Informational Article

How Gold Coins are Valued

What is the value of that gold coin you have? Why are some gold coins so much more expensive than others? An object collected is an object graded, whether it is trading cards, diamonds, comic books, automobiles or coins. Over time, the United States coin collecting community has devised a very refined and comprehensive method of grading coins that is reputed to be among the most complex in the collecting world. It is this grading system that is used to determine the value of gold coins.

It is necessary to distinguish the U.S. in an examination of coin grading, because different countries (or regions) use different methods of grading coins. Again, it is the U.S. collector who may be privy to the most intense grading system in the world, and it is employed by two primary organizations.

Grading Services

The coin world seems at times to be a place no more or less politicized than the very halls of Congress. Grading services themselves get graded, and these are meted out among institutions with names like the American Numismatic Association and the Professional Numismatists Guild.

In an industry once riddled with counterfeiting controversy and quality control concerns, two dominant grading services have emerged from the ashes:

1. Numismatic Guaranty Corporation (NGC) - The NGC was founded in 1987 and is headquartered in Sarasota, Florida. It offers a wide variety of services, including fee-based grading, encapsulation and certification, and has reputedly graded more than 10 million coins. It does not, however, buy, sell or trade coins.

2. Professional Coin Grading Service (PCGS) - The PCGS was founded in 1986 and is headquartered in Newport Beach, California. It also offers a wide variety of services, and like NGC these services are centered on fee-based grading. PCGS boasts of having graded 20 million coins since it opened its doors. It also does not buy, sell or trade coins.

Both services claim to be the best, however, of the four main grading service companies available these two are generally regarded as the most reputed in the business.

Coin Grading System

These services both use what has come to be known as the authoritative U.S. system of grading, and is called the Sheldon scale. The scale begins at 1 (Poor) and proceeds to 70 (Mint State), and there are grades along the scale as follows:

Note: proof coins (PF), "prooflike" coins (PL) and specimen coins (SP) all get special prefixes, as noted. Also, you may see a grading of PR-1 coins as B, for "basal state," and UNC for uncirculated coins.

Grading the Value of Gold Coins

Several factors are taken into consideration before a gold coin will be graded, such as strike, luster, coloration, surface preservation and eye appeal. A coin that has no minting blemishes whatsoever and essentially has not been handled after it was struck may receive a grade of MS-70.

This high rating is reserved for uncirculated coins. To be "uncirculated" means that the coin was never used as currency, which suggests it would not have been exposed to the wear and tear that comes with being handled.

Gold coins can fall anywhere on the Sheldon scale, but of course as an investment you want your gold coins to be as close to MS-70 as possible. Remember, though, that gold bullion coins are primarily designed as investment products; the entire concept is that the coin be worth as much in an unrecognizable lump as long as it contains the same weight and purity of gold.

It is only when gold coins are being treated as collector's pieces based on some uniqueness that adds value beyond their gold content that makes grading essential. A Sheldon rarity scale helps grade this, and it goes from R1 (common) to R8 (unique).

So, if you are investing in collectible gold coins, the ideal rating (the most rare and least common) would be a combination of MS-70 and R8; in other words, a one-of-a-kind uncirculated coin. The value of gold coins are measured using this criteria to determine its current market value.