subject: How Gold Coins Are Graded [print this page] Collecting gold coins is not simply a hobby; it's an investment. Gold is a primary financial asset in almost every central bank, and many countries continue to use gold to back their currency and hedge against the U.S. Dollar--as weakness in the Dollar is offset by stronger gold prices. Having a personal collection of gold, then, is a sensible move on your part. Merely having a store of gold, however, is not enough. The value of gold coins is determined by grade, rarity, overall quality, and demand. The grading standard was set in the 1950s so that all gold could be evaluated by the same criteria. Before you invest in gold coins, here are some things you should know about how they are graded.
Coins that show no sign of wear can be classified as Mint State or MS. Numbers between 60 and 70 are the best: MS-70 means it is a perfect color and without blemish. Keep in mind that some dealers use Unc, which stands for Uncirculated, to specify this high grade. Almost Uncirculated or AU is another category--one that may be difficult for neophytes to identify. The AU grades (AU-50, AU-55, and AU-58) are based on the wear on the high points of the coin.
XF or EF stands for Extremely Fine grade coins. This means the high points have a minimal amount of wear. XF-40 and XF-50 are numbers that indicate the amount of light wear. Very Fine, VF, coins have detailed major features while some of the finer details are worn down. Inspecting the major feature of the coin will help you determine the grade. VF-20, VF-25, and VF-30 are the most common. Fine or F grade signifies coins with moderate to heavy wear but which can still be identified easily from the details that remain.
Very Good, VG, and Good, G, grades are differentiated by the fact that a VG rating (i.e. VG-8) requires the coin to have a full rim, even if the design is worn. A G grade does not necessitate a full rim, but the mint mark and date must be clearly discernible. Almost Good, AG, and Fair, F, coins should only be bought if you are trying to fill in a missing date; the conditions of these coins are poor, and the details may not be readable.
The key to investing in a gold coin is to know its rarity. The grade rating, along with number of existing coins, helps to determine a coin's rarity. Avoid coins that have scratches or artificial colors or have been pitted or retooled. These will be downgraded by a dealer and are not a good investment. In time, you will learn how to quickly discern which coins are more valuable and which are not.
