The “Mystery” of the 1932 $10 Gold Piece

[BillJones]

 

Recently I added this 1932 $10 gold piece to my collection. There is nothing special about it. It’s in a PCGS MS-63 holder, and it is nice looking for the grade.

 

I find this coin intriguing because it was made during the depths of the Great Depression when $10 would have looked like a fortune to many people. At the same time it is the only U.S. gold coin that was minted in the 1930s that is common and cheap enough that I can own it. All of the other pieces cost many thousands of dollars. In fact this coin is the most common date in the $10 Indian series, and it is among the most common of all U.S. gold coins.

 

I have a number of questions about this coin for which I have not been able to find any answers. I imagine that few people who are alive today could answer them, but perhaps it would be fun for us to speculate about these questions:

 

First, why did the mint produce a record 4,463,000, 1932 gold eagles when the economy was barely alive and the demand for coins was very low? In the 1932 the mint system produced only cents, quarters, $10 gold pieces and $20 gold pieces. What prompted such a high mintage of $10 gold coins?

 

Second, the mint struck 1,101,750, 1932 double eagles, but virtually all of those pieces were melted. Who or what company saved the 1932 eagles from the melting pot, and why did they do it? Why weren’t most of the eagles in banks or Treasury vaults where they would have been subject to melting? Were these coins stored in European banks, which would become the source of many U.S. gold coins in later years, or did a domestic concern quietly hold them?

 

I’d lover to hear your speculations on this subject.

 

[jtryka]

well, I have some thoughts which may not be totally correct, but the key difference in the gold mintage vs. the regular base metal coins is the purpose for minting. Base coins were designed to circulate in everyday commerce, which being the depression, demand was down a lot in 1932. Gold was used for settlement between banks, bank reserves, and most importantly international settlements. As many European central banks were going through similar if not worse crises, there was an increase in demand for gold in settlement of international payments, hence the need for higher mintages. Some of this was likely settled in bullion, but a lot was settled in coin. As for who saved them, most were in European banks, which did not (ironically enough) have the same imposition of orders outlawing the ownership of gold. I doubt many were hoarded here, as holding more than $100 worth was a crime. I guess it all came down to the luck of the draw as to which coins had been sent out of the country and which remained when the executive order was issued in May of 33, leaving us saint collectors out in the cold as they were mostly melted. There's a lot of speculation peppered into my statements, so please don't consider it gospel fact.

[BillJones]

Thanks for your post. I think you are probably on to something here. It would be great if we could find out the particulars. With a mintage of over 4 million, which was almost double that of the second highest mintage, some sort of special deal or situation had to be in the works.

[jtryka]

Here are a few other historical items that may be factors:

 

In 1932, the Hoover administration created the Reconstruction Finance Corporation which was designed to increase economic output by lending money to financial, industrial and agricultural organizations. So that might have played a role, though the much larger role it played was during the Roosevelt years.

 

On Sept. 31, 1931 Great Britain abandoned the gold standard, which would have placed pressure on foreign investors to redeem dollars for gold.

 

In 1931 the US ran a $900 million deficit, and Hoover called for higher taxes to make up for it.

 

Farm prices are 60% below 1929, and industrial output is 46% below 1929.

 

Protective tariffs are running rampant around the globe.

 

In June 1932, Hoover signed a relief act to provide $300 million in loans to states.

 

So with all this activity, there would have been increasing demand for gold on the part of foreign investors, as well as a need for greater liquidity/currency in the US. And remember, despite the high mintages, the Mint only produced $44.6 million in eagles, and $22.2 million in double eagles.

 

Finally, I just found this in an article by Joseph I. Salerno, at this Link, so there is some opinion here, and I haven't verified the accuracy, but it seems to support my ideas on the outflows of gold to foreign investors/banks. Here are the highlights relating to 1932:

 

"The deflation of the money supply, therefore, was caused wholly by factors beyond the control of the Fed. First, there was a loss of confidence in the Fed-dominated phony gold standard among the domestic public and foreign investors. As a result there occurred an increase in currency in circulation and a decline in the Fed's gold stock, both of which caused bank reserves to decline. Second, U.S. banks prudently attempted to save themselves and their depositors by restricting their loans to overcapitalized and failing businesses and instead using these funds to pay down their indebtedness to the Fed, which gave further impetus to the "uncontrolled" reduction of bank reserves. Third, in the second quarter of 1932, the banks also began to increase their liquid reserves beyond the legal minimum. The accumulation of "excess reserves," as they were called, constituted a separate uncontrolled factor that reinforced the deflationary influence of the uncontrolled decline in bank reserves on the money supply."

 

"From the end of December 1929 to the end of December 1931, bank reserves fell from $2.36 billion to $1.96 billion causing RM (for Rothbard's money supply) to drop from $73.52 billion to $68.25 billion or at an annual rate of 3.6 percent. But this monetary deflation was not caused by the Fed, which pumped up controlled reserves by $672 million or at an annual rate of 17 percent during the period, while uncontrolled reserves declined by $1,063 million or by 27 percent per year. During 1932, RM continued to decline, falling to $64.72 billion or by 5.2 percent. But bank reserves increased sharply during the year from $1.96 billion to $2.51 billion, as the Fed furiously inflated controlled reserves. In the last ten months of the year, controlled reserves rose by a staggering $1,165 million, or at an annual rate of 76 percent. Fortunately, this attempted massive inflation of the money supply was undone by the domestic public, foreign investors, and the banks as uncontrolled reserves dwindled by $495 million and banks began to accumulate substantial excess reserves."

 

"The story was much the same in 1933 as a determined inflationary campaign conducted by the Fed in the early part of the year-controlled reserves rose by $785 million in February alone - was defeated by the public and the banks, and RM declined by over $3 billion, or by almost 5 percent.27"

 

"So once the data have been properly arranged and interpreted, it becomes clear that the Fed does not deserve praise for the bank credit deflation of 1930-1933. This honor goes to private dollar-holders, domestic and foreign, who attempted to reclaim their rightful property from a central bank-manipulated and inflationary financial system masquerading as a gold standard that had repeatedly betrayed their trust."

 

Sorry to go on so much, but at least I hope this sheds some additional light on the subject.

[Count_Erfit]

Great thread and responses. Thought provoking.

[Hoot]

Excellent information Bill and Jeff - wish I had somethng to add, but what you two have written is very thought provolking.

 

Hoot

[cladking]

The financial system was in chaos. Many had lost or were losing their savings in banks. There would have been fear that the financial panic might spread to currency and some wouldn't trust paper for a store of value. This was likely the reasons for increased mintages.

 

Actual circulation may have increased a little also due to the chaotic situation.

[Bob Flaminio]

On Sept. 31, 1931 Great Britain abandoned the gold standard, which would have placed pressure on foreign investors to redeem dollars for gold.

 

Ya sure about that date?

[jtryka]

I found that date on the web, so it could be wrong, if you have a better date, please share.

[DaveG]

In May 1925, the UK adopted the Gold Standard Act of 1925. This introduced a 'gold exchange standard'. The public was no longer entitled to convert bank notes or currency notes into gold coin, and the right to have gold bullion coined at the Mint was reserved exclusively to the Bank of England. The Bank was, however, required to sell 400 ounce bars of gold to the public in exchange for bank notes.

 

(Needless to say, at about 1700 pounds sterling per bar, most members of the "public" wouldn't be able to afford a 400 ounce bar, unless they were a major commercial bank or foreign government treasury.)

 

A generally declining confidence in banks and a move to liquidity (that is gold) reached panic proportions with the failure of the Creditanstalt (an Austrian bank) on May 31, 1931. There was a run on Germany in particular, and following the collapse of the Reichsmark on July 13, speculators turned their attention to the UK.

 

The Bank of England actually ran out of gold and on September 19, 1931, the gold standard was suspended. The Gold Standard (Amendment) Act of 1931 stated that 'until His Majesty by proclomation or otherwise directs sub-section 2 of section 1 of the Gold Standard Act of 1925 shall cease to have effect.'

 

Source: "A History of Money from AD 800" by John Chown, 1994.

[Higashiyama]

jtryka -- September, 1931 is fine. I think flaminio is taking issue with the 31st!

 

In any case, when the US was left as the major global economic player redeeming paper money for gold, there was an outflow of the yellow metal from the US.

 

BillJones -- great coin, especially the deep rich color.

[jtryka]

I see, my bad, it was a type, should have been the 21st according to what I read.

[DaveG]

Has anyone found any more information?

 

Does anyone know if the National Archives would have records of when the 1932 eagles were minted and when/where they were shipped?

[ms66quarters]

DaveG

 

Are you talking about the archives in Washington D.C.

I was just there,and they were closed for remodeling

 

We wanted to go real bad....supposedly a draft of the constitution is there.

 

If that is where you are talking about,is there a web site on the archive's?

 

Thank's

 

Rob

[Oldtrader3]

Actually, I am glad that the Mint did release so many 1932 Eagles. Otherwise, there would not be much gold available from that Decade that is within the reach of most collectors.

[DaveG]

ms66quarters:

 

Actually, the National Archives are spread out among several repositories, but, as I recall, the Constitution and the Declaration of Independence are in Washington.

 

The National Archives' website is www.archives.gov. They have some records on line and you can use the site to find out where documents you're interested in are stored, so you can go read them.