What are pre-1933 gold coins?
Today you can buy pre-1933 gold coins as collectibles or long-term investments. These coins were once circulating silver, including $ 2.50 quarter eagles, $ 5 half eagles, $ 10 eagles, and $ 20 double eagles.
There are many good reasons why gold coins have been used as currency throughout history.
One reason stands out: He gave all countries a common standard for measuring the value of their currencies against.
1911-S Saint Gaudens double eagle in gold.
When gold was silver and silver was gold
As a result, gold coins of the same weight and purity had the same purchasing power all over the world. This was true even though the coins may represent a different amount of currency in each nation.
For example: international trade and payments between governments were always done in gold or sometimes in silver.
Most gold coins used the same standard of purity of .900 fine gold. In other words, a typical gold coin was made of 90% pure gold. Today you will only see 99.9% pure gold coins classified as investment grade gold.
Using precious metals for both large and small transactions made sense.
Paper banknotes and all forms of credit are just a promise. Either way, gold was the fulfillment of that promise.
Why would a government’s treasury accept anything other than the real thing?
All of this meant that gold was helping to connect economies around the world. It was the stable and unchanging basis on which economic growth and activity were measured.
Why have all the gold coins disappeared?
It has been several decades, and in some cases almost a century, since gold coins were issued as legal tender in circulation by one of the governments of the world.
It is telling that most people today have never owned a real gold coin. You probably wouldn’t recognize a $ 20 Double Liberty Eagle if you saw one!
The $ 20 “Coronet” or Liberty Head double eagle gold coin.
The global financial system was in many ways less organized and less sophisticated during the 1800s and early 1900s than it is today. This is to say the obvious.
However, one thing bound this world system in relative harmony: gold.
The world operated on a gold standard where different currencies could be measured against each other based on how much gold they represented.
Specifically, most countries have used a gold species standard. This meant that the local currency could be converted into a specific amount of gold in the form of coins at any time.
In addition, gold and silver coins were freely spent in the normal course of trade.
The outbreak of two world wars and the Great Depression in the first half of the 20th century put an end to the gold standard.
War debt makes an honest gold standard virtually untenable. Governments have too much of an incentive to inflate their debt burden through currency devaluation.
Although a modified gold standard replaced the previous system for the thirty years following the end of World War II, gold coins were no longer part of the monetary system.
What is pre-1933 gold?
This is what makes 1933 so important in numismatics. This is the last time gold coins were produced for regular trade in the United States.
Later that year, one of the first steps taken by newly elected President Franklin Roosevelt was to declare a public holiday and order the confiscation of all gold held by individuals. The US government has literally banned the possession of gold by executive order.
Several countries had already stopped producing gold coins beforehand, as the UK did in 1925. Once the US stopped minting gold coins in 1933, everyone was followed suit.
The Gold Sovereign was the UK’s flagship gold coin.
This is where the idea of ââ”pre-1933 gold” was born. It is essentially the cutoff point between the era of gold coins and today.
It was a time when beautiful designs appeared on coins, like the Saint-Gaudens double eagle at $ 20, the Indian Head half eagle at $ 5 or the Indian gold eagle at $ 10.
Buy pre-1933 gold coins from the United States and around the world
The role of gold in the Bretton Woods system
There was, however, a system used in the transition from a true gold standard in cash to the modern regime of floating fiat currencies.
It was put in place in 1944 by the Bretton-Woods Agreement. This is why it has been called the Bretton Woods system.
Bretton Woods was the previously mentioned modified gold standard. You might think of it as an indirect gold standard.
The system was based on the US dollar, which was theoretically still convertible into gold (but not gold coins).
The arrangement only worked because the United States owned the vast majority of the world’s gold when the dust cleared after World War II. By some estimates, the United States held almost 70% of all known gold in existence (at the time) in the mid-20th century.
A photograph of the Mount Washington Hotel in Bretton Woods, New Hampshire. The conference took place in July 1944.
America was also the dominant overwhelming military power in the wake of a devastating war.
The rest of the traditionally powerful nations had little choice but to accept such a system.
Bretton Woods also worked initially because the United States supplied roughly half of the world’s manufacturing capacity during the post-war economic boom.
Thus, the US dollar supported much of world trade in the period immediately following.
The dollar was also supported by a huge stockpile of gold – perhaps 20,000 metric tons of the precious metal.
As a result, other currencies were primarily tied to the value of the US dollar. In turn, the dollar was the only currency that could easily be converted into gold by central banks.
The Nixon shock and the death of Bretton Woods
A number of nuanced economic factors have started to erode and collapse this monetary system.
The fairly stable exchange rate of the dollar with gold has made it the main reserve currency of central banks around the world.
Yet, as economic conditions improved (especially in Japan and Europe) during the 1960s, it became difficult for the United States to maintain a healthy balance sheet.
The current account deficits in the United States’ balance of payments provided global liquidity and encouraged faster economic growth abroad. Paradoxically, this meant that over time the dollar would lose its stability.
The only mechanism to support the system in the face of this deficit problem was the manipulation of the price of gold.
This could be accomplished by selling large amounts of gold on the open market to reduce prices, but this “fix” was short-lived.
Ultimately, the crisis culminated in 1971 when President Richard Nixon unilaterally ended the US guaranteed convertibility of the dollar into gold.
The momentous decision is unofficially referred to as âclosing the gold windowâ.
President Nixon announced the suspension of the convertibility of the dollar to gold in a nationally televised address on August 15, 1971.
The shortcut “Nixon Shock” caught on because the president acted without consulting any advisers or US-dominated international monetary institutions such as the World Bank or the International Monetary Fund (IMF).
Within a few years, all the advanced economies of the world had decided to let the exchange rate of their respective currencies float freely.
Follow the link to learn more about the Nixon Shock and the end of Bretton Woods.
Gold coins are insurance against another systemic disruption
Since the end of Bretton Woods, the global monetary and financial system has grown considerably more complex.
Crises and recessions are rife. Speculation in the forex markets is rampant.
During the same period, gold prices have increased dramatically in the open market.
Although it became legal again to own and trade gold in the United States after Bretton Woods, the use of gold coins in commerce never returned.
Instead, investors can buy and sell old pre-1933 gold coins that escaped confiscation and melting.
Fiat currencies are only maintained by government decree. They are based on tenuous international agreements and ever-growing debt. It is not a lasting foundation.
Buying physical gold is the safest and most convenient way to protect yourself from a new financial crisis or disruption in the economic system.
Listen to podcast episodes on Old Gold Coins and Gold Standard from Gainesville Coins:
Death of the gold standard
The sustainable ethics behind the Gold Standard
The Half Union: the $ 50 gold coin you’ve never heard of
Gold Forfeiture Really Coming?
Who owned the most gold in history?