Please Explain Gold Bullion Coins To Me

Simple... because "coins" sell better than "rounds"

So basically these "coins" are really ciphers. They appear to fill a monetary function as currency when in fact they are not really money at all.

What about back in the day with the original (19th/early 20th century) gold coins? I believe they were used in circulation, correct?

gold circulated widely upto WW1: thereafter, governments held their gold and issued paper.
Silver was replaced by CuNi, etc.
The "coins" in the original post are "non-ciculating legal tender" (NCLT). So, as a matter of strict law, they are legal tender, but as a matter of practicality, they do not get used in circulation. Mostly because the mint sells them at a big premium above their face value. Also, the Mint prices them well above their bullion or "melt" value.

Who buys them ? People who like shiny pieces of metal. Certainly not investors. There is another thread on CCF about NCLT issued in England - if you paid the Mint's asking price; held it for 40 years, and then put it on the market in 2011, you still wouldn't get your money back. That illustrates how overpriced they were when first sold.

I don't waste my time or money on NCLT, but there are plenty who follow that path ...

Peter in Oz

The government does not want them to circulate, and does not expect them to. When people do actually spend them, deposit them in banks or otherwise attempt to use them as money, it creates all sorts of red tape for bank staff and Treasury officials to get them recalled and melted down again.

And this is the answer to your second question: putting the face value far below the actual bullion value is the government's way of making sure they don't circulate. It's all based on Gresham's Law: "Bad money drives good money out of circulation". Suppose you owned both a $50 coin that contained $1000 worth of precious metal and a $50 banknote containing 2c worth of paper. Which one are you likely to keep, and which one are you likely to use to pay your $50 grocery bill? You will of course want to keep the "good money" - the precious metal coin - and get rid of the "bad money" - the banknote. So banknotes circulate, and bullion coins do not.

Occasionally you will find a country that will give you precious metal coins at face value. There's a new one out from Canada. France and Germany have a long tradition of issuing silver coins at face value. Mexico even attempted to re-introduce silver into mainstream circulation in the early 1990s. All of these governments run the risk of people redeeming all their silver coins when the metal price falls again, effectively forcing the government to "buy back" the silver from the general public at a loss. Larger economies such as France, Germany and Canada can absorb this cost; smaller countries cannot do so and some, such as the Cook Islands and Marshall Islands, have had to declare some of their NCLT bullion "coins" they issued at the height of the craze to be not legal tender anymore.

If a government issued precious metal coins with face values far above the bullion value, the coins would circulate - this is in fact the situation that happened with silver coins prior to 1964. But as governments learned with silver in the 1960s and with copper in the 1980s, a rise in the price of the metals used to make coinage out of can mean that those coins become "good money" and disappear from circulation, as people hoard them. In order to maintain a stable money supply which people will not hoard, governments were forced to make "bad money" coins out of worthless metals.


Not true. Most nations that produce coins intended for bullion sale put both a weight/purity measurement and a nominal face value on them. South African krugerrands and Mexican onzas are the only coins I can think of that are not denominated in the regular currency unit of their country.

No matter who says what or why, I think this is the simplist and best explanation for most or all of the coins not for usage by our Mint.

does anyone know the name of that case? i'd be really interested in reading the decisions.

Because the Mint is limited by the legislation that authorizes coin programs. The legislation authorizing the bullion Buffalo specifically called for it to bear the classic Buffalo nickel design created by James Earle Fraser. Most complaints about the Mint's practices should, in reality, be complaints about Congress and the lousy numismatic legislation they sometimes write.