By:In this column, I shall try to put an end to some misconceptions about technical coin grading. I have seen some inaccurate postings on numismatic online forums. Then, at a coin show recently, I listened as a dealer explained the difference between technical grading and commercial or market grading to a couple of older gentlemen purchasing some Indian $10 gold coins. It was clear to me that the young dealer had little understanding of technical coin grading or its roots. So, who needs to know about a grading system that numismatists no longer use? Sit back, read on and you be the judge. |
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Let me first state that I was very closely involved with the conception, augmentation and refinement of technical coin grading beginning in 1973. My involvement continued up until the time technical grading was gradually replaced by commercial grading standards, beginning in the late 1980s. I'll make no judgments or complaints here, just an effort to set the record straight in this limited space and provide an insider's perspective about this chapter of numismatic history.
I believe that coin grading developed over a century ago so collectors could describe the appearance of a coin to someone else who could not actually see it. Yet, today, I'll bet most readers would say that coin grading was developed to price a coin. That's the rub and the problem. Perhaps it was Sheldon's grading scale that was the first to equate a coin's grade and its price, forever locking these two different concepts together. I say grading came first - long before value was a factor. I like to think that technical grading involves grading a coin and letting the price be set by dealers in the market, and that commercial grading involves establishing a value for a coin and then assigning a grade to reflect that value.
Technical grading began and was perfected at ANACS while it was located in Washington, D.C. We needed to develop a universal grading system for U.S. and foreign coins in order to identify them for record-keeping purposes in our diagnostic files. This system had no relevance or regard to a coin's value and did not attempt to establish one.
We determined that the system needed to have the following attributes: It should be simple to understand and use; more importantly, it should be accurate and precise. Thus, a fairly intelligent person could pick up a coin and grade it. Also, the assigned grade would stay the same each time it was seen as long as the coin remained in the same condition of preservation.
In order to accomplish this precision, all the variables that went into a coin's numeric grade were to be kept separate.
Net grading, as practiced especially by large cent collectors at the time, was not allowed. It only caused confusion. If a novice matched the details remaining on a coin to the picture in Photograde of an extremely fine coin, and then was told the coin graded very fine because of a large scratch, what was he to think? You need to be an experienced numismatist to net grade coins. With technical grading, the XF coin could be graded "XF, scratched" so the novice would not be confused. The coin could be priced as a VF because of the damage.
For technical grading, the basic variables to a coin's condition were its strike, number and location of marks, amount of wear (for circulated examples), cleaning, damage and the like. Each coin was examined one side at a time and a grade was given to each side. I remember that it wasn't until reading a galley copy of James Halperin's NCI Grading Guide that the importance of eye appeal and prime focal points became apparent. Technical grading took all the marks on a coin into consideration no matter where they were located. Eye appeal was less important than full luster and originality. With technical grading, an AU-58 coin always graded lower than an MS-60 example.
At times, technical grading notations could be quite cumbersome: Choice Uncirculated, weakly struck (the obverse grade)/Choice Uncirculated, toned (the reverse). Can you see such a coin in your mind's eye? It has full luster, few marks with a toned reverse. How many different coins can you imagine with the commercial notation of MS-64?
The technical grading system attempted to identify the actual "condition of preservation" of a coin. I'll personally take 100 percent credit for introducing that combination of words to coin grading. A grade was assigned to a coin and qualified if needed. Others could understand the assessment and assign a value.
Can you understand the difference between an AU polished coin and a polished AU? The first still grades about uncirculated but it is shiny, the second is now polished down to an XF. The description was important with technical grading.
Technical grading was easy to teach and to learn. A novice grader could be up and running after a weekend seminar because technical grading is less subjective with very little wiggle room. Strict grading with few variables narrows the range of possible opinions. Once mastered, it provided a stepping stone to learn market grading because it broke down and explained each variable that determines a coin's single commercial grade.
Commercial grading takes years of study and experience to master. You need to know current market prices. Thank goodness we have the major third-party grading services to stabilize that method today.
The amount of wear on a technically graded coin was paramount because at the time, any coin graded uncirculated could have no trace of friction wear. A coin's luster was important because surface luster provides the clues to a coin's originality and any wear present.
If any wear was detected, the coin was graded AU even though it may have never actually circulated. This strict criterion was important to maintain precision. With such strict standards, a grader would not need to make a choice as to whether a coin with a tiny amount of rub was Unc. or not each time the coin was seen.
With commercial grading, a coin can grade AU one week and MS-62 the next because it's left to the market to determine if any rubbing on a coin resulted from circulation or storage in a coin drawer so called "cabinet friction."
Technical grading was also immune to changes in market conditions.
Since technical grading was concerned with a coin's actual condition of preservation, little emphasis was placed on the quality of a coin's strike. Some coins in a particular coin series are rare fully struck, but in the interest of simplicity we didn't need to have any of that knowledge to grade a coin. That information was extremely important to know, however, when pricing the coin the domain of coin dealers. While a strong strike was more desirable than a weak strike in the marketplace, for technical graders strike was mentioned only when it was uncommonly strong or very flat. A weakly struck coin showing no wear or marks was a gem - as nice as it left the dies.
The severity and number of bagmarks or surface damage was an important factor that influenced the final technical grade. All marks were considered, even those hidden by the design, although more weight was given to obvious imperfections. Both sides of the coin got equal consideration and they were described separately.
Eye appeal was less important than the coin's actual condition. While a discolored coin may have been ugly and that was noted, its grade was not lowered due to poor eye appeal. That is one major area where technical and commercial grading diverged. While no one could argue against an attractive coin being worth more than a discolored one, splotchy toning did not remove any metal from its surface or add bagmarks. Besides, color and toning are very subjective characteristics that can add or subtract grade points from a commercially graded coin.
Technical grading was a simple, consistent system. We grade 'em, you price 'em. There was no "gradeflation" or evolving standards. If a coin was slightly rubbed on the high points, it was AU. It would always be AU. Anyone could see that it was AU, yet its value in the marketplace could continue to rise.
Finally, before I get letters, the grading practiced at ANACS after it moved to ANA headquarters in Colorado was not technical grading in its true sense. For that reason, the final chapter of that experiment occurred when MS-65 coins became MS-63s overnight in an effort to mimic commercial grading standards and align the price of a coin with its grade.