Market reacts to PCGS+

By Steve Roach
First published in the May 10, 2010 issue of Coin World

The rare coin market continues to adjust to the presence of new Professional Coin Grading Service Secure Plus coins and PCGS has posted on its Web site an FAQ with nearly 100 questions that its clients have asked about the new service.

So, if you don't fully understand the new PCGS Secure Plus grading tier, don't fret. Apparently, you're not alone.

Don Willis, PCGS president, commented that the firm "arbitrarily" decided to limit the new plus grade to select grades between Extremely Fine 45 and Mint State 68, saying that for MS-69 coins, "As the grades get higher, the gap between them shrinks. The difference between a 69 and 70 can be one tiny tick. I honestly don't know how we can slice it much thinner."

Willis also addressed a concern that the Secure Plus holder would "lock" a coin into a given grade. He answered that coins in PCGS Secure Plus holders are not more locked into their grade than coins in a regular holder. He said "every coin that is submitted to PCGS for regrading will be evaluated by our graders without them knowing if the coin was previously graded, and if so, what that grade was."

He further clarified that a plus designation will require a coin to be in the top 10 to 20 percent of a grade. For collectors who are seeking validation that a coin is solid for the grade, Willis wrote, "I think there is a firm that puts little stickers on coins that are solid for the grade," referring to Certified Acceptance Corp., a firm that stickers coins that have been verified as meeting CAC's quality standards.

While few Secure Plus coins have appeared in online auctions, looking at the results of a Heritage Exclusively Internet Gold Auction that closed on April 14 shows that coins awarded a plus grade are selling for a very slight premium.

For example, a 1900 Coronet gold $20 double eagle graded PCGS MS-64+ realized $2,601 while an example grading PCGS MS-64 brought $2,576.

Three 1924 Saint-Gaudens double eagles graded PCGS MS-65+ realized $2,022, $2,022 and $2,056 while four MS-65 examples brought $2,000, $2,001, $2,022 and $2,022.

Gold to dominate CSNS Platinum night auction

By Steve Roach
First published in the May 3, 2010 issue of Coin World

The upcoming Heritage Auction Galleries Platinum Night sale, to be held at the Central States Numismatic Society convention in Milwaukee on April 29, offers the next big test of the auction market.

The contents of the auction also seem to confirm what many have observed over the past several months: that sellers are simply not offering as many great coins in the marketplace compared to the prior year. It also shows that dealers who are sitting on great rarities aren't putting them into auctions.

But, something else that a review of the lots illustrates is that sellers do have confidence in one area: big, sexy, high-grade rare gold coins.

Unlike the 2009 CSNS Platinum Night in Cincinnati, which featured an 1804 Draped Bust silver dollar that realized $2.3 million, or the 2008 installment, which featured another 1804 dollar that realized more than $3.7 million, the 2010 CSNS Platinum Night lacks a million-dollar head turner that will generate heat.

Instead, at the most expensive level, consignors have put in the kinds of coins that have been selling strongly at recent auctions: rare and high grade Saint-Gaudens $20 double eagles, early gold type, high-grade 1915-S Panama-Pacific International Exposition $50 commemoratives and Proof $4 Stella patterns, such as the one depicted to the right (image from Heritage Auction Galleries).

The makeup of the top lots will be comparable to Heritage's last major auction, held at the March American Numismatic Association National Money Show in Fort Worth, Texas.

A look back at the most expensive lots at the 2009 CSNS Platinum Night reveals a very different makeup from the 2010 installment. In 2009, the top tier was occupied by mostly classic silver rarities from the Joseph C. Thomas Collection.

What does the dominance of gold coins but no ultra rarities in the Heritage ANA and CSNS auctions signify? Perhaps that well-heeled sellers with the high-level coins are holding steady, unconcerned with selling at the current market levels until confidence improves.

But, at least at auction, it appears that gold is king and that gold rarities are the one place that sellers are willing to test the market at auction.

The "Secure" in PCGS' new Secure Plus grading tier

By Steve Roach
First published in the April 26, 2010, issue of Coin World

Last week's market analysis focused on the possible market impact of the new "plus" grade at Professional Coin Grading Service and Numismatic Guaranty Corp. This week we will focus on the second prong of the PCGS announcement of Secure Plus. Specifically, Secure Plus uses digital technology to capture a unique "fingerprint" of each coin, to be entered into a permanent data base.

The system is supposed to catch whether a coin has been artificially toned or processed in an effort to get a higher grade, also called coin doctoring. PCGS officials have said that for Secure-Plus coins, "Neither the coin's appearance nor its grade can be changed without flagging the system."

Secure-Plus is optional for all coins except for coins submitted under two grading tiers: Rarities, coins submitted with a maximum coin value of $200,000, and Ultra Rarities, with unlimited values. PCGS Secure Plus is the only option for these coins.

PCGS has stated the technology will provide a better understanding of rarity for top coins by eliminating resubmissions, and the problem of the same coin reappearing on the market – with different looks and grades at different times – will be eliminated.

Ultimately, PCGS believes that the program has the potential to achieve five goals: "More precise and consistent grading; improved detection of altered coins; less chance of 'gradeflation'; more likely recovery if a Secure Plus coin is ever lost or stolen; and increased value of high-end coins within each grade."

The digital fingerprinting concept also has the potential to protect the high end of the market from the dangerous counterfeit coins emerging from China. But, because for most coins it is an opt-in process, it will take some time to determine what its impact will be, and generally, Chinese counterfeiters have not successfully replicated high-end coins.

Additionally, it remains to be seen whether dealers and major auction houses will use the Secure Plus tier as it may alienate one of the key groups of coin buyers and bidders at auction – the coin doctors who pay strong premiums for coins they can upgrade.

PCGS' 'Big one' bang or bust?

By Steve Roach
First published in the April 19, 2010 issue of Coin World

Professional Coin Grading Services' March 25 announcement of a new grade designation of a + sign that will "unlock value" for 15 to 20 percent of coins within 11 grades between Extremely Fine 45 and Mint State 68 will change the market, but how?

Numismatic Guaranty Corp. announced the same day that it too would add the + sign to high-end coins.

PCGS had a lot riding on its announcement and attracted plenty of speculation as to what this "big one" (PCGS's term for the announcement during weeks of promotion) would be: Was PCGS going to start grading to a decimal point? Would the firm adopt a 100-point grading scale? Release a completely new holder to combat the problem with counterfeit holders? Would PCGS return to the computer grading that it began in the 1990s?

Ultimately, the announcement was a logical adoption of a fact of the market, that some coins are nicer than others, even within a given grade.

Certified Acceptance Corp. for several years has used stickers that indicate that a coin has been verified as meeting CAC's "stringent quality standards." That the market has seemed to embrace the CAC stickers indicates that collectors wanted a reliable way to differentiate quality within a grade.

Ultimately, it is up to dealers and collectors to decide whether they accept the concept of a + sign as an indicator of premium quality. However, how much extra will they pay for a + coin? Will this be a consistent premium or will it be different for each issue?

With NGC joining PCGS in using a + sign, it means that there will be enough coins of many issues to form a market. But since it is an opt-in program, where submitters must pay extra to get the new service, at what value point will the + sign be relevant?

If anything, it will be very interesting to see the results as auctions feature comparable lots of + and non + coins for price comparisons, and to see how dealer trading networks adapt to this new development.

The other major prong of the announcement is that PCGS unveiled technology aimed at combating coin doctors. More on this second point will appear in next week's market analysis.