The Basics and Origins of Grading

Grading is part and parcel of collecting as much as exams are part of studying; and yet there many collectors feel that grading is something best left to the experts or numismatists.  Let me assure you that nothing can be further from the truth.

We grade things in our daily lives – from picking the right fruit at the grocery store, to checking out that used car, right up to our life partners!  Grading is the process of determining the condition and therefore value of something and subsequently deciding on how much of resource e.g. time and money that you want to invest in it.

Sheldon Scale
Fig1. Dr. William H Sheldon (Source : LIFE)

Grading coins and banknotes is no different. All you need to do is to get familiar with the grading scale, with the right equipment and some practice you’re good to go.

Let’s begin with understanding the grading scales used by the collecting community. The most commonly used scale in the coin grading world today is the 70 point “Sheldon Scale”. It was introduced in 1949 by Dr. William H Sheldon as a more scientific way to grade large US copper coins. Prior to this, different people graded their coins differently, from “near proof” to “former fine” to “a trifle uncirculated” and collectors have no way of knowing the actual condition of the coin until he holds it in his hand. The Sheldon Scale made a huge impact by providing a standard “short hand” description of the coins relative condition. In 1979, the American Numismatic Association (ANA), thru its certification service provide ANACS starting using this 70 point scale. Soon after, Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC) adopted the same scale in mid and late 1980s.

Essentially, the grades are divided into 2 broad categories, circulated and uncirculated.  Circulated coins grade range is from one to 58, the uncirculated ones will be assigned one of the 11 points from 60 to 70. The one or two alphabets preceding the numbers are the short form of the grade description, for example “MS” stands for Mint State, AU stands for “About Uncirculated” and F stands for “Fine”. For example a Mint State 65 will be labelled as “MS-65” out of the possible a maximum of 70.

For collectors, the higher the points for the coin, the more desirable it is; and of course the value of the coins will go up accordingly. When Dr. Sheldon first developed his scale, it was meant to be a value guide for the large US copper coins. At that time, he observed that the market had priced an MS60 copper coin double to that of a VF30 one; and that a perfectly mint state coin sold for as much as 70 times the price of a barely identifiable one (Poor), hence the top end of the scale was set at 70. As a result, the grade becomes a reference point for its market price.

Sheldon Scale
Fig 2. Modern version of Sheldon Scale. 

However the market price of coins since then had changed dramatically, an MS60 coin today may be worth 20 times or even more than a VF30 one! But the scale remained useful as a quantitative guide to the market value of coins and its easily understood description makes it the most widely adopted standard in the industry today.

No comments:

Post a Comment