Coin Grading - Distinctions

Distinctions

In 1984, Numismatic Certification Institute (NCI), the first privately-owned grading service, was launched by the owners of Heritage Rare Coin Galleries (now Heritage Auction Galleries) of Dallas, Texas. In 1985, Ivy Press published the NCI Grading Guide, later renamed How to Grade U.S. Coins, an instruction manual on grading mint state and proof U.S. coins by James L. Halperin. In 1986, PCGS (Professional Coin Grading Service) was incorporated. PCGS authenticated, graded and encapsulated coins in a protective hard plastic shell. They used a combination of the two older systems putting letters and numbers together so that the grades became BS-1 (or PO-1), FR-2, AG-3, G-4 (Good: coin is heavily worn, even the major detail is not clearly visible), G-6, VG-8, VG-10, F-12 (Fine: fine detail visible but coin is heavily worn), F-15, VF-20, VF-25, VF-30, VF-35, XF-40, XF-45, AU-50 (About Un-circulated), AU-53, AU-55, AU-58, MS-60 (Mint State: completely un-circulated condition), MS-61, MS-62, MS-63, MS-64, MS-65, MS-66, MS-67, MS-68, MS-69 and MS-70 (Mint State: perfect, the highest level on the Sheldon Scale). For mint state and proof coins, PCGS used a slightly stricter interpretation than NCI, but basically employed the same standards outlined in Halperin's book. They also issued limited guarantees for the value of coins they had graded.

The march to finer and finer distinction had taken another huge step. Alongside this scale was a similar one for proof coins PR-01 or PF-01 through PR-70 or PF-70 that was roughly equivalent to the MS scale, except for proof coins. This is important as in some issues distinguishing between mint state (for commerce) and proof coins is very difficult and specialized and the price differences can be large in favor of either MS or PR/PF.

The origin of the idea to make coins easily tradable on an open market came from Wall Street in order to expand beyond the bullion coin market. However, because they had finite mintages, and used technical grading rather than market grading there are physical and practical limits to their system, particularly in relating the grade directly to a value. One thing PCGS did accomplish was largely ridding the marketplace of inferior counterfeit coins. Unfortunately, some better counterfeits have since come into being, further justifying the need for professional authentication in a counterfeit-authentication arms race.