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Quo Vadis: what good will First Day of Issue Grading do to the collector?

by Ursula Kampmann

October 16, 2014 – Until now, coins were being collected according to regions, topics and times. But now it seems that a new collecting area is coming into being: First Day Issues – from the mint straight into the holder. The unequivocal combination of a certain information with a specific coin by means of the plastic holders of grading companies opens up whole new possibilities nobody had thought about so far. While thus far the first coin of an issue was in no way different than the last one, it is the slab that makes this new collecting area possible.

Every additional First Release grading creates an artificial mintage reduction even for large series, to the effect that individual specimens increase in value significantly. The question is: who will be this game’s lucky winner in the long run?
It won’t be the mint, that’s for sure. It comes as no surprise that the U.S. Mint suspended on-site sales of the Kennedy gold half dollar set for the ANA on the third day after witnessing the sale’s side-effects.
Positively winners are the grading companies. They get themselves additional customers for whom the First Day of Issue Grading certifies an immaterial value that can’t be verified any other way.
What about the collector? If he buys the First Release coins directly from the mint he is happy about the coin’s rapid increase in value once it is graded. Is this a stable increase in value, though? Will future collectors and, most of all, investors, be inclined to pay a higher price for a First Day of Issue coin than for an ‘ordinary’ coin? Do the nice label and the little bit of plastic really make the collector prefer the first day issue coin, and accept its higher price, to the one that has been sold the second day? It remains to be seen.

As a matter of fact, when it comes to stamps, first day covers are a popular collecting area. This parallel, however, rather calls for caution. After all, no other collecting area has lost more credibility than stamps in the previous years. He who has collected the newly released stamps of a country by subscription can now use them to frank his letters (given he was clever enough to collect mint stamps). Stamp dealers buy the former collector’s items only at high discounts. A popular collecting area has been destroyed because too many issues had been sold for too much money with too little equivalent value.

But not only philately serves as a warning. There is a debate going on about a pseudo-scandal revolving around a numbers discrepancy of the graded First Day coins. The mintage of the Kennedy gold half dollar in Chicago does not correspond to the number of coins certified by the grading companies. While the U.S. Mint has sold 1,500 specimens at the ANA Chicago, ANACS, NGC and PCGS have graded 2,113 specimens. How can this discrepancy be explained?
Well, the answer is actually quite simple, but it reveals the problem of the First Day of Issue Grading. The U.S. Mint offered and sold the commemorative coins at different venues. The only location where they were graded, though, was Chicago. What could be more logical for an owner of an ‘ordinary’ specimen than to go to Chicago at once in order to make the value of his coin greatly increase thanks to its being graded?

The problem is how to interpret the label attached to the coin. With the encapsulation ANACS and NGC certified the coins relevant being First Day Issues of the ANA Chicago after they had checked the original purchase receipt. PCGS, in contrast, graded all coins with the ANA Chicago label designation. This is considered something of a scandal. But does the value of a First Day coin really depend on the place where it was bought?

In his response to CoinWeek, PCGS President Don Willis said: “All JFK coins graded by PCGS in Chicago were submitted in Chicago. We believe all these coins were sold in Chicago, but we can guarantee only that they were submitted in Chicago.” PCGS checked only a part of the coins submitted for grading: “Any JFK coins that received a First Day of Issue label, regardless of the mint, had to adhere to very strict chain of custody requirements. We can guarantee that those coins were sold in those locations on that day.”

This is highly likely to lead to confusion. Does the ‘ANA Chicago’ label mean that the coin had been issued and bought there or that it had merely been graded at this place? Which is worth how much? As a matter of fact, this is by no means a purely academic issue.

Immediately after the gold Kennedy half dollar had been issued, for a price of $1,240, a company paid $20,000 for the initial four First Day coins! Even after that, many ‘collectors’ were also able to sell the coins they had just bought for $3,300. The price dropped later, but one thing is for sure: the different labels made a lot of money at the ANA.

The trend is obvious. Every grading service will offer its own First Day of Issue Grading for every mint very soon, as long as enough profit can be derived from it. It remains to be seen if that offer will be appreciated. Perhaps the First Day coins become a new collecting area. Perhaps some very smart investors lose a whole lot of money. We will have an eye on how this First Day coin idea develops in the future.

PS. In Germany we already witnessed a hype of First Day Issue coins in plastic in the past. In 2002, the starterkits, little bags that were intended to make the citizens in all of Europe become acquainted with their new euro coins were traded at unrealistically high prices as long as they came from the proper countries. Nowadays, the prices have dropped considerably. If you are really lucky you can get 5 euros or so above the content’s nominal value for a German starterkit. The citizens living in the Vatican are the only ones that can rejoice. Their starterkit is worth 500 to 600 euros, which is only 20% below the price the coins would obtain if they were unpacked and in a perfect condition.

For Chinese coins NGC already offers a special First Release designation.

With the ANA number mystery deals an lengthy article published in CoinWeek.

We of course reported on the gold Kennedy Half Dollar hype.

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