What grading actually certifies

Two people, one coin, two opinions

Condition is where most of the difficulty in coins lives. A gold sovereign carried in a pocket for ten years and a sovereign that went straight from the press into a sealed capsule from the mint are the same weight of the same metal, and they are not the same object. One is worn. The other is as the Royal Mint made it. Between those two extremes sit dozens of gradations, and almost every one of them is a judgement call.

Left to a buyer and a seller, that judgement becomes a negotiation rather than a fact. The seller sees a bright, sharply struck coin. The buyer sees a faint scuff on the monarch's cheek. Both are describing the same surface honestly, and both have an interest in the answer. Written descriptions do not settle it either. Some of the words in common use, such as choice or select, carry no fixed definition. Others have a settled meaning but describe something else: Brilliant Uncirculated, for example, is a Royal Mint finish, a statement about how a coin was produced rather than a measure of the condition it is in today.

Third-party grading takes the judgement away from both parties. The coin goes to an independent grading company with no stake in whether it sells or at what price. Trained graders examine it, they agree an opinion on its condition, they confirm it is genuine, and they seal it in a grading holder with that opinion printed on the label. A capsule from the mint is not a grading holder. The capsule protects the coin and nothing more; only the grading holder carries an independent opinion and a certificate number. From then on the description travels with the coin, and it was written by someone who does not profit from it.

NGC, PCGS and a scale that runs to 70

Two grading companies dominate this work. Numismatic Guaranty Company, almost always shortened to NGC, and Professional Coin Grading Service, PCGS. Both are American, both were founded in the second half of the 1980s, and both grade very large volumes of coins each year. Their opinions are widely recognised in the international market, including for British issues such as sovereigns and Britannias.

Both use the Sheldon scale, a numeric scale running from 1 to 70. It takes its name from William Sheldon, an American numismatist who published the original version in the late 1940s for a single series of early American coins. The market later adapted it into a general standard for everything.

A letter prefix tells you how the coin was made. MS means Mint State, an ordinary business strike produced by the usual high-speed minting process. PF or PR means proof, a coin struck slowly, often more than once, from specially prepared dies onto a polished blank to produce mirror fields and crisp detail. So MS70 and PF70 are both the top of the scale, but they describe two different kinds of object. Proofs may also carry a cameo designation, which records the contrast between frosted raised design elements and mirrored background fields.

Modern coins made for collectors and investors sit at the top of the scale almost by definition, because they have never circulated. That is why the conversation about a modern sovereign or Britannia is usually about the difference between 69 and 70 rather than the whole 1 to 70 range.

What a grader is judging

Four things, roughly, and it helps to know them because they are physical properties you can look for yourself.

• Strike. How completely the design transferred from die to blank. On a weakly struck coin the highest points of the portrait or the shield look soft, as though slightly out of focus, because the metal never fully filled the die.
• Lustre. The particular way light moves across an uncirculated surface, caused by the microscopic flow lines left as metal spread under striking pressure. It looks like a soft rotating pinwheel of light when you tilt the coin. Handling, cleaning and wear all dull it, and once it is gone it does not come back.
• Contact marks and hairlines. Contact marks are the small nicks a coin picks up from touching other coins in the minting and packaging process. Hairlines are fine parallel scratches, usually a sign the coin has been wiped or polished. The grader records both their number and, more importantly, where they fall. A mark in the open field beside the portrait is far more visible than the same mark hidden in a wreath.
• Eye appeal. The overall impression: colour, evenness of tone, whether the coin simply looks right. This is the most subjective element and graders acknowledge it as such.

Put those together and MS69 and MS70 become descriptions of a physical object rather than scores. MS70 says that under a five times loupe a grader could find nothing to fault: full strike, undisturbed lustre, no contact marks anywhere. MS69 says the coin is superb and something small was found, perhaps a single tick in a field or a whisper of softness in one high point.

There is also a category for coins with a problem that cannot be reduced to a number. If a coin has been cleaned, polished, scratched, damaged, holed or chemically altered, both grading companies will authenticate it as genuine but decline to place it on the numeric scale. NGC issues what it calls a details grade, which states the level of wear and then names the problem, for example Uncirculated Details, Cleaned. PCGS seals such coins in a separate holder with equivalent wording. The presence of that wording is the single most useful thing on a label, because it tells you the coin has been interfered with at some point in its life. Handling your own coins so that this never happens to them is covered in the storage lesson.

The holder, the number and the guarantee

The holder is part of what you are buying. The coin sits in an inert plastic core inside a sealed outer shell, sonically welded rather than screwed or clipped, so it cannot be opened and reclosed without visible damage. That is the meaning of tamper-evident: not that the holder cannot be opened, but that you can tell if it has been. Holders also carry security features such as holograms and micro-printing that are difficult to reproduce.

Printed on the label alongside the description and the grade is a unique certificate number. That number is the useful part. Each grading company publishes a free lookup against its own public database. Type the number in and you are shown the record the grading company holds: the coin's date and denomination, the grade assigned, any designations, and for some coins a photograph taken at the time of grading. If the record does not exist, or it describes a different coin from the one in front of you, you have learned something important before any money moves.

Both grading companies also stand behind their opinions with a published guarantee. In broad terms, if a coin in an intact holder is later shown to be counterfeit, or to have been graded more generously than the company's own standards allow, the company undertakes to compensate the owner. The exact terms are set out on each grading company's own website and are worth reading rather than assuming, since they include conditions and exclusions.

You will also see submission designations on some labels, with names such as First Releases, Early Releases or First Strike. These record a fact about timing: the coin reached the grading company, or an authorised submission centre, within a defined window after the coin's official release date, typically the first thirty days. That is all they record. They do not mean the coin was among the first struck, they say nothing about die state, and they are not a quality assessment of any kind. A First Releases label sits beside the grade; it is not part of it.

A grade is an opinion, not a measurement

A grade is an expert opinion, formed by human beings, about a physical object, on one particular day. Treating it as a measurement is the mistake to avoid.

Graders can and do differ. Two of the finest examiners in the business, looking at the same borderline coin, may land one point apart, because the last increment on the scale turns on judgements about eye appeal and about how much weight to give a mark in a particular position. Standards are applied by people rather than by instruments, so they are not perfectly uniform from one grader to the next, or from one era to the next.

This has a practical consequence. A coin can be resubmitted, either back to the same grading company or across to the other one, and come back with a different number, higher or lower. Nothing about the coin has changed. Only the opinion has. A grade is an opinion recorded on a label, not a permanent property of the metal.

Most importantly, a grade certifies two things and only two things: that the coin is genuine, and what condition an independent examiner considered it to be in. It does not certify what the coin is worth today and it says nothing whatever about what it will be worth later. Values move with the gold price and with collector demand, and they can fall as well as rise.

So the useful way to read a grade claim is to check it. Ask for the certificate number and look it up yourself in the grading company's own public database. Read the whole label, not just the number, and look for details wording. Confirm the holder is intact and the coin inside matches the record. Understand that a designation about release timing records when the coin was submitted, not how well it was made. A grade that survives all four of those checks is genuinely useful information.

Nothing here is financial advice. Gold investing is not regulated by the Financial Conduct Authority in the UK, so there is no FSCS protection and no access to the Financial Ombudsman Service.