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Commodity Investing

Graded Coins: Is This Market About to Break Out?

Approaching the graded coin market can be a bit intimidating at first. The grading system is ultra-specific, and high-grade coins can be pricey. But, at stake are remarkable opportunities in the numismatic market for those open to an interesting investment alternative.

Numismatic experts say the coin market is on the verge of a major break out. David Hall, founder of the Professional Coin Grading Service (PCGS) and regarded as one of the top numismatists of the twentieth century, says “we’re now experiencing a renaissance in coin investments and collecting.”

Graded gold and silver coins have the advantage to leverage both the numismatic and bullion markets. And for investors already interested in precious metals, high-grade bullion coins offer an intriguing and beautiful opportunity.

Here, we’ll take a quick look at the graded coin market, and I’ll show you the exact products that I believe are the best high-grade gold and silver coins for investment.

A Quick Look At Graded Coins

The majority of all coins are produced for general circulation purposes. Over the years, coins in general circulation can experience heavy wear and damage. But a few coins never go into circulation and are preserved – stored through the years in a bank, attic, garage, etc. These very well preserved coins are the most prized by collectors.

Third-party coin grading companies perform evaluations for general currency and proof coins and assign grades based on preservation.

These grading companies use a standard 0- to 70-point scale to appraise a coin’s state of preservation. But buyer beware…

There are many coin graders that try to establish themselves as experts. However, most of these grading companies represent nothing more than one-man operations (called “self-slabbers”) that significantly over-grade coins to dupe unwary buyers into lofty prices.

In the graded coin world today, there are only two highly respected coin grading companies: The Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corp. (NGC). I highly recommend only buying coins that have been graded by these companies.

Mexican Revolutionary High Grade CoinAt the extreme bottom end of the grading scale (0), coins are worn almost smooth so that the type of coin and date is unreadable or barely discernible. At this grade, a coin is basically piece of metal that you can assume was once used as currency. The coin to the right, for instance, is extremely low grade.

On the extreme top end (70), coins are considered absolutely flawless. There are no microscopic scratches or marks, the coin has a sharp strike, it’s perfectly-centered, bright, and has the original luster and overall outstanding eye appeal. I’ll show you some of those in just a minute.

Here’s a general breakdown of the current grading system for U.S. coins:

Bullion Coin Grade Numbers

That means the highest-grade coins command the highest prices. But excellence commands a premium in everything. It’s why people pay hundreds of thousands of dollars for a Rolls Royce, or a Patek Philippe. And in the graded coin market, experts say quality is key.Most coins produced are never in MS 70 condition. It is only a few specimens that are ever struck flawlessly. So for every year a coin is produced, there are only so many flawless examples. And it’s the general rarity of these perfectly struck coins that piques the interest of collectors.

David Hall says:

The best quality is in the greatest demand; therefore, prices of high-quality coins increase more rapidly. So, buy the best quality.”

The bottom line is, quality of preservation is what the graded coin market is all about. And when it comes time to cash out of a high-grade coin investment, perfect-grade coins are going to be the easiest to sell at the highest premium. So invest in quality. Now, let me get down to specific coins…

The Best High-Grade Bullion Coins for Investment

The American Gold and Silver Eagles set the global standard for bullion coins. They’re the most widely recognized and liquid bullion coins in the world. So I believe perfect-grade American Eagles are best high-grade bullion coins for investment.

The U.S. mints produce the American Gold and Silver Eagles in two strike types: A business strike, and a proof strike.

Business strike coins are produced for general circulation. The coins in your pocket, for instance, are business strike. But, as I mentioned earlier, some business strikes are never circulated. They will go directly from the mint to collectors or grading companies who are looking for flawless business strike examples.

Third-party coin grading companies grade business strike coins on their “mint state” (MS). The highest grade American Eagle business strike coin is MS 70. Have a look at two perfect-grade business strike American Eagles from PCGS and NGC:

Graded American Gold and Silver Eagles
American Gold and Silver Eagles graded MS 70 by NGC and PCGS

Proof coins are primarily produced for the collector’s market. Modern proof coins often have mirrored backgrounds with contrasting frosted figurative designs. Proof coins are graded on the same 0- to 70-point grading system. But third-party grading companies also evaluate the contrast of the frosting on proof coins. And the highest contrasts are the most sought after.

PCGS and NGC have slightly different terminology and abbreviations in their labeling of perfect-grade proof coins and their cameo contrasts. It’s important not to get confused. Have a look:

Grading Company

Flawless, but little to no contrast

Flawless, with some contrast

Flawless, with full contrast

PCGS

PR 70

PR 70 CAM¹

PR 70 DCAM²

NGC

PF 70

PF 70 Cameo

PF 70 Ultra Cameo

¹ “Cameo”
² “Deep Cameo”
High Grade Gold and Silver Bullion Coins
American Gold and Silver Eagles graded PF 70 DCAM by PCGS and PF 70 Ultra Cameo from NGC

The U.S. Mint also produces a one-of-a-kind proof for the American Eagle series of bullion coins called a “reverse proof.” For these coins, the mirrored and frosted finishes are reversed. They look pretty wild. Check one out:

2006 American Eagle Reverse Proof
2006 American Eagle Reverse Proof graded PF 70 by NGC

Professionally graded MS 70 and perfect proof American Gold and Silver Eagles are widely available from most bullion dealers. You can even buy these right from Dave Hall himself.

As I mentioned, these coins will sell at a significant premium over spot prices. But excellence is the standard in the graded coin market and will pay off in the long run. And recent date, perfect-grade American Eagles are one of the best high-grade bullion coins to own for investment.

So to wrap it up…

  1. Avoid Over-Graded Coins – Buy only PCGS and NGC graded coins. These are the most highly respected coin grading companies.
  2. Invest in Quality – Buy MS 70 or proof 70 coins with the highest cameo contrast. Excellence is the standard in the graded coin market.
  3. Buy American – The American Eagle series of bullion coins are the most widely recognized and liquid coins in the bullion coin market.

Experts say the market for coins as investment is rapidly growing. If they’re right, perfect-grade silver coins like the MS 70 and proof 70 American Eagle will continue to command higher prices while retaining full leverage on bullion spot prices. And for investors already interested in precious metals, high-grade gold, and gold and silver coins offer an exciting and beautiful opportunity.

Good Investing,

Luke Burgess


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