There are many different gold coins in the world. Some, like the Canadian Maple Leaf, are .9999 pure. Others, like the American Eagle and the South African Krugerrand, are .996 pure. That is, the .996 coins are alloys that contain copper, silver and such; but they weigh 1.0909 ounces, so they actually have one ounce of gold in them.
Why are other metals put into some gold coins? Why not make them pure gold?
Can the “impurities” be removed, leaving pure gold?
Many gold coins have a currency value. For example, my Maple Leaf is valued at 50 Canadian dollars. Why not assign them a currency value closer to their market value? (I’ve heard that Krugerrands can be used as currency at the prevailing price of gold.)
How much gold was in the 19th Century American $20 gold piece (weight and percentage)? Was it an alloy? What about the $1 gold coins? $5 coins?
If you went to a store with a $50 American Eagle and offered to use it as payment at, say, $320 (the approximate cost of the coin), is that legal?
Not everyone would be able to afford a whole ounce of gold, I figure the mint just mints different values in order to give everyone a little buying power.
Yes, but it’d be very costly. It all lies in the density of the alloy. The denser of the metals would go to the bottom and vice versa.
I’ve only viewed them as a ceremonial peice. I’m not sure if they say Legal Tender or not but if not then they’re not really accepted.
No. Point and case:
On your next trip to the store, you pay with a good ol’ $10 bill. Couldn’t the manager argue that if your $50 coin was worth $320 your $10 bill is only worth the paper/cotton it’s printed on?
IANADWWATM (I am not a dude who works at the mint) but thats just my WAG on the issue.
A “one ounce” gold coin of .996 purity actually weighs more than an ounce, but it actually contains one ounce of gold. I know there are different weights of gold coins, but I’m curious as to why a mint would add other metals when the amount of gold in the coin remains unchanged.
I don’t think so. The gold coin has an intrinsic value of about $300. The paper has an intrinsic value of basically nothing, but by law it has a monetary value of the amount printed on it.
Back when gold coins were used as currency, the US used 90 per cent gold and 10 per cent copper for virtually all the coinage, the exceptions being very early US gold coins. The problems with face value and actual bullion value have plagued countries for years. The US had a very real drain of Silver Dollars early on, since it became profitable to buy US dollars, sell them in Canada, and repeat the process ad infinitum.
The 20 dollar gold piece for example, used just shy of 1 ounce of actual gold. They are still legal tender for 20 dollars, although this would be foolish.
The modern 50 dollar “Eagles” can be used for legal tender, but only for their face value, again, foolish. They contain 1 ounce of pure gold, plus a very slight amount of silver and copper. They weigh more than one ounce. Higher refinement levels cost more, of course, which is why the Canadian bullion coins trade for a slight premium over the ‘spot’ or melt price.
The other metals are added for durability. Pure gold is quite soft.
It’d be expensive, but you could do it through an electrolytic process.
The face value is completely arbitrary - bullion pieces aren’t intended as circulating specie, anyway.
$20 gold piece: 33.436 grams, .900 fine
$5 gold piece: 8.359 grams, .900 fine
$1 gold piece: 1.672 grams, .900 fine
Sure it’s legal, and if the proprietor of the store agreed to accept it at that rate, you’d have yourself a deal. But it’s “legal tender” for only $50. The concept of “legal tender” has been discussed here before, and I’ll leave that one for the lawyers.
Well, the basic reason why you don’t have gold coins that are 100% pure gold is because 100% pure gold is too soft to retain its die-stamped markings, and those die-stamped markings are what makes the difference between an official government-backed “coin” and a mere piece of gold with no value other than the intrinsic value of its gold.
Pure gold is soft enough that you can dent it with your fingernails, if you have really strong fingers, or between your teeth–remember all those Westerns with the grizzled old prospector biting the gold nugget and then doing the happy dance?
Another reason why you don’t have pure gold - or for that matter, pure anything - is practicality. It is progressively harder to remove the last bit of impurities from a substance, so there’s a “good enough” level for almost anything, from water to silicon to gold.
** Because the price of an ounce of gold fluctuates too much. Whatever an oz is worth when it’s minted won’t be what it’s worth today.
…actually it would be worth about $300 at today’s spot prices</nitpick>
Sure it would be legal. As long as the store owner agreed–he could always sell it for cash…and if he held on to it, he might end up making some money on the deal! You wouldn’t be breaking any law by doing that, if that’s what you’re asking…
About the purity. What I was really wondering is why .996 pure, when other countries are .9999 pure? Since the coins will not actually be used as currency, durability shouldn’t be an issue. BTW: If .9999 pure is 24kt., what’s .996? 23kt.?
Yes, the price of one ounce of gold is about $297 more or less, but dealers add a premium to gold goins. I saw a dealer selling Maple Leafs on the internet for $356, although the price of gold at the time was $294/oz.
I think everyone missed the direction of the impurity question.
It seems that **Johnny ** is asking why many bullion coins are between 0.990 and 0.999 fine, and not 1.000 fine. The reason is simply that it is not worth the cost to remove the impurities any more than that. There is a certain cost/benefit involved in making a 0.999 fine coin versus a 0.996 fine coin that some just don’t want to include. As long as they have an ounce of gold overall, no one really cares. And as for its mechanical properties…while 0.004 of some items might change steel characteristics appreciably in some case, 0.004 of just about any metal is not going to make gold appreciably different in characteristics Besides, no one really cares about the softness of gold bullion, as it’s not meant to be dropped into soda machines or slid across the counter at McDonalds anyhow.
If you take a legal-tender $50 gold coin to McDonalds, they are only obligated to take it back at $50 - at least as much as they are obligated to accept your $20 bill as $20. The government has assigned “legal tender” values to gold coins as being much lower than the intrinsic value for a very good reason. Think about a situation when gold was around $900 an ounce (1979?), and is now about $300 an ounce. Or the reverse.
Una, who almost bought a gold aureus last month for about $600 (weight about 6-7 gram or so).
Thanks Una, but I was under the impression that other metals were added to .9999 gold to make it .996, rather than it just being a case of removing impurities. I understand that it’s hard to remove .00001 impurities, but why add silver, copper or whatever to .9999 gold to make it .996?
“Almost” bought an aureus? Why didn’t you? I think it would be neat to have a Roman coin.
I see upon further asking that sometimes small amounts of other metals are added, but I think it is still very unclear as to why. I have a hard time seeing 0.004 of titanium adding to hardness appreciably. (continuing) I have just been told that sometimes silver, platinum, and copper are added to increase the “lustre” or the shine of the surface, which could make sense, but I don’t know if that is absolutely true.
I’m going back by Bath before too long, and I may change my mind on the aureus. I really want one.
To address the “legal tender” question without any opinions whatsoever, I quote the Supreme Law of the United States of America–with apologies to Brits and posters from other places:
Sorry. That last post was a little vague. The Supreme Law of the United States can be found at this link, which is maintained by the U.S. House of Representatives.
The Section 10 that I referenced comes from Article I of the Supreme Law of the U.S.A..
As an interesting but completely useless piece of information:
Once several years ago, I got a free Mexican 2 peso piece through the mail: It was likely a left-over from the crazy days in the late '70s when gold was $700+.
A Mexican 50 peso piece contains about 1.2 Troy ounces of pure gold so, if my arithmetic is right, the 2 peso had about 0.04 Troy ounces. It was so small that you had trouble holding it; maybe a quarter or fifth the size of a U.S. dime.
Still, it was once official Mexican currency–before gold was replaced with whiffs of rolled, flattened, printed tree-pulp. :o
Numismaticism, I don’t know. Metallurgy is a bit more up my street.
(Numismaticism?)
An alloy can have very different properties than its constituents, and even a tiny fraction of something else in the mix can have a suprisingly large effect. Absolutely pure gold is very ductile; I don’t think that a circulating coin of 100% gold would have much durability. I few years down the road, it would be bent, scratched, and generally banged up beyond recognition… I couldn’t tell you that a .4% mix of something else would definitely prevent that, but it’s not an unreasonable supposition. Look what a pretty small fraction of carbon does to iron, after all.
The answer is more tradition than anything since, as you suggest, the coins are not actually used as currency (though they could be and were quite sought-after in 1999 due to Y2K fears). You may notice that the design on the US gold coins is similar to the design of coins actually used for currency in the 1800s. Those coins were 90% gold for durability and so are the modern coins.
Other countries are merely interested in producing pure bullion coins and are primarily interested in the gold value itself and, perhaps, beauty to attract buyers.
Just a different philosophy in marketing gold bullion coins.
To find out more about this than you will ever want to know, read “The Power of Gold” by Peter L. Bernstein. It was a best-seller not too long ago, I think, and is widely available.
The legislation allowing Roth IRA’s in the US allows one to invest in collectibles and precious metals as well as more conventional securities like stocks, bonds, mutual funds.
The current limit for individuals is $2000. Seems to me one way around this would be to invest in $50 gold “eagles”; they are legal tender after all, for $50
That the current spot value is approximately $12,000 would allow one to sock away a lot more, wouldn’t it?
Anthracite, I’d think that you would be aware that even a minimal impurity causes remarkably different characteristics in any alloy. Semiconductors, for example, are usually germanium “doped” with a very small amount of an impurity – which is what makes them semiconductors. The stuff you put in your radiator, which includes antifreeze and water, freezes at a lower temperature and boils at a higher one than, not only pure water, but also pure antifreeze – it’s the mixture that makes the difference. A minimal addition of another metal hardens pure gold, which is a relatively soft metal, all out of proportion to the amount added.
As for the Constitutional provision, you may want to look up the Legal Tender cases, dating from the Civil War and just afterwards. I don’t pretend to understand them, but what they amount to is, if Congress has the exclusive right to coin money, and is supposed to make it out of gold or silver, it also has the right to issue coins, paper money, or for that matter large stone discs that are backed by gold or silver held by the government and call that legal tender as well. Later developments suggest that that principle can be extended to the point where one does not have to have a particular $20 worth of gold or silver in Fort Knox backing that money but that it can be backed by the credit of the United States, based on the fact that we as a nation do have gold and silver in reserve to cover those pieces of fancy paper.
