What are the Basics of Coin Grading and Mint State?
With gold coins and other coins made of precious metal becoming increasingly popular as an investment vehicle, it’s important to know as much as you can about them if you’re going to take the plunge and make a buy.
So what goes into evaluating a coin? The process is known as coin grading, and it takes into account the quality and physical condition of each individual coin.
On a more subjective level, it also takes into account the level of interest in the coin, along with its rarity and liquidity. Two of the main companies that do this go are the Numismatic Guaranty Corporation and the Professional Coin Grading Service, but there are others that do this as well.
How Does the Evaluation Process Work?
The evaluation is based on a system called the Sheldon coin grading schedule, which was invented by a numismatist named William Herbert Sheldon.
He came up with his scale in 1949, but it quickly went out of date several years later, and it was the American Numismatic Association that revamped the scale for modern use, and the Sheldon scale is still the gold standard for modern coin evaluation today.
Part of the grading prices deals with evaluating uncirculated coins that have never been a part of the monetary supply. The ideal scenario is for them to be handled properly so that they remain in the same condition they were immediately after being minted, but this hardly ever happens.
Instead, they come in a case, and buyers and investors are quickly advised never to remove them from their cases, as this will immediately cause them to lose value.
The goal of the coin grading process is to determine how close the purchased coins are to their original condition right after they were minted.
Mint State Coins and How Mint State Works
All coins are given a two-letter prefix after being minted, along with a numerical grade. Coins whose condition lands closest to their original state after minting are called mint state coins, and they’re given an “MS” prefix.
That’s where the numerical evaluation comes into play. The number range for mint state coins fun from 60-70, with 70 being a perfect new coin that contains no imperfections that are visible to the naked eye. There are other prefixes, though. Actually, there are too many to run through, so we’ll just mention a few to give examples that show how the system works.
The AU prefix, for instance, stands for About Uncirculated, and it contains four different numbers, all in the fifties.
Going down the scale, XF equals extremely fine, with two different numbers in the forties. VF is Very Fine, with four different numbers in the 20-35 range, and so on down the line until you get to PR, which stands for Poor and has one number, which is 1.
If you’re looking for more detailed descriptions, the United States Mint is happy to oblige. An MS-70 coin, for instance, is designated as Perfect Uncirculated, and it shows no trace of wear, no scratches, no evidence of handling and a complete lack of contact with other coins. These kinds of coins are extremely rare, though, so the focus becomes on the other coins that land in the 60-70 range.
MS coins that land in the 62-67 section, for instance, may have some degree of tone, and they may also have contact marks on either the rim or the surface of the coin.
At the bottom of the MS range, MS-60 coins may have contact marks but no trace of wear. They may also have a spotted surface, or they may lack the luster of their higher-grade cousins.
The Importance of Coin Grading
So why does all this matter? Simple—the grading of the coin helps determine its value, and the way coins have increased in value recently, we’re not talking about small amounts.
It’s not uncommon for coins that were sold informally for a price of $100 to now have a four-figure value, and some are even valued at over $2,000.
That means each scratch, mark or shift in tone can cost the buyer hundreds of dollars, so there’s a lot more attention focused on the buying process now than there was just a few short years ago before the value of coins jumped exponentially.
It also means potential buyers should consult with an expert when they go to make their purchases. It’s the best way to get fair value, and it helps ensure the quality of the coins as well as the integrity of the purchase.