Rare coin certification boasts decades of success. One of the foundations of this success is the grading and authentication guarantee. No longer do collectors and investors have to merely accept the word of dealers. Certified rare coins are graded by multiple persons and finalized by world class experts to ensure accuracy and consistency; the system works! It is hard to imagine where the rare coin market would be today without certification - much smaller, to be sure. Because of certification, rare coins are traded with confidence over the internet. Without this innovation, the numismatic market could not flourish and take advantage of such technologies. Other important innovations, such as set registries and population reports, would not be possible either.
Numismatic Scandals Across the Globe
In the 1980’s, the rare coin market was very different than it is today. Coins were traded uncertified in most cases, and guarantees of authenticity and grade were only as good as the dealer selling the coin in question. In spite of this incredibly risky environment, the rare coin market thrived. Prices were much lower in those days, however, many individuals committed large sums to numismatics. In many cases, the results were phenomenal. The apostrophe sales by Stacks, Bowers and Merena, RARCO and Paramount alone represented millions of dollars of great, uncertified coins that were trading hands. What you don't see, however, are the thousands of sorely disappointed collectors and investors from that era who trusted the word of the seller. The coin market at that time was rife with everything from outright fraud to “selective fudging.” Many dealers made an effort to sell correctly graded coins, but even then, a buyer was dependent on the skills of the dealer. Very few issued formal guarantees of grading when making a sale, meaning prudent collectors needed to learn enough to protect themselves.
Grading Guarantee: Judging a Book by its Cover
In the rare case of a grading guarantee, collectors had no assurance the dealer would be in business when it came time to sell. Over the years, I have, unfortunately, been the one broke the news to many collectors or investors that their oranges were indeed rotten apples. Before certification, this came in the form of collectors who had purchased everything from “whizzed coins” (coins that have been buffed or polished to give the false appearance of natural luster) to slight overgrading of very expensive coins. In most cases, buyers had very little luck when contacting sellers for refunds. Legal action on the subject of grading has always been difficult because of the expense and complexity of the subject.
Finding Treasure in a Sea of Errors
Imagine for a moment that you are buying that great rarity you have always been seeking. Perhaps in your case, it is a 1932-D Washington Quarter in MS65. The price seems fantastic at 20% below bid. The coin is frosty white, just the way you like them. The strike is great, and the luster is above average. Now, imagine making the purchase for an uncertified coin. Would you be willing to invest thousands of dollars based on your knowledge or that of the seller with a monumental conflict of interest as to the grade of the coin? How would that small mark in the field or the light line on the cheek be received when it came time to sell? Pretty scary stuff! For the most part, the dealer community has always been diligent in protecting buyers against counterfeits. Most reputable dealers offer lifetime protection. The problem being: whose lifetime? I have purchased countless estates over the years that contained counterfeit coins. After decades, recovery from buying an uncertified counterfeit is nearly impossible. Very few even make an attempt. Most sell the genuine coins and move on. Rare coin certification is critical for those making long-term investments in numismatics. For many, it will help their heirs make the sale. Without certification, there is little to no protection.
Modern Numismatic Certification
Decades ago, rare coin grading was also subject to the whims of market makers. If dealers wanted to promote an area of the market and needed coins, their grading standards would slip a bit. After they had moved on to another part of the numismatic market, the grading standards for the previous object of desire would magically become very strict. This had an incredibly negative impact on liquidity. Third-party grading has solved many of these issues, however, the debate market making continues.
There is no such thing as a “sure bet” when buying rare coins or any other tangible property. Rare coins, however, are one of the few collectible fields that offer third-party grading and authentication guarantees. The two major grading services, Numismatic Guaranty Corporation (NGC) & Professional Coin Grading Service (PCGS), have each invested millions of dollars over the years to ensure the integrity of their services. Today, anyone investing money in numismatics has a far greater chance of success than collectors did in the 1980’s.