Grading & Assessing the Value of Rare Gold Coins

Prior to 1986, coins were usually graded by dealers. This obvious conflict of interest created controversy over the grade and value of the coin. In 1986 and 1987, two nationally recognized independent third party grading services, Professional Coin Grading Service (PCGS) and the Numismatic Guarantee Corporation (NGC), adopted the Sheldon Scale to grade coins. The Sheldon Scale was developed in 1948 by Dr. William Sheldon, a renowned numismatist, who assigned a grade of 1 to 70 to each coin being evaluated. Using the Sheldon Scale these two organizations independently grade each and every coin submitted to their service, eliminating any conflict of interest. Uncirculated grades are Mint State (MS), beginning at MS60, and rising to MS70. Each step in the grading process reflects an improvement in quality.

PCGS and NGC Grading Services

How is Gold Graded
Since the inception of PCGS and NGC, the condition of individual coins has been greatly emphasized. The advent of these services means you can acquire gold and other rare coins with confidence, knowing that the coins are authentic and properly graded. In fact, today valuable and rare coins are routinely sold sight-unseen via the telephone or electronic numismatic exchange.

However, ITM only sells sight-seen coins, and we believe it is wise for an investor and/or collector to understand the difference. There can be quite a variance in the price one might expect to pay and, more importantly, the price one might expect to receive between sight-seen and sight-unseen coins, especially when the coins are sold!

The paragraphs below are taken verbatim from the May 10, 1996 Certified Coin Dealer Newsletter (Bluesheet). This is a dealer-to-dealer newsletter which indicates the wholesale value of sight-unseen coins. We think it may help you better understand why ITM Trading only offers sight-seen coins to its clients.

If you have any questions, especially on how to own rare gold coins, please call your ITM representative today!

Sight-Unseen Market Is Wholesale Only

While the Bluesheet represents sight-unseen Bidding activity, it is terribly unfair to assume that all the information within these pages comes from the method of trading. When generic coins trade daily, sometimes hourly, such as MS65 Morgan Dollars, one could rightfully assume that the prices paid are truly representative of the wholesale market; whether it be sight-seen or sight-unseen. If Bid is $90 and hundreds of coins trade at $90, give or take a dollar, it sounds like MS65 common Morgan Dollars are worth $90 wholesale.

This does not mean a retail customer can buy a group of MS65 Morgans at $90; they will probably cost in the neighborhood of $100 to $115, depending on the overall quality of the coins. Nicer ones will even cost more of a premium. If the customer wants the cheapest coins, he can expect the lowest quality. If he wants average to better coins, they will cost more. As the old adage states, “You get what you pay for.”

When coins are not generic, they do not trade on a daily, weekly, or even a monthly basis. They trade when a buyer and seller get together. This will usually take place when one dealer (the buyer) likes the coin better than the other dealer (the seller); the coin is then added to the buyer’s inventory. Or, the buyer has a customer for this particular coin. Of course, the customer (collector) then buys the coin sight-seen from the dealer.

While this sort of activity takes place every day, the same coins (denomination, date, and grade) are not traded that often. Despite the popular belief that sight-unseen Bids may represent value, this is not the case at all. We may see three sight-unseen Bids for a particular Type coin at $1,400, $1,410, and $1,420; yet, the sight-seen Bids may be something in the area of $1,750, $1,800, $1,900, and $2,000.

One ugly coin might trade sight-unseen at $1,420, but this coin will usually not be sold to a retail customer. This is what may be accepted when a seller needs money. At the same time, several coins may wholesale at the $1,750 to $2,000 level and then be sold to retail customers. These would be nice coins that collectors would be proud to own. At the same time, these should be coins that the dealer will want to buy back at a later date.

The point here is that the sight-unseen Bids are a safety-value price; they do not represent value (except for generics). They represent quick-sale wholesale levels. When one wants to sell nice coins, they will command sight-seen prices to the buyers that appreciate them the most.

Video: PCGS’s grading process with David Hall, President and Founder of PCGS.