Gold coins for sale at the Dubai Gold Souk

A gold coin is a coin that is made mostly or entirely of gold. Most gold coins minted since 1800 are 90–92% gold (22‑karat), while most of today's gold bullion coins are pure gold, such as the Britannia, Canadian Maple Leaf, and American Buffalo. Alloyed gold coins, like the American Gold Eagle and South African Krugerrand, are typically 91.7% gold by weight, with the remainder being silver and copper.

Traditionally (up to about the 1930s), gold coins have been circulation coins, including coin-like bracteates and dinars. In recent decades, however, gold coins are mainly produced as bullion coins for investors and as commemorative coins for collectors. While modern gold coins are still legal tender, they are not observed in everyday financial transactions, as the metal value invariably exceeds the nominal value. For example, the American Gold Eagle has a denomination of 10 USD, but a metal value of more than $900 USD (being around a half an ounce).

The gold reserves of central banks are dominated by gold bars, but gold coins may occasionally contribute.

Gold has been used as money for many reasons. It is fungible, with a low spread between the prices to buy and sell. Gold is also easily transportable, as it has a high value-to-weight ratio compared to other commodities such as silver. Gold can be re-coined, divided into smaller units, or melted into larger units such as gold bars, without destroying its metal value. The density of gold is higher than most other metals, making it difficult to pass counterfeits. Additionally, gold is extremely unreactive chemically: it does not tarnish or corrode over time.

History

Antiquity

Persian Achaemenid Daric, c. 490 BC
Gold Solidus of Roman Emperor Valentinian II

Gold was used in commerce (beside other precious metals) in the Ancient Near East since the Bronze Age, but coins proper originated much later, during the 6th century BC, in Anatolia. The name of king Croesus of Lydia remains associated with the invention (although the Parian Chronicle mentions Pheidon of Argos as a contender). In 546 BC, Croesus was captured by the Persians, who adopted gold as the main metal for their coins. The most valuable of all Persian minted coinage still remains the gold drams, minted in 1 AD as a gift by the Persian King Vonones (Matthew 2.1–23).[1][2]

Middle Ages and Early Modern period

Gold coins were rising in popularity during the Middle Ages in Europe. These coins were made of nearly pure gold and usage was low compared to coins made of bronze and silver which were more plentiful. Coins were often melted down if the raw material was more valuable than the coin. To prevent this, coins were given more complex designs in order to raise the coin's value and prevent clipping.[3]

Modern history

Gold coins then had a very long period as a primary form of money, only falling into disuse in the early 20th century. Most of the world stopped making gold coins as currency by 1933, as countries switched from the gold standard due to hoarding during the worldwide economic crisis of the Great Depression. In the United States, 1933's Executive Order 6102 forbade most private ownership of gold and was followed by a devaluation of the dollar relative to gold, although the United States did not completely uncouple the dollar from the value of gold until 1971.[4]

Large gold coins

In 2007, the Royal Canadian Mint produced a 100-kilogram (220 lb) gold coin with a face value of $1,000,000, though the gold content was worth over $2 million at the time. It measures 50 centimetres (20 in) in diameter and is 3 centimetres (1.2 in) thick. It was intended as a one-off to promote a new line of Canadian Gold Maple Leaf coins, but after several interested buyers came forward the mint announced it would manufacture them as ordered and sell them for between $2.5 million and $3 million. As of May 3, 2007, there were five orders.[5] One of these coins was stolen when it was on exhibition at the Bode Museum in Berlin.[6]

In 2012 the Royal Canadian Mint produced the first gold coin with a 0.11–0.14 ct diamond. The Queen's Diamond Jubilee coin was crafted in 99.999% pure gold with a face value of $300.[5]

The largest legal-tender gold coin ever produced was unveiled in 2012 by the Perth Mint in Western Australia. Known as the "1 Tonne Gold Kangaroo Coin" and with a face value of one million dollars, it contains one tonne of 9999 pure gold and is approximately 80 cm in diameter by 12 cm thick.[7]

Collecting

A 20-crown gold coin from Norway. Introduced in 1875, it became part of the Scandinavian Monetary Union, which was based on a gold standard. Norwegian gold reserves included tonnes of this and other coins, backing Norway's paper money. The coin was designed for circulation: "124 Stk. 1 Kil. f. G." means that 124 pieces gave one kilogram of pure gold.

Bullion coins

The European Commission publishes annually a list of gold coins which must be treated as investment gold coins in all EU Member States. The list has legal force and supplements the law. In the United Kingdom, HM Revenue and Customs have added an additional list of gold coins alongside the European Commission list. These are gold coins that HM Revenue & Customs recognize as falling within the exemption for investment gold coins. This second list does not have legal force.[8]

Fineness

Counterfeits

Balance for checking the weight of gold coins

Gold is denser than almost all other metals, hence hard to fake. A determination of weight and volume is in many cases sufficient to spot forgeries. A coin that is not gold or below the expected fineness will either have the right size but will have a lower than expected weight or it weighs right and will be somewhat larger. Most metals that are of similar or higher density than gold is similarly or more expensive and were unknown in ancient times (notably the platinum group). During the 19th century platinum was cheaper than gold and was used for counterfeiting gold coins. These coins could be detected by acoustic properties.[9] Only two relatively inexpensive substances are of similar density to gold: depleted uranium and tungsten.[10] Depleted uranium is government-regulated, but tungsten is more commonly available and suited for counterfeiting.[10]

Bullion coin counterfeits (of all types) used to be rare and fairly easy to detect when comparing their weights, colors and sizes to authentic pieces. This is because the cost of reproducing any given coin precisely can exceed the market value of the originals.[11][12][13][14] However, since about 2015 counterfeit coins are "flooding the market at an astonishing rate" and "it's gotten to the point where even people who deal with coins all the time may not be able to recognize a counterfeit coin right away" (American Numismatic Association (ANA), 2016).[15] The coins consist mostly of tungsten plated thinly with gold, have the correct weight, correct or near-correct dimensions and are professionally produced in China.[15][16]

The weight and dimensions of a coin of .999 fineness such as the Maple Leaf cannot be replicated precisely by a gold plated tungsten core, since tungsten has only 99.74% of the specific gravity of gold. However, forgeries of alloyed gold coins (such as American Gold Eagle or Krugerrand made from a crown gold alloy with 22 karats = .917 fineness) may have the correct weight and dimensions because of the lesser density of the alloy. Such forgeries can be detected testing the acoustic, electric resistance or magnetic properties. The latter method uses the fact that gold is weakly diamagnetic and tungsten is weakly paramagnetic. The effect is weak so that testing requires strong neodymium magnets and sensitive conditions (e.g., a gold coin hanging from 2 m long pendulum or placed on Styrofoam floating on water), but such tests can be performed without special equipment.[17]

Pirates biting gold

The rationale for biting a coin was the supposed widespread dissemination of gold-plated lead coins in the 19th century. Since lead is much softer than gold, biting the coins is a sensible test for counterfeiting. While fine gold is softer than alloyed gold, and galvanized lead is softer, biting coins can only detect the crudest of forgeries. And all "gold" coins minted for circulation in the UK and America since the Tudor period (1485–1603) contained copper which made them more durable and thus hard to bite.[18]

Biting a coin to determine whether it is genuine, or counterfeit is a widespread cliché depicted in many films (like the 1917 The Immigrant), books (like the 1925 L'Or by Blaise Cendrars) and plays (like the 1938 Mother Courage which is set in the Thirty Years' War 1618–1648). According to a 2017 study, the assumed widespread practice of pirates biting into a coin is almost certainly a Hollywood myth.[18]

"This cliché might find its origin in the crude testing method used by American prospectors during the 19th century gold rush. They bit the gold nuggets they found to be sure that they were not fool's gold" [18]

Olympic champions often pose biting their gold medals, even though the medals are no longer made of solid gold.[18][19] Only at three Olympics (in 1904, 1908 and 1912) were medals made of solid gold but were also smaller.[19] David Wallechinsky commented in 2012 that "It's become an obsession with the photographers. I think they look at it as an iconic shot, as something that you can probably sell. I don't think it's something the athletes would probably do on their own."[19]

Numismatic fake samples

There are well made counterfeit gold coins in circulation. For example, the St. Gaudens Double Eagle omega counterfeit is infamous for its complexity.[20]

Another example is the US $20 gold coin ("double eagle"), which has raised lettering around its rim. If the coin is uncirculated, the letters will be flat on top. If slightly rounded, and the coin is uncirculated, it is a counterfeit. There are other counterfeit double eagles in which the gold and copper alloy was not thoroughly mixed. These counterfeits will have a slightly mottled appearance.[21]

See also

References

  1. ↑ "Gold coins – A Brief History".
  2. ↑ "Monetary Episodes from History".
  3. ↑ "Medieval money | Castellogy". September 22, 2018. Retrieved January 14, 2024.
  4. ↑ Lewis, Paul (August 15, 1976). "Nixon's Economic Policies Return to Haunt the G. O. P." The New York Times.
  5. 1 2 "The Million Dollar Coin – a true milestone in minting". Royal Canadian Mint. Archived from the original on March 9, 2015. Retrieved January 25, 2015.
  6. ↑ "Giant gold coin with Queen's head stolen from Berlin museum". TheGuardian.com. March 27, 2017.
  7. ↑ "The Biggest Gold Coin in the World". Perth Mint, Australia. Archived from the original on February 26, 2015. Retrieved January 25, 2015.
  8. ↑ "Investment Gold Coins". May 17, 2022.
  9. ↑ Manas, Arnaud (2015). "The music of gold: can gold counterfeited coins be detected by ear?". European Journal of Physics. 36 (4): 045012. Bibcode:2015EJPh...36d5012M. doi:10.1088/0143-0807/36/4/045012. S2CID 117927529.
  10. 1 2 Gray, Theo (March 14, 2008). "How to Make Convincing Fake-Gold Bars". Popular Science. Archived from the original on February 14, 2015. Retrieved June 18, 2008.
  11. ↑ "Counterfeit Coin Detection". rg.ancients.info.
  12. ↑ "Counterfeit gold coins and bars". International Offshore Law & Affiliates. Archived from the original on January 29, 2013.
  13. ↑ Sargent, Mike (April 2009). "Indian Head Quarter Eagles: King of the Counterfeit Gold Coin Series" (PDF). Collectors Universe. Archived (PDF) from the original on March 10, 2023.
  14. ↑ Lafleur, Merlin (2009). "Fake gold bars out of tungsten a counterfeit story". gold-quote.net. Archived from the original on March 16, 2023.
  15. 1 2 Weisbaum, Herb (June 13, 2016). "Glitters, but Not Gold: Fake Gold and Silver Coins 'Flooding' Market". NBC News. Retrieved January 24, 2023.
  16. ↑ GoldSilberShop.de (November 19, 2014). "Sehr gut gefälschte Goldmünzen: Echtheitsprüfung für Krügerrand, Maple Leaf und American Eagle". YouTube. Archived from the original on June 22, 2015.
  17. ↑ Wolfgang Graf (January 20, 2014). "Test Tungsten / Wolfram Fälschungen von Krügerrand-Goldmünzen prüfen". YouTube. Archived from the original on February 4, 2017.
  18. 1 2 3 4 Manas, Arnaud (2017). "Why do pirates bite gold coins they are given?". ResearchGate. doi:10.13140/rg.2.2.27019.08487.
  19. 1 2 3 McAfee, Melonyce (August 9, 2012). "Why Olympians bite their medals". CNN. Archived from the original on April 16, 2018. Retrieved February 16, 2020.
  20. ↑ Roberts, John (2007). "The 1907 High Relief Saint-Gaudens Double Eagle". ANACS. Archived from the original on February 4, 2016.
  21. ↑ "How Can You Know If Gold is Fake or Real?". Bullion Trading. November 14, 2012.

Further reading

  • Robert Friedberg, Gold Coins of the World: From Ancient Times to the Present – An Illustrated Standard Catalogue with Valuations (Coin and Currency Institute, 2003) ISBN 978-0-87184-307-4
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