Gold Coins

The History of Gold Coins

For more than 2,500 years, gold coins have played an important role in human history. While no longer found in the pockets and cash drawers of everyday commerce, the gold coin continues to fulfill its ancient roles as a store of wealth and safety net in times of turmoil.

In The Beginning...

While the gold coin was invented ca 500 BC by Croesus of Lydia, the idea wasn't widely spread until the Persians conquered Lydia and adopted the idea of coins for themselves. As the Persians in turn were conquered by Macedonians, the Macedonians by the Romans, and so on, great empires spread the use of gold coins throughout the known world.

The Era Of The Gold Standard

The use of gold circulation coins hit its zenith during the great mechanization of the societies of the late 19th century. British sovereigns and American double eagles vied for the title of "most popular gold coin" in international commerce, as the economies of both nations grew at a breakneck pace.

In recent years, other European sovereigns like the Austrian and Greek gold coins have seen a surge in popularity, with the Austrian Gold Philarmonic chief among them. Not to be outdone, the Switzerland and French gold coins have also become investment assets.

The idea of a Gold Standard, which would peg currencies to a troy ounce of gold, spread throughout the industrialized world in the mid-1800s. These currency pegs to gold created a fixed exchange rate between nations, smoothing international commerce.

The Great Depression of the 1930s brought this all to a screeching halt. Circulating gold coinage disappeared as the public demand for gold coins rather than paper money reached impossible heights. Governments withdrew the remaining gold coins from circulation, removing the ability to redeem paper banknotes for legal tender gold.

The incredible levels of deficit spending required to win WWII meant that no nation on Earth could shrink their money supply drastically enough after the war to return to the Gold Standard.

The era of circulating gold coinage was well and truly dead.

How Are Gold Bullion Coins Different From Old Circulated Gold Coins?

The fundamental difference between gold bullion coins and old circulation pieces is that bullion coins are based on their gold weight, while old circulated coins were based on their place in a nation's currency system.

Bullion coins are given a denomination simply to make them legal tender. This puts the "full faith and credit" of the issuing country behind the coin, and allows counterfeit laws be used to prosecute anyone making fakes. In fact, bullion coins are most commonly described in terms of their gold weight, rather than face value.

The gold content of circulation gold coins, on the other hand, depended on their denominations. This meant that their gold content sometimes had to be reduced, when long-term gold prices rose. This means that pre 1933 gold coins, for example, are described by the face value and descriptive name they carried when in circulation.

These differences in focus affects their modern prices. The price of bullion coins is tied almost exclusively to the price of gold at the time of purchase. Old circulated gold coins, even common dates with wear, have a numismatic value above that of their gold content.

Gold bullion coins are made according to even fractions of troy ounces, such as one ounce, .12 ounce, 1/4 ounce. This means that the total gold content of your bullion coin inventory is readily apparent, no matter their country of origin.

Gold circulation coins, however, were struck in non-standard weights to properly fit into a nation's currency system. One has to know the gold content of each denomination to find the total gold weight of your holdings. This becomes more complicated when you have gold coins from different nations. For example, an old U.S. gold half eagle $10 coin is 90% pure, and has 0.2419 troy ounces of gold content. A British sovereign is 91.7% (22K) pure, but only has 0.2354 troy ounces of gold content.

Even so, many people like to mixing some history into their physical gold investments, and there's nothing at all wrong about that.

How Are Gold Coins Different From Gold Bars?

Gold bars, especially poured bars, need to be weighed and assayed every time they are bought or sold. Some modern minted bars are sealed in tamper-evident cards at the refinery, making the weight and purity obvious. Gold coins have a known weight and gold content, making them easier to buy and sell. The fact that gold coins were and are produced as legal tender by national governments lends peace of mind to gold buyers.

Another area where gold bars and coins differ is in their purity. Gold bars have to have a purity of at least .999 fine to be accepted by the public. Many gold coins are minted in .917 fine gold, and still find a ready market. Old historical gold coins can be .900 fine, or even .720 fine and still be popular among buyers

What Is "Crown Gold"?

The gold-copper alloy known as "crown gold" is composed of 22/24ths gold and 2/24ths copper, making it 22K (.917 fine) gold. Crown gold got its name from King Henry VIII's "crown of the double rose" in 1526. A century later, crown gold became the standard for all British gold coins. This is seen most famously in the British sovereign gold coin. The sovereign influenced the coins of other nations in the 18th and 19th centuries. The newly-independent United States looked to the mother country when creating its own currency: U.S gold coins were struck in 22K gold from the birth of the U.S. Mint until 1834, although the American coins contained a mix of silver and copper in their alloy, giving them a brighter appearance compared to British gold coins.

The History of Gold Investment Coins

The first gold investment coins were simply circulating gold coins that someone would save instead of spending. The gold content of the saved coins were in many cases more important than their face value. These circulated coins were a store of wealth against disasters such as war or famine, and provided a financial buffer in case the king debased (devalued) the currency by reducing its gold content.

In the modern era, inflation and economic panics replaced debasement as the public's greatest fear. The frequency of economic panics and bank failures stretching from the 18th and 19th centuries to the Great Depression of the 1930s made people distrustful of banks and paper money. At the first sign of a collapse in financial markets, people literally ran to banks by the thousands, to exchange their paper banknotes for legal tender gold coins.

The Krugerrand Becomes The First Gold Bullion Coin

The history of the modern gold bullion coin began in 1967. In an effort to boost flagging gold sales, the government of South Africa began producing the world's first coin specifically made with one full troy ounce of gold content. Named the Krugerrand, it became the default choice for millions of gold investors. Holding gold was made simpler by the Krugerrand, compared to buying old gold circulating coins, since each one contained exactly one ounce of gold.

The South African Krugerrand is struck from 22K, crown gold, giving the Krugerrand a deeper hue than other gold bullion coins that use silver in their alloy. This same .917 fine (91.7% pure) gold copper alloy was used in British circulating gold coins for over 400 years. This composition was chosen to provide protection from excessive wear in everyday commerce.

The obverse of the Krugerrand features the left-facing bust of Paul Kruger, the president of the white South African Republic (also known as the Transvaal). South Africa is proclaimed in both Afrikaans and English above his portrait. The reverse features a springbok antelope, which acts as a national mascot the same way the kangaroo is associated with Australia. The year date is split to either side of the creature. Similarly to the national name on the obverse, the weight of 1 oz fine gold is proclaimed in both Afrikaans and English.

Krugerrands became an international sensation during the high inflation of the 1970s. Even villains in James Bond movies demanded their ransom in Krugerrands, instead of rapidly depreciating U.S. dollars. By 1980, Krugerrands comprised 90% of the gold coin investing market. However, when international sanctions against the apartheid laws of South Africa were imposed in the 1980s, Krugerrands were banned from most nations in Europe and America. This opened the door for new gold bullion coins minted by Canada and the U.S.

Since the end of Apartheid in 1991, the Krugerrand is once again freely traded and accepted around the world. The enduring Christmas tradition of anonymous benefactors slipping Krugerrands into Salvation Army kettles shows that the Krugerrand's historical symbolism of wealth has remained intact.

The Canadians Join The Club

The first competitor to the Krugerrand appeared in 1979, with the debut of the Canadian Gold Maple Leaf. It was the world's first 24K (.999 fine) pure gold investment coin. As the only bullion coin option when sales of the Krugerrand were sanctioned, the Gold Maple Leaf soared in popularity. The Canadians upped the ante in November 1982, producing the first "four nines" (.9999 fine) unlimited mintage gold bullion coin (as opposed to limited mintage commemoratives). The Canadian Gold Maple Leaf would remain the world's only .9999 fine gold investment coin until 2001, when Australia's Perth Mint raised the fineness of their Gold Kangaroo bullion coin to match.

The Royal Canadian Mint has been an industry leader in anti-counterfeiting advances, and the Silver and Gold Maple Leaf coins are arguably to most secure bullion coins on the market.

1986: The (Gold) Eagle Has Landed

The American Gold Eagle is the most popular gold bullion coin in the world today. Introduced in 1986, the Gold Eagle is made from 22K (.917 fine) gold. The composition of the Gold Eagle differs from crown gold by using a 3% silver and 5.33% copper alloy, instead of the 8.33% copper in crown gold.

The status of the American Gold Eagle as a U.S. legal tender coin backed by "the full faith and credit of the United States" offers a peace of mind to both foreign and domestic buyers that few other coins can match, and accounts for its high international liquidity.

Not to be outdone by its neighbor, the Mexican Gold Peso has also become a favorite investment coin.

Under its designation as the official bullion coin of the United States, only "fresh" gold mined within the previous 12 months from American gold mines can be used to mint Gold Eagles. The artistic design of the coin also sets it apart from its competitors. An updated version of the famous Saint-Gaudens double eagle design of 1907-1933 was revived for the obverse, enhanced by Chief Engraver John Mercanti to realize the details of Augustus Saint-Gaudens' original creation. The reverse design by Miley Busiek marks the first time more than one bald eagle has been featured on an American coin.

Gold Buffalo: Pure American Gold

The American Gold Buffalo bullion coin was released in 2006 to compete in the extra-pure .9999 "four nines" fine gold bullion market. Like other modern American bullion coins, the Gold Buffalo reintroduces one of the most famous designs in American coinage. In this case, it is 1913's Type 1 Indian Head "Buffalo" nickel design by James Earle Fraser. Unlike the American Gold Eagle and American Silver Eagle, the American Gold Buffalo recreates both sides of the original design is is based from. The Gold Buffalo is also mandated by law to only be produced from gold extracted from U.S. mines in the previous 12 months before use.

The Gold Down Under: Australia's Perth Mint

The Perth Mint is Australia's official bullion mint. (Circulating coinage is produced by the Royal Australian Mint in Canberra.) The perth Mint produces some of the world's favorite numismatic precious metal coins.. Most one ounce versions in their bullion coin programs, such as the Silver Kookaburra and Koala, and their Lunar New Year Series II coins in both gold and silver, have limited mintages. The reverse designs of these coins change from year to year, making the proof versions especially popular.

Australia's only unlimited mintage gold bullion coin is the Gold Kangaroo. The series began in 1986, the same year as the American Gold Eagle. Originally named the Gold Nugget, the series featured the image of a famous giant gold nugget discovered in Australia. The designs were changed beginning in 1990 to feature kangaroos in an attempt to increase its appeal. The purity of the coins was increased from .999 fine to a .9999 fine purity in 2001. In 2008, the name of the program was officially changed from "Gold Nugget" to "Gold Kangaroo".

Like the Perth Mint's other offerings, the 1oz Gold Kangaroo had a limited mintage. However, it was usually ten times that of the silver Koalas and Kookaburras, averaging 350,000. In 2014, the restrictions on the 1 oz Gold Kangaroo was lifted, making it Australia's first unlimited mintage gold bullion coin.

Staying in the Far East, the Chinese Gold Panda has also become a popular coin with investors.

Today's Gold Coins Flourish As Investments

Gold bullion coins have the largest share of the retail gold investment market by a large margin over gold bars. People buying gold do so mainly for the safety and financial security that it provides. Naturally, they desire safety and security when buying gold. Purchasing government-minted, legal tender silver coins provides the extra feeling of security and higher liquidity that they desire in their precious metal portfolios.