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All coins are not equal

Thursday, March 8, 2012

A question we’re often asked… What are proof and uncirculated coins?

Coins manufactured by minting houses around the world, such as the Royal Mint in the UK are designed and struck to very high standards to ensure precise size and weight consistency for every coin produced, maintaining an exact replication for every coin in a production batch (that may run to several million coins) is vital.

Each coin is produced, or minted, from a flat sheet of source metal, such as gold and silver. The coin is stamped from the sheet by two dies coming together under great pressure. Each of these two dies is engraved with a mirror image of the reverse and obverse coin design, as the dies come together the carefully measured pressure applied to the stamps imprints the design to each side of the coin.

As the coins are produced they are check and verified using computer control optical technology to verify each coin meets the strict mint standards.

The coins are at this point regarded as uncirculated; they are fresh from the mint and free from any wear which can occur from everyday handling. Any marks or scuffs on the coins (sometimes called ‘bag-scuffs’) are a result of the manufacture and storage process only. Increasingly more commonly, high value coins such as Gold Sovereigns are now packaged into vacuum seal plastic pockets to protect them from any such wear. Proof coins can be distinguished from their standard production counterparts by their more defined edges, crisper profile and highly polished appearance.

The manufacture process is significantly more considered, dedicated dies are used to punch the coins, with each die striking the coin several times to ensure the perfect transfer of each contour. Raised features on each die are treated with an acidic coating to give a frosted matt finish on the raised coin features while flat background areas on the die are highly polished to give a clean mirror finish, this process of high contrast features gives the coin very striking appearance known as a cameo finish. Proof coins will undergo close manual inspection to ensure the highest standards for the finished product. Proof coins are regarded for their superior quality finish; generally fetch a higher premium, proof coins are often packaged in a tailored higher quality case to enhance their appeal (and justify the price premium).

For an investor, proof coins represent a vanity that cannot realistically be justified by their intrinsic value. Proof coins carry such high premiums over their mass production cousins that any movement in the precious metals price would need to be significant just to break even! Essentially, in years to come the coin will most probably be valued by its metal purity and weight – not the ornate carved wooden box it came in!

Discover more in our gold coin buyers guide.