Momentum Effect ... Why PCGS Will Continue to Dominate for Older, More Valuable U.S. Coins

The momentum effect in economics usually refers to price of a security continuing in the direction it has been recently changing ... up or down. The momentum effect confounds economists and analysts. They would love to be able to predict when current momentum will end ... it would be the path to riches untold. When they're successful, it's just luck.

But momentum can also refer to changes in market share by companies. It can be especially strong in business sectors involved in evaluating products and services. Service and product evaluation companies have existed long before coin grading companies came about ... companies like S&P, Moody's, A. M. Best. Once one or two of these companies establish a reputable name for evaluating particular services or products, it's very difficult for competitors to gain a significant portion of the business.

Unless PCGS or NGC stumbles badly, they will be the dominant coin grading services for the foreseeable future. And PCGS is likely to remain the dominant grading service for medium- to high-end, older US coins. I consider the bottom end of medium-priced to be a few hundred dollars (regardless of grading service) and older to be pre-1970. I also eliminate coins that are priced near their melt value ... some double eagles for example.

The market perception is that PCGS-graded US coins are more valuable than NGC-graded coins. An inspection of auction prices realized confirms this perception. For many investors and collectors, that's enough ... no need to decide whether one service is really a tougher grader than the other. If the desired grade is on a slab and the eye-appeal is there, that's good enough. It's not sight-unseen ... it looks OK or better ... no ugly toning ... not a really weak strike ... no heavy adjustment marks, etc. But they'll take NGC's or PCGS's word for it on the numerical grade. But, they will prefer the PCGS coin and pay more for it because the past market has carried forward to be the reality of the present. That's momentum.

The bright spot for NGC is world coins. Ultimately, it may be a bigger market than U.S. coins. For the indefinite future, NGC will be a solid number 2 for U. S. coins. However, there are folks who will favor it over PCGS for a variety of reasons when it comes to submitting and buying coins.

Cal

 

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I agree. Unless something drastic (scandal) comes out, it will remain PCGS as #1 followed by NGC as #2 in the general market (especially for US coins as you described).
I personally don't value one above the other (I'm perfectly happy to find a nice coin in an NGC holder or any other holder for that matter), but I do realize the market forces and take that into account when analyzing the situation.