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The Story of the Most Controversial Gold Coin

Everett Millman
By Everett Millman
Published August 20, 2019

This is Breaking The Dollar, the podcast that dismantles some of the biggest misconceptions about money.

Presented by Gainesville Coins.

Welcome back to Breaking The Dollar, I'm your host, Everett Millman.

This week's episode is going to cover probably the most famous and controversial gold coin in modern history, and that is the 1933 Saint Gaudens Double Eagle.

So I'll have to step back and walk you through, what is a double eagle for any of this to make sense.

So the Double Eagle is the largest gold coin that the US Government has ever issued and it had a face value of $20. So if you can imagine that we live in a world now where the last time we minted a real silver dollar for circulation was 1935 so very few people alive today really have even handled or seen silver dollars, or for that matter, a coin that's worth $20 it was kind of incredible.

The Double Eagle was born right after the California gold rush.

We had a lot of extra gold in the country and we needed to do something with it.

The story of the Saint Garden's Double Eagle picks up just after the turn of the 20th century.

In 1907 Teddy Roosevelt was president and he looked at the designs of American coins and he didn't like them. He thought they were ugly. He thought they were of low artistic value. And he even used this phrase that has become kind of infamous where he said that US coins were atrocious hideousness, it was a pretty strong words.

So Roosevelt's idea was to bring in some highly skilled outside artists to design US Coins. We had never done this before and the most obvious candidate to do this was a sculptor by the name of Augustus St. Gaudens.

St. Gaudens was familiar to Teddy Roosevelt because he had actually designed his inaugural medal, his presidential medal. So the two already had some kind of familiarity and a relationship.

Teddy Roosevelt, like everyone else, really admired Saint Gaudens work. He was basically the most famous and revered sculptor in the United States. He had a couple of big sculptures like the Shaw Memorial and another one called Amor Caritas. St. Gaudens was just as hot as you could be as an artist at the end of the 19th century.

So 1907, we get his new design for the $20 Gold Double Eagle and it was unlike anything anyone had ever seen on a US Coin or really on basically any coin in modern history because it was done in this dramatic high relief. And for everyone that is not an art nerd out there, relief is a coin design that rises above the surface. So a high relief design is one that is very dramatic and has a lot of depth to it.

This unfortunately was not taken very well at the Mint. Not only did they resent that an outside artists was involved, but it was very hard to mint these coins in a economical way. It was very difficult to get the design to come out in one strike. And when I say strike, that's the blow that produces the image on the coin.

So it was taking too long to make the coins, it was hard to stack them up. There was just a lot of functional problems with them. Eventually those are fixed and unfortunately it happened just after Saint Gaudens passed away in 1907 but these coins were fantastic. They are widely considered the most beautiful coin designs in American history even to this day. So that's one of the reasons why just in general, the St Gauden's design is important.

Now in 1933 if you remember from one of our previous discussions, the US Government confiscated all of the gold in the country to try and fight against the Great Depression, and that included the brand new 1933 St. Gaudens, $20 Double Eagles that were being minted for that calendar year.

Now the US Mint and the Treasury Department claim that there is no record of any 1933 Double Eagles leaving the mint. So it has no evidence to prove that coins of that year, that $20 gold coins from 1933 had any right to be in the public's hands. Theoretically that shouldn't have been a problem then. They didn't have to go and confiscate them from anyone if none of them left the mint.

But that's where the intrigue comes in, is that we know at least a handful of these coins did end up in private hands. And the most likely explanation is not that they were actually released to the public.

At the very tail end of 1932 and in early 1933 before all of the gold confiscation had really gone into effect, you could go to the mint with any Double Eagle, with any $20 gold coin, and exchange it for the new year's coin, for the 1933 coin.

And the prevailing theory in the coin industry is that a few very smart enterprising coin dealers did exactly that.

They went and they traded in a couple of Double Eagles for the new 1933 Double Eagle, knowing that the chances were good that those would be in higher demand with collectors.

They didn't know that was going to become a illegal to own. They didn't know necessarily that the government was going to confiscate them from everyone. But that's what happened. And although the government decree, the executive order really took effect overnight in early 1933, the actual process of collecting and confiscating everyone's gold took more than a decade.

As you can imagine, most of the gold coins were turned in voluntarily as people were getting compensated. They were getting paid for their gold. So it wasn't a huge problem to convince them, hey, hand over your gold to the government.

That's different with the 1933 St Gaudens because even shortly after 1933 it became clear that gold coins were not going to be made anymore, this was the last one. And the government was so determined to make sure that none of these coins were out there, that the public did not have any gold hidden away, that the secret service was still hunting down gold eagles and gold Double Eagles well into the 1940s.

So that brings us to the most famous known 1933 Double Eagle, and I'm going to skip ahead in the story. There are only about 8 to 10 of these known to exist at all. Incredibly rare. Only one of them is legal for someone to own. And it's a very strange story of how it got that way.

So King Farouk of Egypt is perhaps the most infamous coin collector of the 20th century.

And I say infamous because he had a fantastic collection. He had an incredibly expansive collection of rare coins, gold coins, ancient coins from all over the world. But he was not the most likable character.

King Farouk was very eccentric. He came to power when he was only 16 years old and he did a lot of strange things, let's say that.

So he was an obsessive collector. Basically anything he could get his hands on and strange things, even trivial things that you wouldn't expect a king to care about. So he had, a bunch of matchboxes and toothpicks and just useless every day items such as bottle caps, toothpaste containers. I'm not just pulling this, you know, out of thin air. These are true stories from his inner circle of the types of things he collected and hoarded for.

Farouk had several red sports cars. He loved Red Sports cars and he actually decreed that nobody else in Egypt could have a red car and only he could drive a red car. And there are stories of how he used to recklessly drive his cars down the streets of Cairo just knocking things over indiscriminately, almost running people over causing all sorts of property damage.

And we're not talking about, you know, little beat up red trucks or something. He had a red 1947 Bentley that he would drive around like this and for Farouk's desire to hoard and collect things, really knew no limits.

His brother in law was the Shah of Iran. So Farouk's sister, an Egyptian princess, she married the Shah of Iran. So they have this close kind of family relationship and yet Farouk stole a priceless relic, a famous sword from the Shah and would not give it back.

And this even caused international tensions between the two countries and there was a lot of uproar in the Middle East in the Muslim world because of this.

Another example is that during World War II when Farouk had to meet with Winston Churchill, who was the prime minister of the United Kingdom, he actually stole a watch off of Churchill's wrist in the meeting. And Churchill realized this and Farouk had to fess up and kind of play it off like it was a joke. But that is a confirmed reported story that actually happened, you know, the king of Egypt stealing from another world leader right under his nose.

So needless to say Farouk was a really weird character and he was definitely driven to greed and excess.

His personality type definitely fit the fact that he would collect and hoard anything he could get his hands on.

One of those was the rare 1933 St Gauden's Double Eagle.

By this time in the 1940s it was known that not many examples of this coin existed and also the added cachet that it was not supposed to be owned, it was illegal.

Somehow Farouq bought one from an American coin dealer and he actually got a waiver or an exemption from the US Treasury Department to have the coin exported to Egypt. My theory about why this happened is because of alliances during World War II that the United States wanted to maintain good relations with Egypt. They were a very important strategic partner against the access powers. And so if they had to let this one illegal gold coin out the door, that was a small price to pay for Farouk's cooperation. Again, that's just sort of my theory.

At any rate, this was one of the centerpieces of Farouk's coin collection that, as I said, was fantastic. I'm pretty sure Farouq head every single gold coin ever minted in France, just to give you an idea of the breadth and majesty of his collection.

Maybe not surprising, in the early 1950s King Farouk was deposed. He was not a particularly good statesman, didn't seem to care that much about running the country. He really just wanted to be King and so he was overthrown rather easily.

Now when this happened, the Egyptian government claimed and you know, understandably so, that Farouk's expenses to build his coin collection we're not authorized spending from the Egyptian treasury. He used the Egyptian government's money as his own personal piggy bank to buy a lot of these coins. And in fact, a lot of the American coin dealers who sold to Farouq never got paid.

They assumed that he would pay, as he was monarch of another major government, but in many cases he did not pay or did not pay in full.

So the Egyptian government simply auctioned off all of his collection in 1954 and it was one of the biggest turning points in coin collecting history, not just because those coins made it back into the pool of what could be collected for other people besides, you know, rich, wealthy kings, but that most of those coins flew under the radar.

Everything that was sold off of Farouk's collection, it wasn't well documented what he had. They didn't have professionals come in and appraise or evaluate how rare most of them were or how great of condition they were. The lots of coins were separated in a very haphazard way. It was all done just so that the Egyptian government could recoup some of its money as quickly as possible. It was not a proper auction or sale of coins.

As a result, a lot of these amazing rarities made it back into collector's hands at discounted prices.

So back to the main point of our story and why this matters. The 1933 St. Gaudens Double Eagle that Farouk owned, it did not surface again until the 1990s and it was auctioned, I believe in Britain. And then a few years later it made its way to the United States, at which point the US Government said, hey, that coin is illegal to own.

But up to that time it was the only example of a 1933 double eagle that had ever been seen. So to kind of cut to the chase with how that was resolved, the lawyers for the person who wanted to buy the coin and the u s government came to a settlement wherein the government made an exception and monetized this one double eagle, partly because it had the Farouq history and name behind it.

And in coin collecting, that's called the pedigree or the provenance of the coin that you can trace who used to own it and which hands it has passed through. That's a very important thing to other collectors. That is the only time the US Government has ever made such an exception for a coin and it sold for seven and a half million dollars. Incredibly rare, valuable coin, and obviously it made headlines. It stirred up a lot of interest and lo and behold, it turned out there were a few more, 1933 double eagles out there.

The most famous of these was a group of 10 that was passed down to the heirs of a coin dealer and jeweler named Israel Swet, who for about 50 years had left 10 of these double eagles in a safety deposit box and his family had no idea until they went and opened it years after he had passed away.

The first thing they did is they handed the coins over to the government to have them authenticated and the Treasury Department said, yes, these are authentic and now you're no longer allowed to have them. They were still illegal to own.

Now the Lambert family went through many court battles over these coins and over the course of about 8 to 10 years, there were a couple of different decisions, a couple of over-rulings, even on technical grounds, they tried to dispute some of the rulings, but ultimately the Supreme Court refused to take up the case and the coins have been deemed illegal to own, so now nobody's allowed to have them and the Lambert family was not compensated for them. They didn't get paid seven and a half million dollars. But nonetheless, the effort to have the coins legitimized goes to show how the lore of the 1933 St Gaudens Double Eagle is still rather strong.

It is still one of the most talked about topics in the numismatic world even today.

And that leads us to some interesting concepts here, partly about what makes a coin rare. Because if you pick a random common date, Double Eagle, same coin, same design, same amount of gold, and yet you can have those other double eagles for close to their melt value.

Why would this one particular double eagle be worth $7 to $10 million? I can see why that would be strange to a lot of people who aren't into collecting and collectibles and partly it has to do with rarity.

If there's only one example out there that you're allowed to have, that's as rare as it gets. It also reveals that the story behind the collectible is just as important as anything else. And so if there's a controversial story or there's a fascinating history and a collectible is going to be worth a lot more, this concept is so powerful and holds so true that even fakes can become collectible.

And I'll explain what I mean by that. So in the 1970s there were some 1907 Saint Gaudens Double Eagles that came to market and there were quite a few of them. And that was unusual because behind the 1933 the 1907 Saint Gaudens is the next most rare because it has a slightly different design than all of its successors. It has this ultra high relief. It has slightly different design features and it's just a very sought after collectible.

So it was slightly unusual that many of these would be coming to market all at once. There's not very many of them, and in general, the people who have them like to hold onto them. What collectors and dealers started noticing about these 1907 St Gaudens, was they had a very small symbol hidden in the talon of the Eagle and it was an Omega symbol, which is not something that's part of the original design.

It's not something that the artist, St. Gaudens would have put there or the chief engraver of the mint would put there. It was something new and it turned out that these coins were actually counterfeits and the counterfeiter had boldly left sort of his signature with these little Omega symbols. Now you would think that would make these things worthless, right? They're fake. I mean, they may have been real gold, but they are fake coins. It's not the real deal.

Turns out that these counterfeits were so impressive, they were so good and had fooled so many people along the way that owning an Omega St Gaudens and Omega counterfeit became something that collectors wanted. Partly because the execution of the counterfeit was so good. They were very high quality, but also because they had this interesting story behind them and that you could trace, oh, this is an Omega counterfeit.

The best comparison or example I can make to explaining why that phenomenon happens is there were a few very famous forgers or counterfeiters of famous people's signatures or autographs. So Abraham Lincoln, there was a Lincoln forger who was so good that many of his forgeries were able to be traced and tracked who had owned them, where did they come from? And just like this Double Eagle, they were very impressive. And so even the forgeries later became collectible and became valuable. That's what happened with these Omega counterfeits, which like I said, to someone outside of the world of collecting probably a strange concept.

And so that brings us to sort of my last point about what makes this 1933 St Gaudens controversial is that even when something is illegal to own or something has a shady backstory, like you don't know where this collectible came from and you often see this in the art world, there is a kind of secondary market, a shadow market for these rare collectibles to trade hands.

They don't do so in the public eye. No auction house is going to be able to publish the amount, it's meant to be off the books and off the record. But there is absolutely still a market for them. There are still wealthy collectors who will pay huge sums of money, millions of dollars for some rare illegal to own collectible as long as it's a private transaction.

That's exactly what I think has probably happened with some 1933 Double Eagles. Once the Farouk coin made headlines and was deemed to be legal to own the treasury made it very clear that this was a one time exception and in fact the Langford case confirmed that that even after a lot of legal wrangling, they were not going to let people own this coin.

I bet that there's still more out there and I bet that every so often they do trade hands privately and that's one of those kind of fascinating mysteries behind how the collectible world works.

We really hadn't covered a topic directly about coins on Breaking The Dollar in quite awhile, so I thought that would be a pretty cool one for everyone to tune into.

So that brings us to our question of the week that we take from our listeners. This one comes from Amy in the Chicago Land Area and she asks,

Why is everybody talking about the yield curve?

That's a good one because they certainly are and that definitely connects to paying closer attention to the mainstream financial news media because they always have an agenda. Not many people probably understand what the yield curve is, which is just the spread between yields or interest rates paid on government bonds. So a normal steeper yield curve is going to have higher yields. The further out you get in time, and the most basic way to explain that is that a 6 month treasury and a 12 month treasury in normal conditions are supposed to pay a lower yield than say a 10 or 30 year treasury.

And that's because those bonds don't reach maturity for a longer amount of time. So if you're going to hold it for longer, you probably should be compensated more. And it also plays into expectations that the economy will be bigger in the future and that inflation will have gotten higher over that time. So normally the yield curve is going to look like a pretty curve upward that as you go further out in time, the yields go up.

The reason everybody in the news media is talking about the yield curve now is because our yield curve, and in fact almost every major country in the world has an inverted yield curve. And all that means is that the situation I described as flipped yields for short dated bonds right now are higher than the longer ones and it's not a, it's not a perfect inversion. It's not as if the curve just goes completely the opposite way, but at any point in that curve, if the yield goes down over time, that is an unusual situation.

One of the reasons it's important is because it means that credit markets are a little out of whack and an inverted yield curve has preceded every recession in the past 50 or 60 years, maybe for longer, but for sure every recession in the past 50 years has been predicted by an inversion of the yield curve, especially when it goes on for a prolonged amount of time and that's the situation we're in right now is that the yield curve has been inverted since the beginning of the calendar year and it hasn't gone back.

So why is that important? It means we're probably going to get a recession soon.

Great question and hopefully that was a pretty simple explanation for why everyone's talking about that.

Be sure to join us on next week's episode where we will discuss some of the famous gold rushes throughout history.

Today's episode was presented by our sponsors, Gainesville Coins. You can find out more @ GainesvilleCoins.com

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Everett Millman

Everett Millman

Managing Editor | Analyst, Commodities and Finance

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in Reuters, CNN Business, Bloomberg Radio, TD Ameritrade Network, CoinWeek, and has been referenced by the Washington Post.