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Graded Coin vs Ungraded Coins: Everything You Need To Know

After 22 years in the industry, one of the most often asked questions is, "What is the difference between graded coins and ungraded coins, and is it worth it to pay the premium for graded coins?"


The U.S. Mint and Grading Services

First, let's clear up a huge misconception in the coin world.  Many collectors believe that if they purchase coins directly from The United States Mint or any of the other world mints, their coins will always arrive in perfect/flawless condition.  That simply is not true.  The United States Mint does not guarantee the grade of any coin that it releases to the public and in 231 years, they have never graded a single coin!  All coins released from the U.S. Mint are considered raw, meaning ungraded, thus there is no guarantee of condition.  This is true for their bullion/ mint state coins as well as their collector proof coins.  They do generally guarantee that the coins released to the public will be in uncirculated condition, but there can be a huge value difference even between an MS69 (near perfect) and a perfect MS70 coin.  In rare cases, this value difference can be tens of thousands of dollars or even hundreds of thousands of dollars between two grades.

Coins are graded by professional grading services.  Currently, there are over a dozen in the United States.  Global Coin only uses the Numismatic Guaranty Corporation (NGC) and Professional Coin Grading Service (PCGS)






The Grading Process

NGC was established in 1987 and PCGS in 1986.  The main objective of any reputable coin grading firm is to identify and authenticate coins.  The best coin certification companies hire some of the most skilled numismatic professionals, who use their knowledge, hobby resources, and diagnostic tools to determine the authenticity of each coin and then grade each coin.  They also make sure the coins have not been cleaned, altered, or tampered with in any way.  The grade is based on the coin's physical condition using the Sheldon Grading Scale from 1 to 70, with 1 being the worst and 70 being the absolute best possible condition.  According to standards accepted by collectors, a coin is given a grade based on factors such as strength of strike, wear, contact marks, and eye appeal.  At least two highly trained experts grade each coin, and in many cases, three graders have to independently agree on a grade before that coin is put in a hard plastic holder to protect it.  Most grading services use tamper-evident, sonically sealed, high-security coin encapsulations to allow safe storage and maintain condition and value.  The coins are also given a specific code similar to a UPC (Universal Product Code) you would see on a cereal box.  You can go to the grading service website, enter the code, and get information including the population of the coin in that grade, the current price guide value, and in many cases, auction records and recent sales.  Graded coins have a value range based on their grade and you can look up a specific coin in a specific grade to see the coin's recent sales.  
Ungraded coins are much more subjective in value.  In essence, coin grading takes the guesswork out of figuring out the value of a coin or set of coins.  Coin grading and authentication emerged as a solution to rampant counterfeiting and coin doctoring in the eighties.  Before the advent of grading services in the late eighties, a coin buyer would have no assurances of the value or condition of the coin they were attempting to buy or sell.  

Also, graded coins are generally worth more as they are enclosed in a protective plastic case.  Graded coins are graded on a 1 to 70 scale.  Think about the grading scale in high school in which the scale was 90-100 for an A, 80-89 for a B, etc.  The grading scale for coins is similar except the scale only goes up to 70.  So, coins are considered brilliant uncirculated if they grade between 60-70, and about uncirculated between 50-59 and down from there.  


2023 $50 Canada Allegory of Peace in SP70. View coin here.


Benefits of Graded Coins

  1. Peace of Mind: Professional coin grading offers you peace of mind because your coin has been authenticated and certified as genuine.

  2. Grading: Your coin has been carefully examined by at least two experts who have assigned a numeric grade on its condition.

  3. Universally Accepted: When graded by one of the two major grading services your coin will be recognized and accepted by dealers and collectors worldwide.

  4. Archival Holder: After grading, each coin is sonically sealed in an archival acrylic holder to preserve its condition and permanently attest to its grade and authenticity.

  5. Additional Pedigree: NGC and PCGS sometimes certify coins with additional pedigrees and imprint them directly on the label. These may include first strike, first releases, or special shipwreck, hoard, or collection pedigrees.

  6. Online Registration: Each coin is given a unique registration number which serves to catalog the coin at the grading service. In many cases, it is possible to look up this number and verify your coin’s information.

2023 $200 Canada Da Beers Ideal Heart in Proof 70. View coin here.



    Take-Aways

    Low-value / common coins are probably better left raw/ungraded in the original government packaging and mid and high-value coins should be submitted to a grading service both to determine value and also to protect the coin. Savvy coin buyers should probably play both sides of the coin market, buying or "stacking" common silver or gold bullion and rounds, while also purchasing high-grade numismatic or collector coins.  The main reason this is true is that the raw/bullion coins will almost always only be worth their intrinsic value, that is the value of the metal contained in the coin.  If gold or silver drops 10%, you can expect your coin's value may drop 10%.  This is not true for collector / numismatic coins as they have other values in addition to the intrinsic value of their metal including:
     
    1. The mintage number (how many were produced)

    2. The grade and population of the coin in that grade (rarity factor - number of coins in that grade in existence)

    3. Variety differences (which mint produced the coin/mint mark, errors or mistake coins, die varieties, special strikes, etc.)

    4. Popularity/Demand - the more people that are interested in a certain coin, the more expensive that coin may typically be.

    5. Historical significance


    Some Examples

    Here, you can see an example from PCGS. A generic 1986 Silver Eagle in a low MS60 condition is valued at $35 today. The same exact coin with an autographed holder and a First Strike designation lists for $13,500.

    Graded Coins vs Ungraded Coins price comparision


    Here is another example from NGC.