The US Mint Ran out of Gold Today (part 4 of a series)

Crossposted at Dailykos.com

I decided to post this today even though the debate is coming up because of a new development in gold. I have been working on this off and on for several days (one does not just sit and type this kind of detail), but today the Mint announced that is has suspended the striking of the 24 karat, 1 ounce Troy Buffalo bullion coin. More in a minute.

So far we have covered the history of United States coins pretty much from the first strikes to 1933, but I have mentioned gold only in passing. There was a reason for that, and it was that no one has the chance to see, even less handle, gold US coins, with a few exceptions.

Previous diaries cover the laws that dictated our monetary policies, and I will refer you to them rather than repeat them. This diary will concentrate on the more well known gold issues, and some of the history surrounding them.

Here is the breaking news: the US Mint has run out of gold. Thus, it has suspended striking the Buffalo bullion coin. I am sorry that this link is to Breitbart, but I can not find it anywhere else, although it is an AP feed. I intend to cover US bullion strikes in a future diary.

I tried to link to the story, but it completely messed up the other links, so I’ll try again. Try this.

This is not good. The demand for honest gold is through the roof, something that has not happened since F. Roosevelt removed gold from Americans in 1933. Here is a picture of the coin being suspended from production:

Gold was the original standard for US coins, bound to the hip with silver at different rations. Please hit my profile and see the pertinent laws that governed that.

Everything rocked along fine until the Great Depression, and everything changed. By decree (actually, an Executive Order, most likely unconstitutional), ownership of gold except for jewelery and teeth became illegal in 1934. All of a sudden you were a criminal if you had gold coins, legal tender the day before. There was a grace period to turn them in to the government.

Gold certificates were were no longer good for exchange for gold, but remained legal tender otherwise, but silver certificates were still good for exchange into silver. This Order had the effect of keeping the United States on the gold standard, but outlawing the ownership of gold, either in coin or bullion form, for anyone except the Federal government. Industrial, medical, dental, and jewelery uses were not affected. Gold producers could sell only to the federal government, and legitimate uses of gold had to buy from the federal government.

The price was set at $20.67 per ounce Troy (actually that was the value given to gold by the Act of 1837), but was reset to $35 per ounce Troy in 1934, essentially devaluing the dollar. The $35 official price held for a long time, until 1972, when it was reset to $38 per ounce Troy, then again in 1972 to $42.22. By that time it was realized that gold was no longer useful for foreign exchange, and the value of gold was allowed to fluctuate, essentially removing any remaining tie to the dollar, so the last vestige of the gold standard expired on 31 December 1974 under Gerald Ford’s watch, for good or ill, when all restrictions against ownership were removed and gold became a commodity, really for the first time, for Americans.

So Fort Knox was constructed, the largest depository for any precious metal ever. And it remains that to this day. There is a very large amount of gold there, and the government will not say how much. With almost no exception it is the most secure facility in the Nation.

Here is what happened. The Great Depression caused the devaluation of the currencies of the entire world, and the United States were not spared, but our suffering was small compared to other counties. Germany printed 10,000,000 Mark postage stamps. People there demanded wages to be paid hourly so they could buy food before the next devaluation of the Mark. Literally, people would bring in wheelbarrows of notes for a loaf of bread.

It got even worse. The Great Depression gave rise to fascism and communism, because the people were hurting. As my friend’s dad told me (he was a GI in the occupation force in Germany after World War II), one of the German citizens said something to the effect as this: “If he offers to feed your babies, would you oppose him?”

Interestingly, in 1975, after the gold ownership ban was eliminated, tens of thousands of previously “lost” gold coins appeared on the market. Since they had been out of circulation for so long, some of them are in quite good condition.

Gold, like silver, is way too soft to make a coin with decent wearing properties unless alloyed. The Mint has used three basic alloys in its gold coins, and now strikes a pure gold bullion coin to compete with the Canadian Maple leaf. Since these coins are not intended for circulation, being soft is not a problem.

The first alloy was 22 karat gold, which works out to be 91.67% (0.9167 fine) gold. That was a carryover from British practice and is the so-called “Crown gold”. The remaining 8.33% is silver and copper, and I regret that I do not have the exact amounts of each. The reason for the silver was to “brighten” the gold, since it becomes redder upon the addition of copper. This alloy was used in all US gold coins from 1792 to 1834.

The Act of 1834 changed the alloy to 0.8892 fine gold, the rest again being silver and copper. That is a bizarre figure, and works out to be 21.341 karat. This was changed by the Act of 1837, which standardized all US gold coin alloy at 0.9000 fine, the other 10% being copper. Our gold coins got a little redder after that.

Before we look at specific coins, a little terminology is in order. In the early days of the Republic, 10 dollars was referred to an an “eagle”. Therefore, a $2.50 coin is a “quarter eagle”, a $5.00 one is a “half eagle”, and $10.00 an “eagle”, and finally, a $20.00 one a “double eagle”. The double eagle was the highest denomination gold coin regular mint issue by the United States, but there are some oddball higher denominations that were not sanctioned because of California gold.

The first US gold coin was the 1795 half eagle. Not many of them were made, only 8,707, and all are rare and expensive. Even fewer were struck in subsequent years, except for 1798, until 1800, when more were minted. I will show pictures of it later.

With that notable given its due historical mention, let us go by denomination from least to greatest. There are so many varieties within series, and so few people ever see these coins, that I will include only representative pictures, unlike the treatment I gave the transition to modern coins in Part 2.

The United States had a $1 gold coin from 1849 to 1889. Some of them are incredibly rare, and others are rather common. The composition remained the same (90% gold and 10% copper) and the weight remained the same (1.672 g) for a gold content of 0.04837 ounces Troy. The diameter varied from 13 mm to 15 mm, the 13 mm ones being thicker than the others. All of these coins had a representation of Liberty on the obverse, but in 1854 Liberty got a feathered headdress, so after then they are referred to as the “Indian Princess Head” series. I have included pictures of both so you can see that it is pretty much the same Liberty on later issues, just with a different hat. As of Thursday, 25 September 2008, the gold content is valued at $42.76. These coins are unusual in that the date is on the reverse, whislt most dates are on the obverse.

Here are representative pictures of $1 gold pieces:

$1 Gold 1849
Designed by James B. Longacre

$1 Gold 1854
Designed by James B. Longacre
Note that the face is the same
as the previous coin, just a
different head dress

The quarter eagle was the third denomination minted in gold. The original one was 22 karat, had a mass of 4.37 g, and was 20 mm in diameter. This works out to 0.1288 ounces Troy, valued Thursday at $113.87. Of course, these very old coins are worth far more in collector value. This denomination was minted off and on until 1929. In 1908 the most radical design change in US coins ever was made: the striking of the marvelous “Indian Head” series of quarter and half eagles. These coins were radically different than any others before or since in US history.

First of all, these coins had no rims (look at any change handy and you will see that the edge — the “rim” — is higher than the detail on the coin. That is prevent wear on the details). Even more radical, but a requirement of having no rim, was that the entire set of details was struck “incuse”, meaning that the design was sunken into the coin rather than being raised. Another radical departure is that these two coins were the first to feature something other than a depiction of Liberty. In 1909 the Lincoln cent featured Lincoln (please see the previous installment). No other coin other then the Indian Head nickel has ever depicted a person not real or Liberty, although the recent Sacajewea dollars come sort of close since there exists no comtemporary depiction of Sacajawea, although she was a real person. The face was made up, essentially.

I find these coins to be hauntingly beautiful. Bela Pratt designed them, and Pratt was a student of probably the greatest coin designer in US history, Augustus Saint-Gaudens (more on him later). The eagle on the reverse looks a whole lot like the owl on ancient Athenian coins, by the way. The composition and size of quarter eagles remained the same from 1840 until 1929, 90% gold, 10% silver, 18 mm diameter, and 4.18 g. This works out to a gold value of $106.91 as of 25 September 2008.

Here are pictures of the first quarter eagle and the last one:

Quarter eagle 1796
Designed by Robert Scot
Note that no denomination is indicated

Designed by
Bela Lyon Pratt
This is one of the incuse coins

Whilst the term “three dollar bill” is usually used in a bigoted and derisive manner, the $3 gold piece was very real. They were first minted in 1854 as a result of the 1853 Act. No one very much liked them, and not too many were made. As a matter of fact, 1854 was the biggest strike year (138,618) until they were discontinued after 1889 (only 2,300 struck that year).

No one really knows why these coins were commissioned, since there were quarter eagles and half eagles. This is another example of a Liberty wearing a feathered cap coin, because if you look very closely (hard to tell if it came across in the posted photograph), the word “Liberty” is inscribed on the hatband. Because this was such an odd denomination, lots of good ones have been preserved. They were of the same standard throughout its life: a diameter of 20.5 mm, mass of 5.015 g, and 90% gold and 10% copper. That amounts to 0.14512 ounces Troy of fine gold, worth $128.29 on 25 September 2008. Since so few were minted and a comparitively large fraction of surviving coins are in good shape, the collector’s value is higher than the gold content for all but messed up ones.

Here is a picture of a typical $3 gold piece:

$3 Gold 1854
Designed by James B. Longacre

There was an experimental $4 gold piece, but it never went into production due to lack of interest. Fewer than 500 gold ones are known to have been struck, and never placed into circulation. One interesting fact is that our old friend from the previous installment, Charles E. Barber, designed the obverse of the one pictured. Here is a picture of one just for the sake of being complete:

$4 Gold 1880
Commonly called a “Stella” because
of the star on the reverse
Designed by Charles E. Barber

In contrast to the $3 and $4 pieces, the half eagle was wildly popular. The first US gold coin minted, as mentioned above, it appeared in one form or another from 1795 to 1929, although there were gaps. There are lots of varieties, along with different sizes and gold content. One of the most interesting facts about this denomination is that it is the only one to have been struck at every mint in the United States that ever existed, although the recent West Point ones are bullion coins, so do not count as business strikes.

The first half eagle was 22 karat gold, with a diameter of 25 mm and a mass of 8.75 grams, giving us a gold value of right at $228 dollars as of Thursday. Even badly worn coins are worth much more as historical objects than they are in gold content by a factor of 50 or so. Here is a picture of our first gold coin:

Half eagle 1795
Designed by Robert Scot
Notice that there is no indication of denomination

Beginning in 1908 the Indian Head incuse design was used (please see my discussion above) and was struck until gold coinage was suspended by the Mint in 1929. Those coins were 21.6 mm in diameter with a mass of 8.359 g and 90% gold and 10% copper. That comes to 0.24187 ounces Troy of gold, worth $213.81 as of Thursday. Here is a picture, and it looks pretty much like the quarter eagle:

Half eagle 1908
Designed by Bela Lyon Pratt
This is the other incuse US coin

The eagle was the second gold US coin minted, and was very popular, especially after the 1848 California gold strike. The first one had sort of a poor looking eagle on the reverse, and of course Liberty on the obverse. I think that the artist should have fattened up the eagle on the reverse a bit, but you can be the judge. These were pretty good sized coins. The 1795 one was 33 mm in diameter, weighed 17.50 g, and was 22 karat gold, amounting to 0.51583 ounces Troy of fine gold, worth $455.99 as of 25 September 2008. Any recognizible coin of that era is worth much more than its gold content for the collector’s value.

Here is a picture of our first eagle:

Eagle 1796
Designed by Robert Scot
Note that no denomination is on the coin

There were many different eagle designs, and the gold content varied over the years. Since 1838 they, although with different designs, all were 27 mm in diameter and had a mass of 16.718 g. The alloy since then was the standard 90% gold, 10% copper. This amounts to 0.48375 ounces Troy of fine gold, worth $427.64 in gold as of Thursday. Many of the coins are rather common and their value is mainly in the gold content, but of course there are exceptions.

In 1907 a new design was introduced by the gifted designer Augustus Saint-Gaudens. Whilst this was a beautiful coin, he was not done. This coin shows Liberty in Native American war headdress, and, with a nod to history of US coins, had 46 stars on the edge of the coin to represent the number of states. Of course that changed in 1912 when two more states were added.

One interesting feature is that in 1908 there were two varieties, one of which showed the motto “In God We Trust”. As I mentioned in previous installments, T. Roosevelt did not like the word “God” on coins, and by Executive Order had it banned. The Congress passed a law requiring it in 1908, and it has been on all of our money since. Would that they grow such a spine today!

Here is a picture of a typical “Indian Head” eagle:

Eagle 1908
Designed by Augustus Saint-Gaudens

We now near the end of our journey in regards to gold coins. The gold strike in 1848 caused lots of coins to be minted, and the Act of 1849 commissioned the double eagle, the largest denomination ever to be authorized by Congress. These are huge coins, and demand respect both for their heft and the beauty of the last ones.

All double eagles were the same in size, weight, and gold content. They were a whopping 34 mm in diameter, had a mass of 33.436 g, and were 90% gold, 10% copper, giving us 0.96750 ounces Troy of fine gold. With the price of gold at $884 per ounce Troy, they are worth $855.27 in gold alone. Many are common enough that they are worth more in gold than in historical value, but of course there are many exceptions.

The original ones were pretty much standard designs, with a nondescript Liberty on the obverse and an eagle with a shield on the reverse. These come in two main varieties, ones with “In God we Trust” on the reverse, above the eagle, and those without it. The ones without were struck from 1849 to 1866, and the ones with it from 1866 to the end of the series in 1907.

Here is a picture of a typical one:

Double eagle 1850
Designed by James B. Longacre

But in 1907, Boy Howdy! Liberty became not an abstract lady, but a beautiful woman, a warrior with a bare thigh and a torch to enlighten us. To Her credit, she holds the olive branch for discussion of peace (UNLIKE some of our purported “leaders” are willing to do). The eagle on the reverse seems to be better fed than one of the previous ones, too. What a beautiful piece of art!

This design is so good that the current US bullion gold dollar uses the obverse artwork. I can not even suggest any improvement. Sometimes perfection does not need to be second guessed.

This was also the first US coin to use Roman numerals for the date, but that only lasted for part of 1907, and those are very rare. In 1908 Arabic numberals were introduced, and later in the year “In God we Trust” became standard.

I agree with most coin lovers that this was the most beautiful coin ever minted. I offer this picture for your decision:

Double eagle 1920
Designed by Augustus Saint-Gaudens

Like the Walking Liberty half dollar, these coins have to be seen to be appreciated. Hie thee to your nearest coin dealer and feast your eyes! That is a nice diversion for tomorrow since it is Saturday.

As always, any feedback is appreciated. Next week I will catch us up with current strikes, but had to talk about gold coins for historical and artistic reasons.

Warmest regards,

Doc

Tags: Coins, Dailykos.com, Eagle, Gold, Learning, Mint, Teaching, Value