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Yesterday's AU May be Today's MS Coin
 | By F. Michael Fazzari, Numismatic News
August 27, 2009 |
Before teaching at the American Numismatic Association Summer Seminar, at the end of June I purchased copies of Making the Grade by Beth Deisher and Grading Coins by Photographs by Q. David Bowers to use for the beginning grading class.
I wished to demonstrate to my students that the criteria for particular grades have changed with the publication of each major grading reference from Brown & Dunn, through Photograde, the ANA Grading Standards for United States Coins, Making the Grade and now the new Bowers.
Guess what? One of the best kept secrets and a source of confusion for beginning collectors regarding the way professional dealers and grading services view the uncirculated grade has finally been exposed in very clear language. While reading the introduction of Grading Coins by Photographs, I came upon these statements: "the interpretation of Uncirculated or Mint State is more liberal than it was 30 or 40 years ago" and, "Today, such coins that used to be graded About Uncirculated (AU) are now often graded as MS-60, MS-61 and MS-62."
I couldn't believe it.
Although this fact was nothing new to me, I was shocked to see it expressed in print. The truth is finally out in the mainstream as exposed by no less an authority than Dave Bowers in association with leading numismatic grading experts.
Has what you just read registered? Hallelujah. The gate is open, the muzzle is off and the dog is out.
Many coins that are AU by the old standards are now considered Unc.! Let's examine this situation to see how it may affect you and your collecting habits.
The word "uncirculated" itself is problematic. For many, the word implies that a coin never circulated in commerce; yet in order to grade properly, you must forget this concept and judge each coin on its own merits.
I have personally picked a flawless $1 gold coin from a pile of assorted coins, dirt and debris dumped on my desk from a rotting black change purse.
As soon as that coin was carefully removed, it became a gem uncirculated specimen with no marks, no hairlines, and blazing full mint luster even though it had definitely circulated. How does that happen? You might be interested to know the rest of the story.
After selling it to an investor (her first gold coin purchase), the coin was returned in a week for a refund. She had showed her purchase to several dealers in order to satisfy herself of its grade. It came back to me as a hairlined AU-55.
Grading is evolving and will continue to evolve. Many reading this column remember when the grade "about uncirculated" didn't exist.
Years ago, as soon as an uncirculated coin showed signs of wear, it was graded extremely fine. Let that sink in and visualize how attractive an extremely fine coin once was. Even coins graded very fine at the time had much of their mint luster remaining. That was in the past; but it does illustrate how much standards can change over generations.
Long ago, it was easy to determine if a coin was uncirculated. Uncirculated coins had no trace of wear. I can remember a case where a major auction house threatened to sue us for grading a $1 gold coin AU-58. The firm said they had sold the coin to the consigner as Choice Uncirculated (MS-65 at the time) and it deserved to be auctioned at the same grade when he wanted them to sell it.
The coin in question was a slider. It had nice fields and luster but there was friction wear on its high points. It possibly resides in an MS-63 or MS-64 slab today, depending on its eye appeal.
Soon after, another auction firm started using the term "cabinet friction" to describe similar "uncirculated" coins with a trace of friction wear! You see, a coin was uncirculated if you missed the wear or ignored it and about uncirculated if you saw the wear and loss of luster or were a strict grader.
On Page 19 of Grading Coins by Photographs there is a photo of a $20 coin begging the question is it AU-58 or MS-64? I can remember a Federal Trade Commission court case with just such a range of grading opinions from the expert witnesses. I graded the coin technically. The knee, breast and wing had dull hairlined patches - traces of wear, therefore AU.
Other experts either didn't see the wear or used market standards to reach grades of MS-63 or MS-64 for the same coin. This situation has not changed in all these years except that now leading numismatic grading experts finally have acknowledged as much in print.
As a matter of fact, the strict interpretation of uncirculated went by the wayside at least 25 years ago. I was there to see it happen and speak against it.
Why should "standards" change? There are many reasons, including the need by collectors to buy coins in the highest grades. Additionally, strictly uncirculated coins by the old standards are truly rare for some coin types.
I can still remember the astonishment I felt while holding the first Barber half dollar that we graded Choice Uncirculated (65) for our internal records at ANACS in Washington, D.C. The coin was a completely original, perfect gem that looked like a modern silver Eagle! I had never seen such a fully lustrous Barber coin before. It made all the halves I had previously seen at coin shows being sold as uncirculated look like dull sliders.
Thankfully, with the coming of the major grading services, today's collectors can find coins as nice as that Barber relatively easily.
I teach my students that they must set their own standard for the uncirculated grade. They need to decide how much "rub" they will tolerate on a coin before it becomes about uncirculated to them no matter what the coin's grade is on the holder.
Since grading is still evolving, the more conservative they are, the better. More people will wish to purchase their coins when the time comes to sell.
I use this example in class. The diamond trade has a standard of 10-power magnification to determine that a diamond gets a flawless rating. Nevertheless, when I go to buy a diamond and the dealer puts four "flawless" gems under his scope for me to view at 10X, I reach up and zoom to the highest power. Then I'll pick the stone with the fewest defects at that power. The standard for "flawless" may change in the future; yet I'll be covered.
It's good to be a conservative grader when buying, but loosen up when you sell. I learned that lesson when one of the nation's best graders and biggest dealers looked through a group of coins I offered for sale. He flipped the pages and stopped at a blazing AU-58 1917 Type 1 Standing Liberty quarter.
"How much?" he asked.
I told him he didn't want that one because it was an AU.
"How much?" he insisted.
I gave him a price; he pulled it out and wrote a check. I'm sure that beauty became an MS-64 overnight. I was a strict grader with little knowledge of the coin market at the time.
I still maintain tight technical standards for uncirculated coins in my personal life; yet this view of coins must be relaxed in a grading service atmosphere.
Since 1986, the major grading services have strived to equate a coin's grade with its value. A quick way to explain this rational is to compare two coins, a strictly original, fully lustrous, bag marked, truly uncirculated MS-61 with a lustrous, virtually unmarked, AU-58 slider. Everyone prefers the attractive slider in this case and it sells for more money.
Realistically, if you are patient, you can find identically graded uncirculated coins in slabs but one will have full luster and no rub while the other will have a market acceptable amount of wear. That's what Bowers alludes to when he writes that the interpretation of uncirculated has become more liberal. Dealers accept a certain amount of friction on many of the uncirculated coins they buy and sell because there are not enough truly uncirculated coins around in some coin series to meet the demand from collectors.
A former colleague of mine once facetiously said let's call every coin submitted for authentication genuine. That will make the counterfeiter happy, the dealer happy, and the customer happy.
In much the same way, graders could call every coin with lots of luster uncirculated. This would make everyone happy.
Now, that's a novel thought.
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