WYNTK: Why do EAC-graded coins cost more?
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NOTE: You may view the PDF version of this article on my website HERE. The PDF version is easier to read and includes better text formatting, and can be easily printed.

 

(Note: I apologize for the length of this article. It's actually already edited down from a much larger document that I've been working on recently.)

 

Why do EAC-graded coins cost more?

pricing of “market-graded” coins vs. “technical grade” pricing

 

Many coin collectors, even those who do not collect half cents or other early American copper coins, have heard the term “EAC grading”. But what exactly does that mean? And perhaps more importantly, why is it that most price guides seem to be practically unusable when trying to price coins graded by “EAC standards”? It seems as if coins graded by the EAC always seem to be worth much more than other coins, and it would be great if coins could be had for the price at the EAC grade!

 

The Early American Coppers club (EAC) was started in 1967 as a numismatic specialty organization with emphasis on early U.S. copper coins. Although originally focused on United States Large Cents, the club soon expanded its interests to include Half Cents, Colonial coins, Hard Time Tokens and (informally) other early copper coins and tokens.

 

As is the case with just about any numismatic entity, coin grading is a subject of strong contention and discussion within the EAC community. A grade is assigned to a coin in order to more-or-less describe to other collectors it’s approximate value in relation to similar coins (though of course, the value of any coin is subject to the opinions of those who might be interested in purchasing it). Naturally, the value of something on the open market – especially something as esoteric as collectible items - is subject to personal opinion, and it is the wide variety of opinions that leads to lively debate on how coins should be graded and valued.

 

As stated by the EAC itself, “every EAC member is entitled to an opinion about what "EAC grading" represents”. What is often referred to as “EAC grading” is really a variation of “technical grading”, and is distinguished from “market grading” in significant ways. It is true that in today’s coin collecting environment, “market grading” is most often used to describe most coins. Indeed, it is possible to assign a market grade to any coin, including early American copper coins, but EAC standards may not be applied to any coins outside the realm of EAC interest (although technical grading may). This limited exposure of EAC grading has the unfortunate effect of obscuring to some degree the purpose of EAC grading standards. Nonetheless, technical grading as practiced by the EAC has some compelling aspects that every collector should understand.

 

Before we explore “technical grading”, let’s review “market grading”. The objective of “market grading” is to assign a grade to a coin based on its perceived value relative to other coins on the market at a specific point in time. In other words, to assign a market grade to a coin, one must first know it’s value. If you were to take ten coins of the same date and kind from a public auction and arrange them in order of realized price, from lowest to highest, you would also be placing the coins in order of grade, from lowest to highest. If you were to then compare the amount each sold for to the values listed for various grades in a price guide, you could then assign the grade based on that value.

 

Let’s look at a specific example. Suppose a popular price guide shows the value of common-variety 1804 half-cents as follows:

 

junk5521.jpg

 

If a common-variety 1804 half cent sold at auction for $100, then according to this price guide, it should be graded “F-12”. A coin selling for $750 would grade right at “AU-50”, and a coin selling for $5000 must have been a really nice UNC – well above the MS-63 displayed in the value guide! In other words, the grade assigned to the coin would be based on what it’s perceived market value is at the time of being graded. So “market grade” and “market value” are inextricably intertwined.

 

Once the individual coins of some population of coins have all been assigned market values (from which their grades can then be assigned), we have a “reference population” of coins and grades, and may then assign grades to other similar coins in the future by comparing them to the characteristics of the reference population. Thus, the assignment of a “market grade” to a coin is really the assignment of it’s value. In essence, the market grade of a coin may not be determined unless the coin’s market value has been established.

 

An interesting byproduct of market grading is that some a coin may display more wear than another example of the same date and mintmark, yet be graded higher. This could be because the more worn coin displays some outstanding characteristic which adds to its value, such as spectacular toning, amazing eye-appeal, prooflike characteristics, or exceptional surface quality (not to mention other intangible factors). In other words, a coin’s value/grade may be boosted due to superior appeal, and this would be reflected in the higher value it is likely to bring in an auction or a direct sale. Likewise, given two coins of equal wear, one might be valued considerably lower than the other due to problems, such as cleaned surfaces, or a large scratch.

 

Traditionally, EAC grading practice is much like "technical" grading, because it is based entirely on an evaluation of how far a coin deviates from perfect mint state. Deviation from initial perfection (when the coin is minted) occurs because of normal loss of metal due to circulation wear, and in addition, incidental marks, surface impairments, and coloration impairments and other problems (such as corrosion, dings, holes and altered surfaces) may lower the coin’s technical grade even more. The further a coin deviates from the perfect “ideal”, the lower the grade. Thus, given that a coin grading MS-70 has an ideal strike, no wear at all, perfectly original color as struck, and no problems, any grade below MS-70 reflects how far away from “perfect” the subject coin has become.

 

Seldom is a coin perfectly struck, and seldom does a coin (especially an early coin) retain it’s original mint color. Thus, even an uncirculated coin is almost never mandates a grade of “70”. There are nearly always deductions due to bagmarks, oxidation, changes in color and environmental effects. It is inevitable that a “perfect” coin, just struck from the dies, will receive impairments, if only from being mixed in bags with other coins. Therefore, MS-60 is considered the threshold at which a coin begins to exhibit wear beyond what is considered normal handling at the mint. On average, just-struck coins usually grade perhaps only MS-65 to begin with, since most coins are not perfectly struck, and the planchets are usually of just average quality. A just-average strike deviates from the ideal, as does a just-average planchet, and therefore deductions are warranted by technical standards. Furthermore, as they are ejected from the dies, coins slide down metal chutes into counting bins, thus receiving slide marks and bagmarks from contact with other coins. It is common for coins fresh from the mint to already have fallen into the MS-63 grade range by they time the reach distribution!

 

Given that a coin displays no loss of metal due to circulation, we already know it may grade anywhere between MS-60 and MS-70. For technical grading, deductions are made to account for incidental bagmarks and color deviation. For example, a copper coin with no wear, no bagmarks, but 100% brown coloration might grade only MS-60, because brown patination is a deviation from the ideal of when the coin was absolutely mint-fresh red. If it displays about 75% of the original mint red on both sides, it might grade as high as MS-65. And if it displays 95% of the original mint red and no bagmarks or other detractions, it could grade MS-68 or higher – lofty grades indeed! But to grade MS-70, the coin would have to have a full strike, absolutely no contact marks or hairlines whatsoever, and retain 100% of it’s original, unoxidized mint red color.

 

If we are grading an uncirculated coin with 75% mint red color, we could begin the technical grading process by pegging the coin at MS-65. If we then discover that it does indeed have a couple of bagmarks, a tiny scratch and a rim ding on the reverse, we might deduct a point for each of these problems, resulting in a coin that net-grades only MS-62. Similarly, for a bright 95% red copper coin with like problems, we might deduct three points from a starting point of MS-69, resulting in an MS-66 grade. Finally, if a perfectly uncirculated coin somehow retained 95% mint red, but had a hole drilled through it, we might want to apply a drastic deduction of some 40 points, resulting in a technical net-grade of just VF-30.

 

Below grades of MS-60, wear has the most important overall impact on grade. Discounting any other grading deductions, a coin graded AU-55 is recognized as having 5 points of wear. A coin graded VF-20 has forty points of wear, and a coin graded PO-1 (often called the “basal state”) has 59 points of wear – so much wear that it is barely recognizable. (Another way to state this would be to say that the coin retains only one point of detail.) In addition to wear, as with an uncirculated coin, incidental marks, coloration and other problems must be all taken into account to apply the deductions necessary to arrive at the overall technical net-grade.

 

By now, the reader may have realized that nowhere in the application of technical grading does the market value of the coin come into play. Indeed, technical grading by definition ignores such external factors, and focuses strictly on the physical quality of the coin itself. This is the crucial difference on which the disparity between technical and market grading hinges. It is also this crucial difference that makes it necessary for the pricing structure of market graded coins to differ substantially from the pricing structure of technically graded coins. Where most of the confusion of pricing EAC coins is concerned, this difference of pricing structure is the most misunderstood aspect.

 

It may have also become apparent that technical grading does not “boost” grades for particular appealing aspects of a coin. It strives to be objective, whereas market-grading is at the mercy of subjective, external factors. Thus, a “market grading” for a coin may be boosted because of special eye-appeal which may draw higher bids in the open market. “Special appeal” cannot apply to technical grading, though, since it is purely subjective, and not inherent to the technical quality of a coin. Indeed, wild blue toning on a copper coin can have vast market appeal (resulting in a grade boost), yet actually be a technical deduction, since the ideal “correct” color for a copper coin is technically, red, brown, or some combination thereof, and blue color deviates from that ideal significantly.

 

Another byproduct of technical-grading versus market-grading is that technical grades are nearly always lower (more conservative) than market-grades when expressed on the basis of the Sheldon grading scale (1 – 70). The reason is fairly obvious, since given a particular level of wear, market-grades can be boosted for appeal, while technical grades can be deducted from due to detractions.

 

Let us now look at an example of a table of values for an 1804 half-cent coin that has values assigned, based on a coin’s EAC grades, as follows:

 

junk5522.jpg

 

Note that for the EAC price guide, the lowest grades described are quite a bit lower than those for the market price guide, and also, it does not go as high as the market price guide, with MS-60 being the highest grade mentioned. This reflects the phenomenon of technical grades being more conservative (often much more so) than market grades. Because they are more conservative, the pricing table must be shifted lower in order to capture the grades that would be assigned to most 1804 half-cents.

 

Given that an 1804 half-cent graded F-12 is worth $100 according to the first price guide, and $300 according to the second, isn’t there a great money-making opportunity here? Couldn’t the astute collector simply go to an auction, buy an 1804 half-cent graded F-12 for $100, then bring it back to an EAC convention and sell it for $300, resulting in a $200 profit? The answer, of course, is that this scenario seldom plays out in the real world. The problem lies with the fact that the disparate values were arrived at because our astute collector is trying to apply a value for what are really two different grades. The market grade of F-12 is almost certain to be too high when technical grading is applied. The identical coin might warrant a technical grade of only G-4! And in that case, we see that indeed, the coin has a value of about $100 at that grade.

 

Conversely, collectors who are immersed in market grading are often heard to complain that they can never seem to buy coins at EAC grades. An EAC member may voice his opinion that a certain 1804 half-cent certified as grading AU-50 would only warrant a VF-30 grade by EAC standards. If that is so, the market collector muses, why then can’t I buy a coin with an EAC VF-30 coin for just $300? That’s what the market price guide states its value should be!

 

The answer, of course, is that again, the wrong price guide is being referenced for the grade. If one wishes to discuss a coin given an EAC grade, it is necessary to use an EAC price guide to value it. Because so many market-value collectors are unaware of how EAC grading standards are applied, and that EAC grading requires reference to an EAC price guide, they often fail to understand what appears to be a wide discrepancy between EAC grades and market grades.

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Good article, James. I do not collect EAC and did not know some of the more esoteric details of EAC grading standards versus market grading. I understand better now. Thanks.

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I had been hoping for a post like this. Thanks.

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James - Very good description! thumbsup2.gif

 

One of the matters that is fun to study is the origin of the Sheldon scale and its relation to early cents. Indeed, I cannot recall which cents this applied to, but I am quite sure that Sheldon assigned a grade of MS70 to more than one cent. Her considered such a coin rare, but attainable.

 

Sheldon equivocated numerous times about his "quantitative scale for condition." An illustration is with his description of "Mint State" and his subsequent mention of the "perfection" of an MS70 coin. For Mint State, Sheldon only remarks that the coin must be "Free from any trace of wear, and the coin should be that of a copper coin which has been kept with great care." He goes on to talk about acceptable color and blemishes. When Sheldon arrives at his description of an MS70, he writes, " For condition 70, the coin must be exactly as it left the dies, except for the slightest mellowing of color." (Emphasis added.) Immediately following the description, Sheldon remarks, "The cataloguer or student of coins must acquaint himself with these varieties and must learn to judge the condition of a particular cent according to the amount of actual wear [emphasis added] after it left the dies. In this ability lies much of the art and skill of cent numismatics. The early cents present so many peculiarities and variations in the dies, as well as differences in striking and in later coloration of the copper, that even the keenest of observers could scarcely master them all in a lifetime." As one can see, the singlemost important criterion for Mint State is the degree of actual wear and not perfection of strike.

 

The modern follower of EAC, as a body of numismatic thought, comes to realize that Sheldon was not the final word or arbiter of his own invention. Modern EAC is, as you (James) said, more astute with the fullness of striking detail. However, I have even heard the "old time" experts equivocate on this matter, and talk about how "certain varieties are struck" when referring to a starting point of grading. It only goes to illustrate that time, experience, and knowledge of the details of every variety comes into play in the final analysis of the EAC grader.

 

One of the things I've learned well in the time I've studied this, is that we EAC-ers are not required to agree on every coin with every grade. A modicum of deviation in opinion is often welcome and a lively basis for discussion. Rarely do feelings get hurt, as long as the coins don't. wink.gif

 

One other remark to make is the emergence of surface condition opinion through the course of time. I'm sorry that I do not know who to credit for its invention, exactly, but Steve Carr is to be credited for "spreading the gospel," so to speak, of surface condition attribution. The reason it's worth mentioning here is that it bears strongly on the value of a coin in today's EAC world.

 

Surface condition is totally subjective. It goes something like this:

 

S = Scudzy: A tough condition to describe. Jack Robinson (Copper Quotes by Robinson, or CQR) could not describe it. He talked a lot about it, but could not get the words out. Such a coin is better than scrap copper and worse than your average piece by a l o n g shot. It's scratched, burnt, polished to death, whizzed, scrubbed, cratered, bent, and colored all wrong for copper. But the coin inside all of that is still collectable. (Collectable vs. collectible - one's an adjective and the other's a noun, although the latter is unfortunately proper American English for both. Drives me nuts.) Oddly, some scudzy coins are still quite eye appealing. Most of these pieces net grade in the PO-1 to VG-8 range, with fewer in the VG-10 to VF20 range, and rarely any above that. Robinson thinks that no coin should net grade above 30 if it's scudzy.

 

A- = Average minus. This coin is not as nice as an average coin, but it's still not up to snuff in terms of the surface. Perhaps the coin is porous but it still has good detail for the variety, or perhaps the coin has some spots that are unwelcome on the surface. Scratches that are not eye-grabbing can be counted here, and there may be some minor corrosion. Color is okay, but not "smooth." Coins in this condition top out below AU, typically.

 

A = Average. The surfaces of this coin are pretty decent looking, with only minor detractions, such as some bag or circulation marks. Few spots and only the most minor of scratches. The color is good, and what would be expected for a coin of the grade and circulation or handling. Porosity is only allowed if the coin comes from porous planchet stock. Still, defects in the planchet must not be severe. Coins of all grades fall into this category.

 

A+ = Average plus. The coin exhibits very few flaws (one or two at most) and the color is excellent. Robinson allows "minor Mint flaws," which I'd still interpret as bad planchet material, such as with 1793 and 1814 cents. This attribute is one that begins with a person looking at a coin and saying, "WOW!". Coins of all grades fall into this category. These coins tend to bring very strong money for the grade.

 

C = Choice. If you find yourself drooling uncontrollably and are willing to forego sex for a year to own a coin (usually occurs when your mate finds out how much you spent), then it's choice. Zero detractions, zero Mint flaws, zero color problems, and zero reason for a net grade. Indeed, if you find yourself wanting to net a coin down for some noticeable flaw or another excuse, then it's not choice. Low grade choice coins are exceedingly rare. The only one I've ever seen is one I own that was obviously a pocket piece and grades a solid PO-1, C. Most coins that are choice grade above VG, but the early cents are a notable exception. Still, choice coins are rare, and they tend to bring funny money for the grade.

 

Well, we could discuss net grading, I suppose, as it also bears strongly on the value of a coin, but I'm tired and am going to bed. sleeping.gif

 

Thanks for the opportunity to yak, James.

 

Hoot

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James---- An excellent post. All of it true----so very true.

 

And to my friend Hoot----Am glad to see you still willing to contribute to our WYNTK threads---even though you are not necessarily a fan of them. Please do continue in this vane. Bob [supertooth]

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Hoot, warm-hearted thanks for some genuinely valuable followup!

 

I deliberately avoided the topic of "surface condition", even in my original version of this article. Personally, where technical grading is concerned, I am against adding another "grading factor" that is not already accounted for in the grade. I think such extraneous comments are valid, but should be made separate from the overall "net grade". Strictly, speaking, I do not think pure technical grading accepts extraneous descriptors, but of course, "EAC grading" is only one variant of technical grading. As you mentioned, it is a purely subjective adjunct to EAC grading - all the more reason it doesn't seem to fit the concept of technical grading.

 

You brought up a fantastic point regarding color:

 

For condition 70, the coin must be exactly as it left the dies, except for the slightest mellowing of color."

 

I have always been fascinated by this exact sentiment, expressed by other EAC graders as well. I have long had a pet theory as to why this specific caveat has been mentioned. In my opninion, I believe this statement is made because many (possibly most) copper planchets were already mellowing, or toned Red/Brown prior to being struck. Thus, I believe that many early copper half-cents and large-cents were actually already Red/Brown before they were even struck 893whatthe.gif!!

 

This is all speculation on my part, but I've frequently wondered whether Sheldon didn't have this in the back of his mind when he expressed the comment you quoted. In that case, if the mint felt that a toned planchet was adequate for striking coins, then of course, that means that an already-toned coin could have been "perfect" as it left the dies from the technical standpoint.

 

Thanks again for an excellent contribution to my thread

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Although I do not collect early coppers (I have random pick-ups from here and there) I am still fascinated how the EAC’er think and respond since the Sheldon Scale is now very much a part of my hobby habits.

 

My roots are from an era where there was no point scale but it was not hard to adapt to the MS-60 and above. I think it’s hard for a collector just starting out to grasp the concept of two different sliding scales, especially with the coins coming out of the mints with today’s standards.

 

I would think one needs to mention the capabilities of the early Philadelphia mint where horses and oxen prodded along in a circle, rotating wheels and levers to roll and stamp out the crude planchets and then turn around and actually press out the die minted coinage. By today’s standards this was archaic at best, but they were only following the leads of existing European methods.

 

It was not exactly a process that relied heavily on quality control for producing coinage of the day, as evident with the normal pieces seen in existing collections today.

 

A very though out and persuasive article James, thank you. (Hoot, you too, OK)

 

hp.jpg

Horse powered roll mill. The horse is located in the room below, flattened metal strips coming out of roller in room above. From "An Essay on Coining".

Planchet.jpg

Planchet cutting press. The unused skeleton strips were sent back to the melting pot. From "An Essay on Coining".

Edited by WoodenJefferson

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James - You've shared some very rich thoughts here.

 

Personally, where technical grading is concerned, I am against adding another "grading factor" that is not already accounted for in the grade. I think such extraneous comments are valid, but should be made separate from the overall "net grade".

 

I know your comment was aimed at the surface condition descriptors, but the first part of it made me think again about net grading. Although we'd like for net grading to follow some rule-based criterion, as does the details grade, it simply does not. There's a fair bit of subjectivity that goes into net grading, although the process calls for an objectivity of observation.

 

First the objectivity. The objective side of net grading is calling the shots with the demerits of the coin. A person must be able to verbally describe those attributes that, aside from normal wear and coloration, detract from the surface perfection of the coin. Minor demerits might include normal nicks and abrasions, rim dings, spots, uneven color, minor porosity or corrosion. Moderate demerits might include a "baggy" look (lots of chatter from circulation or mistreatment), hairline scratches, big rim dings, numerous spots, off-color, noticeable recoloration, significant porosity, noticeable corrosion, and minor repair. Major demerits might include major hits, serious scratches, deformations, bad discoloration, polishing, whizzing, extensive burnishing and repair, tooled, holed, rough porosity, and extensive corrosion.

 

Now the subjectivity. How much does a person deduct from the details grade (to arrive at a net grade) for any of the observed demerits of a coin? This is a matter that will vary from person to person, depending on how they view the coin in total. There is one general rule: the higher the details grade, the more the coin is netted down for any single demerit. Thus, an MS65 details coin with an obverse scratch across Liberty's face will be net graded to low AU or even XF. On the other hand, the same scratch on a VG-8 coin that has otherwise nice surfaces may result in that coin being net to a G-7 or G-6.

 

Variety plays a role. If, for example, the coin is quite rare and has a lot of eye appeal, deductions will likely be less than if the coin is common or if the eye appeal is only average or less. Early dates (1793-1814) are also given a lot more leeway than middle and late dates. In this context, demerits due to recognizeable (or presumed) conditions of the planchet stock are often overlooked or only treated with minor netting down.

 

EAC-ers will more often agree on the details grade of a coin than the net. That's simply because there are no hard-and-fast rules to net grading, and it comes with a high degree of subjectivity.

 

For condition 70, the coin must be exactly as it left the dies, except for the slightest mellowing of color."

 

I have always been fascinated by this exact sentiment, expressed by other EAC graders as well. I have long had a pet theory as to why this specific caveat has been mentioned. In my opninion, I believe this statement is made because many (possibly most) copper planchets were already mellowing, or toned Red/Brown prior to being struck. Thus, I believe that many early copper half-cents and large-cents were actually already Red/Brown before they were even struck 893whatthe.gif!!

 

This is an interesting speculation. The way that I read Sheldon, however, makes me think that he allowed for mellowing of the color post-minting. I suppose we'll never know. It'd be interesting to go back though all of the coins that he applied his grades to and see how they looked!

 

Without a doubt, the Mint struck coins on planchets that were discolored, porous, corroded (sometimes badly), laminated, incomplete, burnt, and otherwise horrible. Makes a person wonder about all the considerations thus far.

 

Hoot

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To me, there is really far less difference between market grading and EAC grading than one might guess from reading this thread (or didn't read the closing paragraph closely). I am relatively new to EAC grading, so I'd be interested in those more familiar with it than I to comment on the following observiations....

 

Market grading used by the TPGs of today use what I would call, in EAC grading terms, "sharpness grading" (with a gradeflation factor) as its basis, then adds or subtracts from this technical sharpness grade the subjective component to arrive at the grade on the holder. If the subjective subtractors are too great, the coin is bagged.

 

EAC grading is very much similar, except there's little to no gradeflation factor, and the subjective component is only used as a subtractor from the sharpness grade. There is no subtractor too great in the eyes of EAC grading.

 

In the end, and to me as a collector, I could care less. The value/price (and eye appeal) are the only things that matter to me. Both the market grading used by the TPGs and the EAC grade used by EACers both yield the same thing -- a value/price that's on average the same regardless of which grading method is used*.

 

All IMHO...Mike

 

*=there are always exceptions to any rule. For instance, high end type coins tend to sell for more in market graded TPG holders, whereas more esoteric coins and rarer varieties often do better raw. This is, in my opinion, more a factor of the intended market than anything more sinister.

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