One of the ways that numismatists determine the value of gold coins is through a process called “grading.” Coin grading is the process of determining the state of preservation and wear for any given coin by considering a few main features such as quality of the coin die and striking characteristics, condition and characteristics of the planchet (coin blank), the amount and type of wear or damage, and the overall eye appeal of the coin. Here is a brief look at the establishment of gold coin grading and how it applies to investment coins today:
- The Adjectival Scale - While today the most widespread coin grading system in use is based on the Sheldon 70-point scale, the earliest coin grading systems were very simple. Despite this, the subject of creating a standard grading scale was debated for decades before some kind of consensus was reached. The first four standard grading terms established were poor (sometimes called basal), good, fine, and uncirculated. As time went on, more intermediate grading terms were established and the Adjectival Scale was born.
- The Sheldon Scale - Developed in 1949 by Dr. William Sheldon, the Sheldon Scale sought to give a more precise meaning to the subjective terms of the Adjectival Scale. Sheldon devised a 70-point system for judging coin condition more precisely on a scale of 1 to 70, based primarily on eye appeal, quality of luster, toning, and the presence or absence of contact marks, hairlines, etc. While coin collectors were aware of Dr. Sheldon's scale, it was not widely adopted until the advent of the third-party coin grading services in the mid-1980s.
- Top Grading Services - Grading services are objective third party companies that grade coins according to recognized industry standards, and then encapsulate them along with an insert describing the grade. The “gold standard” of grading services in the U.S. are the Professional Coin Grading Service and the Numismatic Guaranty Corporation. Any reputable precious metals company consults one or both of these services before putting their coins up for purchase.