steps (where all six steps are complete). A formula is used as follows. The steps are broken into four quadrants. There are a total of 24 part steps. You then look at each of the 24 separate steps to determine if it is complete and unobstructed. You total your score. If the score is 24 then you have a six Full Steps. If it totals 20-23, inclusive, then you have five Full Steps.

3. Full Bands (“FB”) or Full Split Bands (“FSB”): This designation applies to Mercury Dimes. To earn this designation, the 2 horizontal bands that bind the fasces on the reverse must be fully detailed and unbroken, having complete separation between each other and raised. For many dates, fully struck examples that exhibit this feature are in the minority.

4. Full Torch (“FT”) or Full Bands (“FB”): This designation applies to Roosevelt Dimes and depending on the grading service one will refer to it as “FT” and the other as “FB”. To earn this designation, both the upper and lower pair of bands on the torch to show full separation. The lines separating the bands must be full and unbroken.

5. Full Head (“FH”): This designation applies to the Standing Liberty Quarter. This coin design was notoriously difficult to strike fully and the United States Mint made several alterations to improve the quality. In order to be classified as FH, you look at the head. All three leaves on Liberty’s crown must be at least 95% visible, along with the “ear hole”.

Learn to Grade Coins

We can not emphasize enough how important it is for the collector and investor to learn how to properly grade coins. Even understanding the basic concepts can potentially save you serious money as you build your collection. You may make mistakes along the way, but, just as it’s important to sharpen your skills by reviewing lots of coins, you can sharpen your collecting skills by learning from your mistakes. We all make them. The key is not making the same ones over and over again.

* * *

The post What Coin Graders Look at When Grading Coins appeared first on CoinWeek: Rare Coin, Currency, and Bullion News for Collectors.