American Gold Eagle Face Value Question

[Mr. Smith Guesser]

Why did the Gold Bullion Coin Act of 1985 call for one troy ounce coins to have a face value of $50; as opposed to any other figure. Where did they come up with $50? Why not $100 or any other number?

 

Does the $50 face value on one ounce AGEs have anything to do at all with the last fixed Bretton Woods price of $42.22 (or $42 and 2/9ths) ?

 

Maybe the $50 figure was used because that's the face value of a one ounce Canadian Maple Leaf?

 

From my understanding, the CML (as well as the Krugerrand) played an important role in the formation of the Gold Bullion Coin Act of 1985. But if the 1oz AGE gets its $50 face value from the 1oz CML, where did the Canadian government come up with the figure?

 

What's the justification for a $50 face value for one ounce AGEs, $25 for 1/2oz...and so on?

 

"Because we said so" works fine for me. But is there a real justification?

 

It should be mentioned that the average cumulative price of gold in 1984 was USD$360 an ounce. So the face value doesn't seem to have anything to do with market prices at the time.

[BillJones]

Bullion pieces have a face value because that defines them as coins. That provides them with a sales tax advantage in many states. If they had no face value, they would be gold rounds which would taxable in many states.

 

The value is set low because there will be no way that the face value will ever exceed the melt value.

[#]

It's also VERY nice when it comes to traveling outside the USA. With a cash limit of $10,000 or above required reporting it's nice to be able to carry these as $50's. Just saying.

And yes, I've heard about the Lincoln cent limit of something like $4.00 due to melt value.

David

[Conder101]

But $10,000 in AGE's would weigh almost 14 pounds and takes up a lot of room. In $100 notes it weighs 3.5 oz and can be tucked into a jacket pocket.

 

The export limit for cents and non-silver five cent pieces is $5. As mentioned to prevent them from being exported to get around the anti-melting regulation.

[CaptHenway]

As stated above the Canadian government did not want the gold maple leafs being used as currency. I believe that they had already had a problem with people trying to spend the 1976 silver Olympic coins at face value after the games were over.

 

In hindsight $100 would have been a better face value for the one ounce coin because then you could use $50, $25 and $10 for the half, quarter and tenth ounce coins. However, the gold ML came out in 1979, and gold had fallen as low as $103.50 (US) as late as August 25, 1976. In that year the Canadian dollar was worth slightly more than the U.S. dollar, so in 1976 the price of gold in Canada was close to $102 Canadian.

 

Not knowing what the Hunt Brothers were going to do to the metals markets later in 1979, the Canadians conservatively used $50 Canadian rather than $100 Canadian. They later used $5 for the 1/10th and rounded the 1/4th down to $10, which the U.S. later copied. When they still later added the 1/2 they foolishly used double the 1/4th and came up with $20. The U.S. avoided this mistake which is why the U.S. 1/2 is a $25 coin.

 

TD

[CaptHenway]

As to why the governments did not want gold coins circulating at face value, there had been a lot of foreign gold coins sold to collectors in the early and mid-1970's with the promotional gimmick that you could always cash them in, or spend them, at their high face values. Many of these were struck and promoted by the Franklin Mint, which cut deals with various countries that allowed the FM to strike and sell the coins and give the country a percentage of the proceeds for doing nothing other than making the coins legal tender in those countries. I strongly suspect that the FM marketing people had assured them that they would never see the coins or have to redeem any of them.

 

Then, somewhere in the 70's (probably 1976 when gold bottomed out, but I have no notes on it) someone (I think his name was Les Fox but I am not sure) took 10,000 Balboas in gold to the central bank of Panama and asked for his $10,000 U.S., and was refused. He did the same thing at four or five other central banks around the Caribbean, and was refused every time. He then came back home and wrote about the fact that the guaranteed redeemability was a fraud, and that market collapsed.

 

This may have affected the Canadian decision in 1979 to make their one ounce coin a $50 rather than a $100, but I am only speculating based on what I saw working for Coin World until October, 1978.

 

TD

[Conder101]

Then, somewhere in the 70's (probably 1976 when gold bottomed out, but I have no notes on it) someone (I think his name was Les Fox but I am not sure) took 10,000 Balboas in gold to the central bank of Panama and asked for his $10,000 U.S., and was refused. He did the same thing at four or five other central banks around the Caribbean, and was refused every time. He then came back home and wrote about the fact that the guaranteed redeemability was a fraud, and that market collapsed.

If that is correct then history repeated itself about fifteen year later with the Marshall Islands coins, only in that case the folks trying to redeem the coins actually spent a very brief time in jail on charges of trying to defraud the Marshall Islands government.

[RWB]

Didn't the RCM issue such a coin several years ago?

[coinman_23885]

It's also VERY nice when it comes to traveling outside the USA. With a cash limit of $10,000 or above required reporting it's nice to be able to carry these as $50's.

 

Whenever you buy (I think) 5 or more of the gold bullion coins from any dealer, you are required to be reported under the Patriot Act anyway for this exact reason. This significantly limits your ability to do this in massive numbers.

[coinman_23885]

I couldn't find any legislative history that provides any incite.

[RWB]

There might be memos and letters relating to this in the NARA files concerning the gold bullion program. I have not check them, but they are listed in the NARA finding aid.