When investing in gold and silver coins, one of the terms you will encounter is “proof”. Often, you will find a bullion coin, such as a Gold or Silver American Eagle, described as both “proof” and “uncirculated”.

What exactly do these terms mean?

Uncirculated coins

Gold and silver bullion coins, particularly government-minted ones, typically come in “uncirculated” grade. Literally, it means the coin has not gone into circulation, unlike, for example, Pre-1933 Gold Coins, which were widely used as legal tender before they were confiscated.

In addition to this, the term “uncirculated” also describes the coin as being in mint condition, without any trace of wear. If a coin exhibits wear from improper handling, packaging or cleaning, it could lose its uncirculated grade.

As the coin ages, it may tarnish, discolor, or even develop spots, but it could still retain its “uncirculated” grade if it doesn’t show wear.

Proof coins

Proof coins may also be graded as uncirculated coins it they are free from wear. “Proof” refers to the special processing some coins go through to achieve an enhanced finish.

In minting a coin, a fine sheet of polished metal is struck by dies on both sides – the obverse and the reverse. Each die is engraved with the design for the obverse or the reverse.

Dies used for proof coins are treated with chemicals. The result is a mirror-like smoothness on the design’s background and a frosted look on the design’s raised parts. This is called a cameo finish, and is indicated on a coin’s label as “CAM”. Some coins are labeled “DCAM”, for deep cameo, indicating that the cameo finish is highly pronounced.

In addition to the chemical treatment they received, proof coins are also struck twice or more by the coin dies. This gives more definition to the design’s details. Non-proof coins are generally only struck once.

Grading proof coins

Proof coins are assigned a different grading scale from circulated or non-proof, uncirculated coins. The prefix PR or PF is used to indicate a proof finish. The coins are graded between 60 and 70, and a grade of 70 denotes that no imperfections were found even at 5x magnification. Very few coins obtain a grade of 70.

Grading is more important in proof coins, as these are purchased not only for their gold content but also for their collectible value. Grading guarantees that the investor is getting a coin exactly in the described condition and rarity.

Collector’s items

Proof coins have greater collectible value because of their special finish, and because only a small quantity is minted each year. In certain years, fewer proof coins than average are produced, partly to help maintain the coins’ collectability.

The average annual production ratio of proof to uncirculated, non-proof coins is 1:5. The mint pre-determines the number of proof coins to strike by taking orders from dealers and private sellers, who are the only sources of these coins.

Pricing

Proof and uncirculated, non-proof coins contain the same amount of gold. However, because of proof coins’ greater collectible value, rarity and beauty, they are generally priced higher than non-proof coins of the same date.