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To Slab Or Not To Slab

I aim to put together a series of articles discussing how coins are graded and give a balanced account of the advantages and disadvantages of using third party grading services. In the first article we will attempt to explain how uncirculated coins are graded by the major third party grading (TPG) services such as PCGS. Later articles will discuss which coins are worth submitting for third party grading and examine the arguments put forward by people on each side of the religious war between the pro- and anti-TPG forces.

Part 1: How To Grade An Uncirculated Coin

A detailed explanation of the method used by PCGS and NGC (and probably the other major third party graders) to grade uncirculated coins is given by James Halperin in his book "How To Grade U.S. Coins", a version of which is also available online. This book is a useful resource for both the novice and the experienced collector or dealer.

Under this system, four criteria are used in the grading of an uncirculated coin: surface preservation (P), strike(S), lustre(L) and eye appeal(E). Surface preservation is considered more important than the other criteria and is given double weighting thus accounting for 40% of the final grade, while each of the others account for 20%. For each side of the coin, mark all four criteria out of 5 (you can use fractions). Next double the value you assigned for surface preservation and add the marks you gave for the other three criteria (i.e. 2P + S + L + E). Then use the following lookup table to obtain the MS value (incidentally the same table is valid for proofs):

2P + S + L + E
5 to 12.99
13 to 13.99
14 to 17.49
17.5 to 18.99
19 to 20.49
20.5 to 21.99
22 to 22.99
23 to 23.99
24 to 24.49
24.5 to 24.99

The final grade is the lower of the grades valued for each side. For example a coin with an obverse of MS64 and a reverse of MS65 has an overall grade of MS64.

So what does this table tell us?

Boundary Conditions

Let's have a quick look at combinations of P, S, L and E containing minimum and maximum values and see what they tell us in a real physical sense.

P = 1, S = 1, L = 1, E = 1 (2P + S + L + E = 5) comes to MS60. Heavily bagmarked (but no metal missing on the high points due to wear), very weak strike, no lustre and ugly.

P = 5, S = 1, L = 1, E = 1 (2P + S + L + E = 13) comes to MS61. Here we have no bagmarks, very weak strike, no lustre and ugly. This proves that, contrary to rumour, factors other than bagmarks do come into play.

P = 1, S = 1, L = 1, E = 5 (2P + S + L + E = 9) comes to MS60. This coin would be heavily bagmarked, have very weak strike, no lustre but incredible eye appeal. Possibly unrealistic, although I could imagine some of the rainbow Perth mint predecimal copper being similar.

P = 5, S = 5, L = 5, E = 5 (2P + S + L + E = 25) comes to MS70, and is the only way to get a perfect coin. I believe that no Australian circulation issues have graded MS70 by PCGS. As of June 2009 the highest any Australian predecimal coin has graded is MS68 (just three 1962 threepences).

So much for the extremes; let's have a look at a few examples of actual coins.

Example 1: 1942D Threepence

This is an interesting case. I bought it from an ebay seller, the listing entitled "1942-D Threepence - fully lustrous - PCGS MS62"; which is perfectly correct, what was not mentioned is the numerous hairlines on the obverse due to the coin being very lightly brushed. At first glance the coin looks EF; it is only when examining it under magnification that you realise that there is no metal missing due to wear so the coin receives an MS rating. Below are images taken with the light at different angles; the second shows the detail in His Majesty's hair. Neither image successfully shows the hairlines.

So how can a coin that appears to just make uncirculated grade as MS62? The answer lies in the other qualities of the coin. The strike is very strong, lustre is very strong and it has reasonable eye appeal. So if we take P = 1, S = 5, L = 4.5 and E = 3, we have 2P + S + L + E = 14.5, which from our table results in a grade of MS62. (This is also an example of a coin that is probably not worth slabbing. We will talk more about this in a later article).

Example 2: 1948 Perth Mint Penny

Click here to view image Click here to view image

Click on the above images to see higher resolution scans.

This is a typical 1948 Perth penny strike but it is far less baggy than most and has better than average eye appeal (note: ignore the bagmarks on the points not struck up as they are usually considered to have been on the planchet). Taking P = 4.25, S = 2.5, L = 2.5, E = 4 gives 2P + S + L + E = 17.5. Looking up our table we see that the coin comes in as MS63. And now an image of the coin after it returned from its holiday in California.
Click here to view image

Some interesting points. The Americans do not rate our predecimal circulating bronze very highly. They rarely classify our coins as "red" for which they require a full blazing orange lustre, so most come in as red-brown or brown. Occasionally they will classify 1911 Baldwin pennies as red, as well as some 1948 pennies and 1959 halfpennies. It is virtually impossible to have a Perth Mint halfpenny or penny classified as "red". Given that most Perth Mint coins are weakly struck, reasonably heavily bagmarked and somewhat subdued in lustre, for most years the highest grade you'll come across is MS64. Of course their saving grace is the wonderful colours they sometimes exhibit which means that they will quite often be described as "choice " or "gem" by Australian dealers but would grade only as MS63 or MS64 by PCGS.

Example 3: Two 1961 Sixpences

These coins were both recently removed from an original mint roll. Many of the coins were of breathtaking quality. For the first one P = 4.5, S = 4.5, L = 4.5, E = 4.5 gives 2P + S + L + E = 22.5 and comes in as MS66. The second coin was at the end of the roll and while it is virtually identical to the first coin in all other respects, the dark streak across the obverse means it has little eye appeal. So taking E = 1.5 for the second coin, we have 2P + S + L + E = 19.5 and a grade of MS64.

1. It is Virtually Impossible To Grade From An Image

The grade of a coin is determined by surface preservation, strike, lustre and eye appeal. A scan or photograph does not accurately show all these.

In regard to surface preservation, enhancement of images can show most defects caused by bagmarks or hairlines on a coin, but not all. See for example the 1942D threepence above.

Images generally give a good indication of the strike but not always. I have seen a photographer (experienced at photography but inexperienced at coins) photograph some George V copper coins with His Majesty's nose in focus, but with the high points out of focus. The end result was coins that at first glance looked a full grade lower than their actual grade.

The lustre can be reasonably well captured by a camera, but does not show up correctly in a scan.

While eye appeal is the most subjective of our criteria, for true judgement of eye appeal you must have the coin in hand. Neither scanners nor cameras do a good job of showing the true eye appeal of a coin.

Given we have reasonably accurate values of P and S, a slightly dicey value for L and an extremely dodgy value for E, we cannot obtain an accurate grade from a picture.

2. A Set Of Grading Images Is Of Limited Use

If we know the MS grade for a coin, do we know exactly what the coin looks like in terms of surface preservation, strike, lustre and eye appeal? The answer is not exactly, but we have a fair idea. Coins at the higher end of the MS range will have such minor problems that we know they will have few bagmarks, be at least reasonably well struck, have strong lustre and high eye appeal. At the other end of the MS range, coins with the same grade may, for example have considerably different surface preservation or eye appeal as in these two 1954 florins that both grade as MS63.

Click here to view image Click here to view image

Click on the above images to see higher resolution scans.

The first coin is more bagmarked than the second but possesses greater eye appeal.

This concludes our discussion on how MS grades are arrived at. In the next article we shall examine differences between the MS system and various "adjectival" systems in use in Australia and also discuss which coins are worth "slabbing".

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