How Important is Strike?

How important is strike when it comes to determining the desirability of a gold coin? In my opinion, probably not as important as it should be and for what is probably an odd reason. For certain series, strike is a critical component in determining the value of a coin. As an example, a certain date in the Mercury Dime or the Standing Liberty Quarter series might be worth $1,000 in MS65 with a normal quality strike but $20,000 with a sharp strike. There are no gold series in which strike carries a significant premium. Why?

I would have to say the answer has to deal with clever marketing. A few decades ago, some clever marketers made up Full Split Band and Full Head designations and proposed that they were worth enormous premiums. It was discovered that these coins were, in many cases, very hard to find with a sharp strike. You could look through roll upon roll of common coins like the 1945 Dime and not find one with Full Split Bands. Clearly the few examples that were well struck were worth premiums.

Why aren’t gold coins marketed with strike designations? Probably because no one has (yet…) thought of a way to make collectors pay a huge premium for a St. Gaudens double eagle with a full torch or a New Orleans quarter eagle with complete feathers on the eagle’s left leg. But if PCGS or NGC were to suddenly bless the concept of strike rarity in certain gold series, you can bet that certain issues would suddenly command huge premiums.

Why should gold coin collectors care about strike? In my opinion, poorly struck gold coins often have bad eye appeal and should be avoided. However, there are exceptions. As an example, certain branch mint issues are always weakly struck. I have never seen an 1856-D quarter eagle that was not very poorly struck and because of this I will not use strike as a consideration when determining whether of not I am going to buy an 1856-D. But an issue like the 1848-D quarter eagle is usually well struck and if I am offered a piece that has a distinctly below average strike, the chances are good that I will pass.

It is important for collectors to learn which issues are well struck and which are not. This is one reason why my books on gold coins go into careful detail on strike for every branch mint issue. If you pass on a lovely original 1849-O eagle just because it has weak stars, you are making a big mistake: every known example is very flat on the stars. But if you are offered a nice Uncirculated 1847-O quarter eagle with an extremely weak reverse, some basic knowledge of the series will show that this issue can be found with reasonably sharp detail on the reverse.

If you decide to collect U.S. gold coins (or any coins for that matter) learning how the coins are supposed to look is any extremely important consideration. Look at as many examples of what you collect as you are able to. Read all you can. The more information you have at your disposal, the more informed your buying decisions will be.

Grading Early United States Gold Coins

For a variety of reasons, early gold coins are among the most difficult United States issues to grade. There is often discrepancy in grading these coins, even between experts. While it is impossible to teach a collector how to grade based on digital images, I thought it might be a good idea to display a few pre-1834 gold coins here and analyze them as to why they grade the way they do. Before looking at these specific coins, there are a few things to consider. First are the reasons why these issues are more difficult to grade than 20th century pieces. The basic reason is the pre-1834 United States gold coins are, for the most part, hand-produced items made on old-fashioned screw presses while later-date issues are mass-produced items that were struck using more modern steam presses.

As I have discussed in other articles about grading, there are five components that experts take into consideration when examining an early gold coin: strike, surface preservation, coloration, luster and eye appeal.

Strike is a relatively important factor in grading early gold but it does require a good degree of attendant knowledge. As an example, it would be incorrect for someone to penalize an issue such as an 1806/4 quarter eagle for being weakly struck at the center as all known examples exhibit weakness in this area. Conversely, an issue such an 1812 half eagle which is generally seen with a good strike might be properly penalized if an example had a very weak strike.

Surface preservation is very important when determining the grade of an early gold coin. If a coin has deep marks in key focal points (i.e., on the face of Liberty or in the left obverse field) this will certainly cause a deduction in grade. One confusing area in relation to early issues is adjustment marks. These are parallel scratches that were intentionally placed on overweight coins in an attempt to get them to conform to then-current weight standards. Generally speaking, unobtrusive adjustment marks do not cause a coin's grade to be lowered. Marks that are positioned in prime focal areas are considered negatives and may cause the grade to be lowered.

Since so few early gold coins show original coloration, this is no longer a critical factor in determining grade. If a coin that has the detail of an About Uncirculated-50 has very pretty original color, it is almost certain to be bumped up to at least an About Uncirculated-55 grade if not higher. Lack of color will not be a penalizing factor but the presence of good color is certainly a big plus for any early gold issue.

Luster is an extremely important factor in determining the grade of an early gold coin. Given the fact that so many pieces are poorly struck, show heavy marks or possess mint-made faults, the amount of luster that is present is a tangible fact that does not require great expertise to determine. In other words, an early gold coin either has luster or it doesn't and the amount that is present is a great aid in determining how much--if any--wear the piece has.

For any coin, the overall level of eye appeal is the single key element in determining grade (and value). When an expert grader looks at an early gold coin, the first thing he considers is the "look" of the coin. Is it attractive or unattractive? How does it compare to other examples of this date or type that he has seen?

Included below are good quality digital images of a few early gold coins that I have recently sold. After you view each image, I suggest you apply each of the five grading components I just discussed. Then, read my comments as they relate to the coin's strike, surface preservation, luster, coloration and eye appeal. I am going to list the actual grade for each coin at the end of this article so don't cheat and look at the grades before trying to determine what you think they grade!

1. 1801 Eagle

My first impression is that this is a fresh, original and attractive coin. It shows some weakness of strike at the stars on the right obverse but the rest of the detail is very sharp.

The surfaces are relatively well preserved. There are some scuffmarks in the obverse fields which are not overly detracting. The only significant abrasion is a reeding mark on Liberty's face. There is no rub on the cheek or signs of wear on the high spots, which means that this is an Uncirculated piece.

The luster is excellent. The obverse is very frosty while the reverse is more prooflike. Even if I had never seen another Eagle of this date or type, I would assume that the luster is decidedly above-average.

The coloration is a rich orange-gold hue which, from the image, looks original due to its evenness. Again, this is a very big plus and I would assume that not many 1801 eagles show this lovely coloration.

The overall eye appeal is very high. With the exception of the mark on the cheek of Liberty, I see no negatives about this coin. It is unquestionably "new" and it seems to be choice, based on its sharpness, luster and color.

2. 1803/2 Half Eagle

My first impression of this coin is that is has superb color and is about as original as one could hope for. It shows some light, even wear but is as attractive a circulated early gold coin as one might hope to find.

The surfaces of this coin are exceptional. Other than some light friction in the fields (which can be distinguished from weakness of strike by the difference of color between these areas and the high spots) there are no readily noticeable marks.

The luster is mostly obscured by the depth of the coloration. If the viewer looks at the protected areas (i.e., within the stars and around the date) he can see some traces of luster which would be more clear if the coin were lightened.

The best feature of this coin is its stunning deep reddish-gold color. This is what a 200 year old gold coin that is totally original should look like and it adds at least three (if not five) points to the overall grade. No more than 5% of all early gold coins show original color and just a smaller number have this lovely (and desirable) reddish-gold hue.

This is a very attractive, nearly flawless coin with just a bit of light wear noted. Its nice color, clean surfaces and originality give it a very strong degree of eye appeal.

3. 1830 Quarter Eagle

With the advent of new technology in the late 1820's, the quality of strike improved on United States gold coins. The reduced sized Capped Head Left quarter eagle was produced from 1829 to 1834 and it is generally found with good detail and a much better "look" than the quarter eagles produced from 1796 to 1808. This type did not circulate much and when available, survivors tend to come in relatively high grades.

My first impression about this coin is that it is very fresh and bright. It shows some marks in the fields but its vibrancy is enough to make these marks seem unimportant. It is important to remember on a coin like this that the number of marks that are present is not as important as their severity. In other words, a number of small scuffmarks in the obverse fields (as on this coin) are not as important as a few deep, detracting marks in similar areas.

This coin has excellent luster that is more suggestive of a late 19th century issue than one from 1830. From the image, it appears that the luster is very frosty in its texture with some slight reflectiveness in the fields. It appears to be unbroken and relatively undisturbed, leading the viewer to believe that this is an Uncirculated piece.

The coloration is an even medium to deep yellow and green-gold. It is attractive and even if the viewer has never seen another example of this date, this hue should appear to be well above-average.

The overall level of eye appeal is excellent. This is clearly an unworn coin that has a good strike, pleasing surfaces, great luster and nice color.

4. 1807 Bust Right Half Eagle

So how have you done so far? Getting more comfortable grading these early coins? Well don't get too comfortable because I've saved the hardest coin for last.

The 1807 Bust Right half eagle is the final year of issue for this type. It is found with a number of varieties as well as many different looks. This example is a late die state with a "sunken" look noted on the obverse.

But is the weakness at the center strike-related or is it wear? The answer lies in the fact that the luster on this coin is full with no breaks noted in the fields or on the high spots.

I stated earlier in this article that strike is the least important factor when grading an early gold coin. This is true but in the case of this piece, where the important central detail on the obverse has been partially obscured, it is likely that a grader will deduct some points from this coin's overall grade.

In addition, the surfaces show a number of marks. It is likely that this coin was transported loose in a bag from bank to bank in the early 19th century and in the process it picked-up some noticeable marks.

Not everything about this coin, however, is a negative. It has great luster and the coloration is lovely with rich green-gold and lemon hues strongly suggesting that it has never been cleaned or dipped.

While not everyone will agree with me, I happen to like this coin quite a bit. I am a stickler for originality and I would personally rather own a weakly struck, somewhat "baggy" early half eagle than one which was sharper and less marked-up but which was washed-out from having been overzealously dipped.

Early gold is an area where gaining knowledge will give the collector a decided advantage when making purchases. Given the fact that these are expensive coins, I would suggest that careful study is in order. For more information on grading early gold coins or on early gold in general please feel free to email me at dwn@ont.com.

The grades of the coins listed above are as follows:

1801 Eagle: PCGS Mint State-63

1803/2 Half Eagle: NGC About Uncirculated-55

1830 Quarter Eagle: PCGS Mint State-63

1807 Bust Right Half Eagle: NGC Mint State-61

Deconstructing Ten Popular Coin Maxims

We've all heard them a thousand times: the numismatic maxims that have been repeated enough times that they have acquired near-mythic status. So are they true or not true? 1. "Size Matters"

True. Big coins are more popular than small coins and will continue to be. While there are some small coins that are popular (most noticeably branch mint gold dollars) most others are unpopular. Double eagles may seem high priced given their mintage figures and relative availability but the demand for choice and rare pieces is increasing. In the long run, it seems likely that new collectors will prefer the heft of larger-sized gold coins than their smaller counterparts.

2. "Sets Are Worth More Than Individual Coins"

True. One of the most significant developments in the coin market in the past few years has been the PCGS Registry Set. Collectors are now able to post the grades of their coins and compete against others. So far, this has most dramatically impacted modern issues. It is likely that "classic" 19th century issues will see more competitive set building in the coming years, especially as such sets are promoted by dealers and encouraged by PCGS and their collectorsuniverse.com website.

An exception to this maxim is a meaningless set. As an example, a set of 1850-O gold coins (gold dollar, quarter eagle, eagle, and double eagle) is not worth any premium over individual price levels for each piece. But, a complete set of New Orleans quarter eagles is worth more, as a set, than the individual coins.

3. "If It's Slabbed It's Properly Graded"

False. There is a definite hierarchy when it comes to third-party graded coins. Clearly, PCGS and NGC are the two best grading companies. The next tier is occupied by ICG and ANACS who are also good but whose product is not valued as highly in the marketplace as PCGS and NGC's. The bottom rung is occupied by such firms as SEGS, PCI and Accugrade. These services grade much more liberally and allow many "problem" coins into their holders. New collectors should be careful to realize that a 1907 High Relief in SEGS Mint State-64, as an example, is typically worth far less than the same issue in a PCGS or NGC MS-64 holder.

4. "Grade Is Better Than Rarity"

False. Back in the 1980's, there was a widely-held belief that if a coin was not a "gem" than it was essentially worthless. When coin prices came crashing down in the early 1990's, it was ultra-high grade common issues that suffered the most. As the market became more sophisticated, rarity became more appreciated and in recent years it has generally outperformed grade.

The ideal coin collection features "fundamentally rare" coins in comparatively high grades stressing eye appeal and originality. By fundamental rarity, I mean a coin whose rarity and desirability is not wholly a function of its grade. As an example, a 1795 eagle is a desirable coin whether it is a damaged Very Good or a superb Mint State-65. An 1895 eagle has very little value above its bullion content in low grades and really only attains numismatic value at the Mint State-64 to Mint State-65 level. For this reason, a coin like a 1795 eagle is "better" than an 1895 eagle.

5. "All Coins Sell Best At Auction"

False. For very rare or very high grade coins, auction is an excellent selling venue. But auction is not ideal for all coins or collections.

If you have a collection that primarily features generic coins or have a large amount of coins with tight buy sell spreads (like modern proofs sets and mint sets) then it makes sense to sell these to your local coin dealer. The 10-15% that you pay to the auction company will erode your entire profit margin.

High quality, "fresh" coins sell very well at auction. In some cases, however, private treaty sales can work every bit as well or better. As an example, a specialist dealer may be a better choice to handle the sale of a small to medium sized collection than an auction house. My firm has been chosen to sell some wonderful specialized collection of branch mint gold and has, in my opinion, done a better job of getting top dollar for the owners than if the coins had been placed in auction.

6. "Buy The Book Before The Coin"

True. This hoary old maxim has been repeated to the point of triteness but it remains one of the best pieces of advice a new collector can get. All collectors should assemble a good library of basic coin books and, once they have decided on an area of specialization, assemble a comprehensive specialized library.

Once the basic books have been purchased, it may take some work to find scarce, out-of-print specialty works. The collector should contact numismatic book dealers and specialist dealers to get their input as far which books are important and which are not. If you spend thousands (or ten of thousands) or dollars per year or coins and nothing on books, you are operating under flawed logic.

7. "Quality Is Better Than Quantity"

True. Many new collectors begin with the idea that it is good to have lots of average quality coins. The best collections focus on quality over quantity. In most instances, this means that an important specialized collection will not have more than a few hundred pieces. There are, of course, exceptions to this rule. The Harry Bass collection contained thousands of American gold coins. But many of these were duplicates or they represented lower grade die varieties. Plus, Bass had the good fortune to be buying gold coins when they were reasonably priced. Today, it is not practical to assemble a collection as large as the Bass holdings; both from the standpoint of cost and availability.

I purchase (or attempt to buy) collections all the time. The ones that impress me most are "lean and mean." They contain choice, attractive, interesting coins and often number fewer than one hundred individual pieces.

8. "Non-U.S. Coins Are Good Investments"

False. There are more serious coin collectors in the United States than in all other countries combined. Because of this, it remains unlikely that non-American coins will ever show considerable price appreciation. This doesn't mean that foreign or ancient coins are "bad deals" and should not be purchased. It just means that if you are concerned with the return on your numismatic investment dollars, you should stick with American coins. Look at foreign coins as a pleasant diversion that can fill in the down time between significant purchases of American issues.

9. "Don't Be Loyal To A Single Coin Dealer"

False. If you study the buying habits of the greatest collectors, you will note one particularly significant common factor. All of these individuals had close working relationships with one or two coin dealers. This meant that they were able to purchase the best coins from these dealers at fair prices.

The worst way to assemble a collection is to buy fifty coins from fifty different dealers. By doing this you will never earn "most favored nation" status with any one dealer. You may get to speak with a lot of different people (which may not be a good thing...) but you will never get the really good service that they give to their best clients.

10. "High Grade Modern Coins Are A Time Bomb"

True. Tick, tick, tick... The sound you hear is the modern coin market getting ready to self-destruct. In the past year, prices for low population ultra high grade modern coins have skyrocketed. I personally think they are due for a major correction. The most obvious reason for this is potential supply. When price levels for a modern issue are low, there is no motivation to send in examples to PCGS or NGC. But when price levels raise to the point that there is reason to send them in, the floodgates open. Most of these modern issues have mintage figures in the hundreds of millions (or even billions!) and were carefully manufactured. In addition, they are not graded as carefully as older coins. Thus, today's low population modern coin is tomorrow's pocket change in a fancy plastic holder. Proceed with caution!!

Coloration and United States Gold Coins

In my article entitled "Five Components of Grading" (November 2001), I touched upon coloration and the role it plays in determining the grade of a gold coin. In this brief article, we'll look at the natural coloration found on gold coins from each of the seven mints that produced gold issues in the 18th and 19th century. Carson City

Carson City gold coins can be neatly packaged into three distinct eras: those struck during the 1870's, the 1880's and the 1890's. Some of the gold used to make these coins was from local Nevada mines and it displays a distinctive natural hue.

The coins from the 1870's are usually seen with extremely heavy wear. Half eagles and eagles from this decade often have a dark green-gold or slightly coppery hue. The coins from the 1880's tend to have richer green-gold or orange-gold color. The coins from the 1890's often have very nice shadings with rich green-gold or orange-gold hues. On a few issues, the borders may show a ring of deeper color that nicely contrasts the lighter shades seen in the center.

It is much easier to find coins from the 1890's with pleasing original color than on issues from the other two decades. Many half eagles and eagles from the 1870's are essentially unknown with fully original color. Issues such as the 1891-CC half eagle and the 1891-CC eagle are relatively easy to find with nice color.

Double eagles tend to be the easiest denomination from this mint to locate with good color. This is primarily due to the fact that more relatively high grade examples of this denomination are known than half eagles or eagles.

Due to the popularity of Carson City gold coinage with collectors, good coloration is an important consideration in determining grade and value.

Charlotte

Much of the gold used at the Charlotte mint was mined in western North Carolina. The natural composition of this gold was rich in copper ore. Thus, many Charlotte gold coins (especially those struck before 1850) have a distinctive orange-gold or reddish-gold coloration. On later issues, this color tends to be a more green-gold in hue. This is due to the fact that more gold from California (with a higher silver content) was used.

For some reason, the Charlotte coins with the best coloration are the Type One gold dollars (1849-1853) and the half eagles produced during the early part of the 1840's. It is very hard to locate any of the quarter eagles from the 1850's with attractive, even coloration.

Well over 75% of all Charlotte gold coins have been cleaned or dipped and no longer show any hint of original color. Charlotte gold coins with attractive original color are beginning to command a premium, although not as much so as their counterparts from Dahlonega.

Dahlonega

The gold that was used to make Dahlonega gold coins from 1838 until the early 1850's had a high amount of silver within its natural composition. This provided many of the coins from this era with a distinctive green-gold hue. On issues struck after 1850, more gold from the western deposits was employed and the color tends to show more of a reddish-gold hue.

As with the Charlotte gold coins, Type One Dahlonega gold dollars (1849-1854) and certain half eagles from the 1840's (and even into the 1850's) are more likely to be seen with good color than the other issues from this mint. With a few exceptions (such as the 1857-D), quarter eagles from this mint are very hard to locate with nice color. The same holds true for Type Two Dahlonega gold dollars and three dollar gold pieces. As a rule of thumb, the rarer and more popular a certain date is from this mint, the more likely it is to be found without original color.

Well over 75% of all Dahlonega coins have been cleaned or dipped and no longer show original color. This is a very popular series with collectors and their level of sophistication tends to be higher than other branch mint specialists. Dahlonega coins with pleasing natural color currently command high premiums; more so than from any other branch mint.

Denver

The Denver mint produced gold coins from 1906 to 1931, with the majority of the production occurring in the 1910's and the 1920's. They struck half eagles, eagles and double eagles. For the most part, these coins have a fairly consistent natural coloration. Medium to deep yellow gold shadings with pale rose and orange-gold undertones are most often seen on high grade, original pieces.

The Denver issues that tend to show especially nice color include the 1906-D and 1907-D Liberty Head double eagles and the St. Gaudens double eagles from the 1920's. The half eagles and eagles from the 1910's often have a naturally grainy type of luster and their coloration is slightly more subdued.

It is still reasonably easy to locate Denver gold coins with attractive natural color. There are some exceptions, like the 1911-D eagle, which is an issue that is often found cleaned or dipped. At this point, very few people specialize in Denver gold, so there are no real premiums accorded to coins with superb original color.

New Orleans

Unlike its southern counterparts from Charlotte and Dahlonega, this mint had a very long period of operation (1838-1909). New Orleans coins from fall into two neat categories: Without Motto (struck at this mint from 1840-1861) and With Motto (1879-1904).

Without Motto coins are usually seen well worn and have often been cleaned. Coins with original color often have a distinctive deep green-gold hue. Some issues, such as the 1847-O eagle, are found with bright yellow-gold color while others, such as the 1854-O eagle, have a more orange-gold appearance.

With Motto coins from New Orleans are found with less wear than their Without Motto counterparts. Eagles from the 1892-1904 era are sometimes seen with attractive deep natural color, including medium orange-gold and deeper green-gold.

It is very hard to locate New Orleans gold coins with original attractive, especially those struck prior to 1890. When available, these coins tend to bring premiums among knowledgeable collectors.

Philadelphia

Due to better quality control and more consistent bullion sources, there is less variation seen in the coloration of Philadelphia gold coins than on the branch mint issues.

All early gold coinage (i.e., those issues made before 1834) were struck exclusively at this mint. Early gold is very hard to find with original color as the majority of pieces have been cleaned or dipped. Coins that are original tend to show medium to deep orange-gold hues. They often trade for strong premiums among specialists and type collectors.

Liberty Head issues from Philadelphia are divided into Without Motto (1838-1865) and With Motto (1866-1907) types. The Without Motto coins are more difficult to locate with original color. When available they tend to show green-gold or light orange hues.

Due to larger mintage figures and hoarding, many With Motto issues from this mint are relatively available in higher grades. There are some extremely attractive Philadelphia gold coins from this era and they show hues ranging from green-gold to rose and light orange.

Collectors tend to be more focused on specific rarities or types from this mint as opposed to putting together date sets. On certain rare, low mintage issues such as the 1881 quarter eagle or the 1863 eagle, coloration is important. On other more common issues, coloration is not as significant factor in determining grade and value.

San Francisco

Despite the publicity of the S.S. Central America and Brother Jonathan shipwrecks, both of which contained thousands of San Francisco double eagles, gold coins from this mint are not as popular as those from the southern mints. This is somewhat ironic, given the fact that the quality of the coins from San Francisco far exceeds those from Charlotte, New Orleans, or Dahlonega.

San Francisco gold coins from the 1850's and the 1860's (with the exception of certain double eagles) are usually seen in lower grades and have often been cleaned. The issues from the late 1870's though the early 1900's are seen more often in higher grades. The natural color on these coins is often outstanding. Hues of rose-gold, green-gold and medium orange are often present.

Indian Head gold from this mint also displays a wide range of color. Half eagles and eagles from San Francisco tend to have granular luster which subsequently shows somewhat subdued color. St. Gaudens double eagles, especially those struck in the 1920's, often have rich frosty luster and attractive vibrant rose and orange-gold hues.

Due to a relative lack of collector support, there is not currently a strong demand for San Francisco gold coins with attractive natural hues. Many of the earlier issues from this mint are exceptionally hard to find with nice color and may command a premium in the future.

The Five Components of Coin Grading

A "grade" is a shorthand devised by numismatists to indicate the appearance of a coin. In other words, if one collector tells another that he has an About Uncirculated-50 Charlotte half eagle, both collectors should have an expectation of what the coin should look like, even if one has never seen it, due to the implications of its grade. For many years, there were a relatively small number of adjectival grades. Grading became more "scientific" in the 1940's when the numerical grading scale was invented by Dr. William Sheldon. This scale, which ranged from 1 to 70, was originally devised to ascertain values of 1793-1814 Large Cents by ascribing a basal value to each variety and multiplying this value by the grade in order to determine a price.

The Sheldon grading scale is now used by most numismatists. Newcomers tend to complain that there are "too many grades" but experienced graders appreciate that there can be a huge range in quality between specific ranges.

To better understand coin grading, it is important to study the major components of grade. When I grade a coin, I employ five important individual components which, when taken into consideration as a whole, help me determine my opinion of a coin's grade. These individual components are strike, surface preservation, luster, coloration and eye appeal.

Strike: The strike of a coin refers to the process of stamping a design onto a planchet or a blank. A coin can have either a strong or a weak strike. Much of this depends on a coin's design. As an example, certain designs (such as the Type II gold dollar) have the highest relief element on the obverse directly aligned with the highest relief element on the reverse. This means that weakly struck coins are the rule for these designs. Other designs (such as the Indian Head quarter eagle) may be found with sharp strikes on certain issues and weak strikes on others.

Generally speaking, strike is not a major element in determining the grade of a coin unless it is in a series in which value is related to strike. In a series such as Mercury Dimes, where a PCGS MS-66 1945 dime is worth $15 and the same coin with a full strike (designated in this series as "Full Bands") is worth $7,500, strike is a huge element. In all but a handful of circumstances, strike does not play a critical role in determining the value or United States gold coins.

Surface Preservation: The number of marks on a coin and their placement are important factors in determining grade. There is no set formula that says "X" number of marks on a coin's surface means that it grades "Y." But there are some fairly normalized standards in terms of the importance of an abrasion's location.

If a very nice coin has a deep mark that it is well-hidden on the reverse, it tends not to be severely penalized. But if the exact same mark was located in a prominent focal point on the obverse (the cheek on a Liberty Head double eagle, as an example) it would be penalized considerably more.

Coins that have a very open, uncluttered design tend to show marks more obviously than those with tight, compact designs. For this reason, the intensity of the marks on a Liberty double eagle play a greater role in determining grade than on a Type Three gold dollar.

Certain types of coins are known for showing greater concentrations of marks than others. As an example, the quarter eagles struck from 1821 to 1834 did not see ready circulation. They tend to have reasonably clean surfaces. Indian Head quarter eagles, on the other hand, saw a greater degree of circulation. It is much harder to find examples that do not have the marks, scratches and scuffmarks associated with circulation and/or poor handling.

On United States gold coins, surface preservation is very important in determining grade.

Luster: Depending on the design, mint of origin and the metal used a coin may have a variety of surface textures. These include satiny, frosty, semi-prooflike and prooflike. When analyzing the surface of a coin in regards to grade, there are two things to look for: the amount of the original surface (or "skin") that is intact and the amount (and location) of marks.

There is really not one type of surface that is "better" than another. In certain series, such as Morgan dollars, premiums are paid for pieces with mirror-like surfaces. In most other series, prooflike coins may be regarded as interesting but not necessarily worth a premium.

On 19th century United States gold coins, I am most fond of a frosty texture. This texture can be found on issues from all mints but it is most closely associated with Philadelphia and San Francisco.

Luster is especially important in determining if a coin is Uncirculated or not. A Mint State coin is, technically, free of wear and should not have major breaks in the luster. However, this is often not the case for coins graded Mint State-60 and Mint State-61. These coins will typically show breaks in the luster; perhaps as a result of a light cleaning or "rub" that occurs from improper storage in an album. A coin that is not Uncirculated will show a greater amount of breaks in the luster and, obviously, a smaller amount of luster.

Luster is another very important component in determining the grade of a United States gold coin.

Coloration: Color is the most subjective factor in determining grade. A coin is either well struck or it's not well struck; this is not open to debate. But a gold coin that shows deep green-gold color may be attractive to one viewer and unattractive to another. In my opinion, attractive original coloration greatly enhances the appearance of a coin.

Gold is a relatively inert metal and not subject to as much variance in coloration as silver or copper. However, a wide range of colors may be present on gold coins.

Coins from the Charlotte and Dahlonega mints have very distinctive coloration as a result of the amount of silver or copper that was part of the gold found in these sources. Philadelphia and San Francisco pieces have much different coloration.

The majority of United States gold coins have been cleaned or dipped at one time. As a result, they no longer display original coloration. As collectors become more savvy, they are often attracted to coins with pleasing natural color. In many series, it is almost impossible to find original pieces. In the near future, it is likely that totally original pieces will be accorded a strong premium over "typical" examples.

Color is not as important a factor in determining the grade of a gold coin as it is on a silver or copper coin.

Eye Appeal: The four individual components listed above, when combined, form an all-encompassing component that is called "eye appeal." This is a fairly self-explanatory term. A coin that has good eye appeal may be very strong in one area (excellent luster, for example) and good in another (nice but not great color). If a coin is negative in one area (very heavy marks, for example) but acceptable in all others, it is still likely to be noted as having below-average eye appeal.

The concept of eye appeal seems subjective but it is really not. Most sophisticated coin buyers will agree that a certain coin has good or bad eye appeal. But it does require a certain level of knowledge to make this determination.

There are some specific dates or types that almost always come with poor eye appeal and a coin that is somewhat attractive may be considered to have good eye appeal "for the date." As an example, all known 1870-CC double eagles have heavily abraded surfaces. A coin that has typical marks but none located in very prime focal points may be looked at as having good eye appeal for the issue. But if this were any other date, the exact same coin might be regarded as having poor eye appeal. It takes in-depth knowledge of a specific series to make this determination.

Grading is an important subject and this article could easily have been two or three times longer. If you have any questions regarding the five components of coin grading, please feel free to email me at dwn@ont.com and I will do my best to answer them.

Incremental Grading

Old time collectors often bemoan the fact that there are "too many grades." In their opinion, there is no need for a ten point Mint State/Proof scale (i.e., Mint State-60 to Mint State-70 and Proof-60 to Proof-70) and even less of a need for multiple numerical levels in the circulated grades. I strongly disagree with the theory that there are too many grades. In fact, I can let you in on a secret that would make many of these old collector's eyes roll if they were aware of it. Expert graders, such as myself, actually use a whole series of "secret grades" (which I refer to as "incremental grades") when examining coins.

Before I explain what incremental grades are, it is important to understand why they exist. Back in the "old days," coins weren't very expensive and there were not very large spreads between nice coins and not-so-nice coins. A really superb 1927 $20 might sell for $55-60 while an average quality example was readily available for $50-55. This all changed when coins became more popular and a greater emphasis was placed on owning "the best." Today, a superb quality 1927 $20 might sell for $4000-5000 (or more) while an average quality Uncirculated example is worth just $400-500.

The most important thing to remember about grading is that it is subjective. While most experts can reach an impressive degree of consistency when grading a group of coins, there is always some room for disagreement. The reason this exists is due to the fact that a grade actually represents a shorthand for a range of grades. This is where the aforementioned "incremental grades" come into play.

Let's say, for example, that we are discussing a coin that grades Mint State-63. In actuality, the "63" grade is a shorthand for an entire range of grades that goes from 63.0 to 63.9. A coin that is regarded as a "63.0" is extremely low end for the grade. If it were examined by ten experts, four or five of them might not even call it a 63 and it could very well grade MS-62 if submitted to PCGS or NGC. A coin that is regarded as 63.9 is extremely high end for the grade. If ten experts examined it, half of them (maybe even more) would call it a 64 and it could easily grade MS-64 if submitted to a grading service.

An incremental breakdown for the Mint State-63 grade is as follows:

MS-63.0 to MS-63.2: A very low end coin for the grade. If a savvy dealer were offered such a coin already in a PCGS or NGC holder, he would not remove it for fear that it might be downgraded if it were resubmitted.

MS-63.3 to MS-63.5: A coin that is average quality to slightly above average quality for the grade. A coin at the upper range of this grade would be regarded as having a 50% chance of upgrading if it were resubmitted to PCGS or NGC. A knowledgeable dealer would probably pay a modest to significant premium for such a coin.

MS-63.6 to MS-63.9: A very high end quality coin for the grade. If such a coin were already encapsulated in an MS-63 holder, it would be regarded as an excellent candidate to "crack out" if shown to a knowledgeable dealer. Coins such as this generally trade for large premiums.

Grade and price go hand-in-hand. And when coins can be worth many multiples more in one grade than another, this means that two coins in the same PCGS or NGC holder can be worth considerably different amounts of money.

How significant are incremental grades on a coin in which a one-point improvement can mean a very substantial amount of money? Let's look at randomly selected issue: an 1860 double eagle in Mint State-63.

According to the March 2000 issue of the Coin Dealer Newsletter Quarterly, a Mint State-63 1860 double eagle is bid at $14,000 while an MS-64 is bid at $35,000--a value spread of $21,000. How would a smart dealer value a Mint State-63 1860 double eagle if he were figuring it as part of collection he were attempting to purchase or if it was a lot in auction he was attending?

This dealer's decision would be predicated on a number of factors. First, he might look at a PCGS or NGC population report and see just how rare the 1860 double eagle is in MS-63 and MS-64. A quick search of the February 2000 PCGS figures show that this service has graded two in Mint State-63 with two better (an MS-64 and an MS-65) while NGC has, as of January 2000, graded two in MS-63 and two better (both in MS-64). The combined population of four coins in MS-63 with just two better demonstrates that high grade 1860 double eagles are legitimately rare.

The next factor he would consider is the popularity and subsequent marketability of such a coin. Is the Liberty Head double eagle series popular and are there customers for an expensive, high grade 1860? If the dealer is a specialist in Liberty Head double eagles, he is well aware of his ability to sell such a coin and he probably already has a few potential customers lined up for it. If the dealer is not a Liberty Head double eagle specialist, he will either determine its marketability by asking another, more knowledgeable dealer or he will decide not to take a risk on such an expensive coin.

Now that our hypothetical dealer has performed his due diligence and has determined that this high grade MS-63 1860 double eagle is a truly rare and saleable coin, he can grade it incrementally and value it accordingly. An incremental range of prices that he would pay for this coin might be as follows:

MS-63.0 to MS-63.2: In this grade range, the 1860 double eagle would be regarded as "product" if it were already in a third-party grading service holder or as a low-end coin if it were unencapsulated. Assuming that the dealer had a client for the coin or he thought it could be sold in a relatively short period of time (60 days or less) he would probably figure its value in the $12,500 to $15,000 range.

MS-63.3 to MS-63.5: In this grade range, the dealer would be willing to pay more for the 1860 double eagle. If the coin were just a 63.3--meaning that it was just average quality--he would probably still figure it around CDN "bid" level. If the coin were a 63.5--meaning that the coin was nice and had maybe a 50% chance of grading MS-64--the dealer might figure it at $17,500 or a bit higher. This would mean that if the coin did not grade MS-64 after it had been submitted (and resubmitted) to a grading service, he would have a few thousand dollars downside (assuming he could not sell it to a retail client as a "premium quality" specimen) but would have had considerable potential upside if the coined had worked and been graded MS-64.

MS-63.6 to MS-63.9: Here's where determining the value for such a coin gets dicey. The dealer now has to really weigh the upside and downside of his potential purchase. Let's say the coin is a 63.8 in his opinion and he is willing to pay $23,000 for it. This means that he has around $9,000 downside (using the CDN bid of $14,000 in MS-63 as his "cash out" price should his gamble be unsuccessful) and $12,000 upside (using the CDN bid of $35,000 in MS-64 should the coin be graded MS-64 by PCGS or NGC). While I would not personally like the risk/reward ratio inherent in these numbers, many dealers would; especially the "adrenaline junkies" who populate the world of wholesale trading and the upgrading/"cracking out" subculture.

What these figures show is that an MS-63 1860 double eagle could be worth $12,500 to $23,000 based on its incremental grade. This explains why two identical coins in an auction might sell for vastly different sums.

If you are unwilling or unable to learn how to grade incrementally, you could be leaving thousands of dollars on the table the next time you sell an expensive coin with a high value spread between one grade and the next. My suggestion is that you work with a very knowledgeable dealer who understands the intricacies of incremental grading in your area of specialization.

The Concept of "Best Value Grade"

Unless you are Bill Gates, the chances are good that you have a coin buying budget. It is my contention that every United States coin has a price point above which it no longer makes economic sense to purchase it; unless you are an avid specialist within a series or you are totally compelled to have the best of every coin and/or type you collect. I refer to this price point as the "Best Value Grade." There are a number of applications of the Best Value Grade theory (heretofore referred to as the BVG) and these are directly related to the classification in which a specific coin falls.

In my opinion, coins can be classified in two distinct classes: absolute rarities (coins that are rare and desirable in all grades) and condition rarities (coins whose rarity is predicated solely on a high level of preservation). Using Type Three double eagles as the series to examine some coins, we find a number of perfect examples.

The 1891 double eagle is an absolute rarity. Fewer than 50 examples are known from the original mintage of just 1,390 business strikes. This is truly a coin that can be described as rare and desirable in any grade. Coin World Trends (dated 2/28/00) shows the following price information for this date:

EF-40: $4000 EF-45: $5000 AU-50: $7750 AU-55: $11750 No Trends values are listed for this date in any grade above AU-55.

Population data on this date is interesting as well. As of 2/00, PCGS had seen a total of just 25 examples in all grades (quickly confirming that it is a true rarity) with the breakdown as follows:

EF-40: 2 coins EF-45: 1 coin AU-50: 7 coins AU-55: 5 coins Five coins have been graded higher than AU-55 (all AU-58) with none in Mint State.

This data shows that the 1891 double eagle is seldom available and when it does come up for sale, it is most likely to be found in the AU-50 to AU-55 range. Assuming that your budget allows for a purchase in the $7500-15,000 range, the question you must now ask is: "at what point does the 1891 double eagle become overpriced?"

It could be said that there is no real point that the 1891 becomes overvalued as this is a truly rare coin that seems quite undervalued when compared to other more famous but less rare double eagles. But let's say that a collector has a choice between an AU-50 example at $6500 and an AU-55 at $10,000. In my opinion, I think the higher grade coin makes sense. It is priced at less than double the level of an AU-50 but is considerably scarcer, quite close to being the finest available quality (remember that the highest recorded grade level for this date at PCGS is only AU-58) and, from a cosmetic standpoint, a nice AU-55 should be considerably more appealing than an AU-50.

The 1891-S double eagle is a good example of a condition rarity. Nearly 1.3 million were struck and thousands of examples exist in the lower to medium levels of Uncirculated. Coin Dealer Newsletter bids for this date, as of 12/99, are as follows:

MS-60: $390 MS-63: $2,040 MS-64: $6,100 MS-65: No Bid (Note: While there is no published bid for this date in MS-65, we can establish a hypothetical value level of $15,000-17,500, based on other comparable issues of this era).

The 2/00 PCGS Population report shows that 1,840 1891-S double eagles have been graded in all grades with the majority of these in the MS-60 to MS-63 range. The breakdown is as follows:

MS-60: 164 MS-61: 459 MS-62: 784 MS-63: 217 MS-64: 23 MS-65: 0

This data shows that the 1891-S is easily obtainable in MS-63, somewhat scarce in MS-64 and extremely rare in MS-65.

If a collector were to ask my advice what the BVG is for the 1891-S I would unhesitatingly advise him to pursue a nice, high end MS-63.

To my way of thinking, there is nothing especially exciting about this date. If you are collecting Type Three double eagles by date, you need an 1891-S to complete your set but it is unlikely that I will be called by a single collector this year who just happens to be looking for an example. So, right off the bat, this issue lacks the "sex appeal" factor that the 1891 double eagle has.

A look at the price levels for this date are interesting. An MS-63 can probably be bought in the $1750-2000 range, an MS-64 would be at least three times that amount and an MS-65 (if available) might cost ten times the amount of an MS-63.

The population data above tells me that this coin is available enough in MS-64 that I would not want to pay $6000+ for one. And the possibility always exists that one or more of the coins currently graded MS-64 could be upgraded to MS-65. The first PCGS MS-65 example that is graded will, no doubt, command a strong price from a collector or investor who is sold on its status as a "finest known" piece. But what happens to the value level of this coin when two or three other MS-65's are graded?

I also believe that there are certain coins which it always makes sense to stretch for. A good friend of mine has a theory that the most desirable issues are those whose essence can be summed up in fifteen words or less.

An example of this is the 1861-O double eagle. Here's how I would distill the essence of this coin to a new collector: "A rare, historic issue with a strong possibility of having been struck by the Confederacy."

A little background research shows that the 1861-O double eagle is rare in all grades with an original mintage figure of just 5,000. It is probably unknown in Mint State and very scarce in all AU grades. Most interestingly, a number were produced by the Confederacy in the Spring of 1861, after the New Orleans mint had been seized.

According to the 2/28/00 issue of Coin World Trends, the price levels for better quality 1861-O $20's are as follows:

AU-50: $6,500 AU-55: $13,800 No trends value is listed for any grade higher

As of 2/00, PCGS had graded seven examples of this date in AU-50, seven in AU-53, three in AU-55, two in AU-58 and none better.

Now let's say a collector of this series is suddenly offered the chance to purchase two really nice 1861-O double eagles. One is an AU-55 that is priced at $12,000 while the other is an AU-58 that is priced at $17,500. Which coin is the better value?

In this case, I would strongly advise him to purchase the AU-58. To me, this is an easy choice. The price spread between the AU-55 and the AU-58 is not unreasonable. There should be a discernible difference in quality between the two coins. The AU-58 would be tied with just one other coin as the finest graded by PCGS. And, this is a very desirable, truly rare issue with a level of demand that extends beyond specialists within the series. All of these factors combine to make this a logical purchase.

What if the same collector were suddenly confronted with a fantastic, newly discovered 1861-O double eagle that had been graded MS-62 by PCGS and was clearly the finest known by a mile? Would this be a coin that he should stretch for?

It is always very hard to determine a value for coin such as this. But let's say that after careful reasoning, the collector and the dealer who owned the coin agreed that it should be priced at $45,000.

Clearly, $45,000 is a lot of money to pay for an 1861-O double eagle. It would represent a world record price for this date. In my opinion, this would be an instance where a stretch would make sense.

As discussed above, the 1861-O is an issue that passes the "fifteen word test" with flying colors. The finest known example of this date would be a coin that would appeal not only to specialists but to any collector of rarities as well. The price level of $45,000 is not way out of line with the value for an AU-58. And, presumably, this MS-62 coin would be vastly more attractive than the aforementioned AU-58.

There are circumstances that might make this coin a bad deal. For example, its overzealous owner might originally price it at $85,000. At five times the price of an AU-58, this would not make sense. Or, the coin in question might be unappealing and, in the opinion of the collector, not all that much better than the AU-58 he already owned. In this case, the coin should be passed on at the inflated price and maybe even at the more realistic price of $45,000.

The Best Value Grade theory can be applied to all issues of United States coins. Every time I purchase a coin for my inventory, I do a quick BVG calculation. The immediate questions I ask myself are: does the value that this specific coin make sense to me and does this coin offer good value for my clients? I would strongly suggest that before you decide to specialize in an area of make any significant coin purchase that you make your own BVG calculations.

If this theory intrigues you and you'd like to know my thoughts on the Best Value Grade for the coins that you collect, please e-mail me at dwn@ont.com.

The Ten Rules of Successful Coin Collectors

If you do not learn how to become a good coin collector, you will not enjoy this hobby. This will become quickly apparent; especially the first time you have your rash, uninformed purchases looked at (and, probably, summarily dismissed) by a knowledgeable dealer or collector. There are a number of rules that all coin collectors should remember every time they make a purchase. Here are ten that I feel are especially important. 1. Education

The most successful coin collectors take time to learn as much as they can about numismatics. They not only study coins but the dynamics of the market as well. To learn about coins, I strongly suggest that you buy and read as many books as possible. You can supplement these books with specific catalogs that relate to your chosen field of specialization. A serious collector might even go as far as creating a database of prices that relate to his specialty. Other suggestions for new collectors include subscribing to periodicals such as Coin World and Numismatic News. You should join the American Numismatic Association and use their library (they will send books by mail to members). Become friendly with other collectors and communicate with them by phone or e-mail. And don't be afraid to ask questions.

2. Specialization

It is too hard to begin a coin collection without having goals and boundaries. I have always been a strong believer that it is better to view numismatics with a "micro" perspective as opposed to a "macro" perspective. As an example, if you start by collecting Charlotte gold coinage, your "world of focus" becomes 52 specific issues. It is realistic to assume that an intelligent individual who is willing to commit time to this area of study could become relatively knowledgeable within a year or two. To become similarly knowledgeable in a larger field of study (such as all branch mint US gold coins produced between 1838 and 1907) requires many more years. Becoming a well-versed specialist will allow you to level the playing field between you and dealers and it should enable you to make better purchases.

3. Patience

We live in an era of immediate gratification. New collectors often have the urge to jump in very quickly and complete their sets as fast as they can. The best coin collections are built over the course of many years. Sometimes, it is possible to purchase a number of great coins in a very short period of time. But most times, the opportunities to purchase great coins are few and far between. The new collector should avoid the temptation to buy the "wrong coin" just because he needs it for his set and he does not want to wait. Impetuous decisions are invariably incorrect and usually prove costly over the course of time.

4. Connections

It amazes me how many serious collectors get their "meatiest" information on topics such as pricing, market conditions and future trends from such third-hand sources as newsletters, coin magazines and coin brokers. This information is almost always well out of date and totally biased. (Remember that most newsletters which recommend specific coins are written by dealers who have taken a position in what they are touting). The only way to get real information about the coin market is from a dealer or collector who regularly attends shows and auctions. This discounts most coin brokers/salesmen as they get diluted information from their superiors and then pass on these half-baked "truths" to the masses. I personally view it as my duty to pass on accurate information to good clients. Conversely, I will not willing pass this information onto "tire kickers." The best way to get good information is to establish a good working relationship with a well-connected, reliable dealer.

5. Thinking Like A Collector

Anyone who approaches numismatics with a dispassionate attitude is a virtual certainty to lose money. Conversely, most pure collectors make money; often times in spite of themselves. This is because they buy coins for the right reason: they love them. They what interests them and they carefully research their purchases. They know for example, that a coin similar to one they just purchased sold for 10% more at a major auction. They know that they are not buying overhyped coins at the height of a promotional period. They are not buying coins just because a voice at the other end of the phone told them to and they are not buying them because this person told them their new coins would "increase in value 50-75% over the next three years." Remember this rule because it may be the most important one of the ten listed here: learn to think and act like a true collector and you will have more fun now and have a better chance to expect a reasonable profit on your purchases over the course of time.

6. Connoisseurship

I define connoisseurship as the ability to discern true quality in a specific field. In numismatics, the connoisseur is able to determine which coins have the most aesthetic eye appeal and which, literally, stand apart from the "typical" piece. A numismatic connoisseur, for instance, is able to appreciate a truly original gold coin with rich, "crusty" coloration. He is able to innately sense that 150 year old coins do not have to be big and bright in order to be desirable. Connoisseurship is a natural ability. You either are able to naturally determine the "best" or you are not. If you are not a born connoisseur (and very few people are) then you should find a dealer who has this ability to assist you with your purchases. I would estimate that less than 5% of all coin collections are "connoisseur quality" and those that are typically the ones that show the greatest financial appreciation over the course of time.

7. Learning to Grade

I have seen people spend millions of dollars on rare coins without having the slightest idea how to grade. They put their complete trust in dealers and in third-party grading. Frankly, this attitude leaves me baffled. If I do not feel very comfortable grading a specific type of coin, I do not buy it. As an example, I think Indian Head half eagles are extremely hard to grade. To be totally honest, I can't grade the damn things. My solution? I don't buy them. By the same token, I feel that I am a world-class grader of Liberty Head half eagles. So I buy a lot of them. There are some simple rules when it comes to grading. First--and foremost--you need to view as many coins as possible. I would recommend that you attend shows and auctions and carefully look at coins. Secondly, I would take one of the grading classes offered by the American Numismatic Association at their annual Summer Seminars. Thirdly, I would make the decision to specialize, so that you have fewer types of coins to learn to grade. Fourthly, I would try to learn grading tips from the dealer(s) that I buy the majority of my coins from. Finally, I would always remember that while third-party grading is a great safety net for the beginner, there is nothing like your own knowledge.

8. Thinking Long Term

Coins are a terrible short-term investment. Even if you buy coins at a fair "retail" mark-up, you are still paying at least 10-20% over typical wholesale prices. This means that any coins that you purchase has to go up at least 10-20% for you to break even. When coins were heavily touted as investments in the 1980's, the common logic was that you needed to hold at least three to five years. I would suggest that you should plan to hold your coins at least ten years and preferably more. The greatest collections (Eliasberg, Pittman, Norweb, etc.) were built over the course of fifty+ years.

9. Quality Not Quantity

Let's say that you have a coin budget of $20,000 per year. I would suggest that you purchase four or five really nice $4000-$5000 coins each year than twenty $1000 pieces. The coin market of the future will be even more predicated on quality than it already is. High quality coins will become harder to find and, consequently, more expensive. The decision to purchase the best coins you can afford will prove to be very intelligent over the course of time. A few years ago, another dealer had an advertising campaign that basically said that your entire collection should be able to fit into a PCGS shipping box (i.e., it would be twenty coins). While this never really caught on, I think his idea actually has some merit. If you have decided to be more of a "generalist" buyer than a "specialist," I like the concept of having a small collection of great coins instead of a large collection of nondescript coins.

10. Buying the Best You Can Understand

If you are new to coin collecting and you know next to nothing about coins and the coin market, you have no business purchasing $10,000+ items. I would strongly suggest that you start small and take at least three to six months to study the market. Once you feel more comfortable, you can take a bigger plunge into the coin market.

Conclusion:

The regimen that I have discussed above is not easy to follow. Most people are not willing (or able) to follow this approach as it requires considerable discipline and a major commitment of time. If some of these steps seem practical to you and others do not, then I suggest you follow what you can and keep the other steps in the back of your mind as you become better acquainted with numismatics.