Why do coins have a monetary value minted on them?

[SilverMike1127]

I had a related question. If gold and silver are generally  represented to the public that it is not recognized as "money", why do government mints release gold and silver backed coins with monetary value? I tried to do a quick google search and came up with squat. Does anyone have an answer? 

 

[ChrisSilver]

Moved to a new topic 

[Gordy]

It depicts them as legal tender, without this they are simply just 'rounds' 

[HonestMoneyGoldSilver]

They used to be our official money - in the UK silver coins in Sterling (925) silver were legal tender from 1582 until 1919. Then due to WWI and WWII, we reduced the silver content to 50% (500) and then to 0% (Cupro-Nickel). There's a similar story with gold in the UK, with gold coins like sovereigns being our official currency until WWI and the Great Depression of 1929 (which led to Britain abandoning the gold standard in 1931)

For the USA, all y'all kept the 90% Constitutional silver standard until 1965 and kept the gold standard until 1971

If you look at graphs showing average wages in the USA or graphs displaying levels of inequality, you will see that once we abandoned the silver and gold coinage that the top 1% took everybody's money and the bottom/middle classes are earning the same money today as they did in the 1970s. This led to the erosion of middle class wealth and power which ultimately caused the downfall of what was once the greatest country on earth - the United States of America

Legal tender currency (anything with a face value) may have several tax advantages depending on the jurisdiction, although there's no special privilege afforded in the US with regards tax. Issuing something with a face value (legal tender) on behalf of a sovereign nation helps with sales, credibility and global recognition. Everybody has heard of the US Mint, the Royal Mint, USD, GBP, etc. Their brand strength along with the government underwriting their value and guaranteeing their specifications leads to higher market premiums on legal tender coins vs private rounds

[HonestMoneyGoldSilver]

Also depending on your jurisdiction and the use case, the gold and silver coins WILL be treated as money - specifically by mail couriers and insurance companies

The fact we pay taxes of any form on legal tender currency is a cruel joke and should be abolished immediately. In certain states like Texas, there are well-advanced movements seeking to do exactly that - eliminate all taxes on legal tender and investment-grade precious metals

[SilverMike1127]

Oh I get that part. I guess I did not phrase the question. Not sure how the UK works with government issued coins. I was having a discussion with a friend about government minted silver in gold in the US. I could bring a American gold or silver eagle into a store and 10 out of 10 people would not know what it was or at least the real value of these coins. Speaking only for myself and how I have grown up, I'm 42 btw, we have been conditioned to view legal tender as only "antiquated cash" and credit cards/debit cards. We are told that gold is not a form of currency. My question to him was, well if that is the narrative that is being pushed onto generations, then why is the US Mint making gold and silver coins. 

[SilverMike1127]

8 minutes ago, HonestMoneyGoldSilver said:

They used to be our official money - in the UK silver coins in Sterling (925) silver were legal tender from 1582 until 1919. Then due to WWI and WWII, we reduced the silver content to 50% (500) and then to 0% (Cupro-Nickel). There's a similar story with gold in the UK, with gold coins like sovereigns being our official currency until WWI and the Great Depression of 1929 (which led to Britain abandoning the gold standard in 1931)

For the USA, all y'all kept the 90% Constitutional silver standard until 1965 and kept the gold standard until 1971

If you look at graphs showing average wages in the USA or graphs displaying levels of inequality, you will see that once we abandoned the silver and gold coinage that the top 1% took everybody's money and the bottom/middle classes are earning the same money today as they did in the 1970s. This led to the erosion of middle class wealth and power which ultimately caused the downfall of what was once the greatest country on earth - the United States of America

Legal tender currency (anything with a face value) may have several tax advantages depending on the jurisdiction, although there's no special privilege afforded in the US with regards tax. Issuing something with a face value (legal tender) on behalf of a sovereign nation helps with sales, credibility and global recognition. Everybody has heard of the US Mint, the Royal Mint, USD, GBP, etc. Their brand strength along with the government underwriting their value and guaranteeing their specifications leads to higher market premiums on legal tender coins vs private rounds

I appreciate that thoughtful response.....It is a fascinating time line on Nixon removing us from the gold standard to print into oblivion to pay for Vietnam. My question was more about how gold and silver mints play into today commerce. I dont think I posed the question correctly. BUT I really do appreciate you taking the time to respond with your comment! 

[SilverMike1127]

Like if I buy a silver minted coin for $28 dollars and correlated its intrinsic value of the silver spot price, why do they continue to mint silver and gold with a legal tender amount of $2.00. Just seems like a weird thing to continue to do?  

[HonestMoneyGoldSilver]

No worries my friend

I mean ultimately the US Mint's legal mandate is to produce enough ASEs and AGEs (American Silver/Gold Eagles) to meet public demand. They make em cause people buy em

You mentioned the narrative. Not everybody follows the narrative - there's about 1% of the population in the US who are smart enough to own physical gold and silver. They realise if you want generational wealth that's a good hedge against the stock market and a strong hedge against fiat currency, then gold in particular is where it's at

1% of the population of the US is still > 3 million people, each of whom are spending significant funds to create a large and stable demand pool

Why do they put $2 as the face value or £2 when that's tiny compared with the intrinsic value of the precious metal? Well, basically they've kept the same pricing structure since the official gold/silver standard was abolished. British sovereigns (£1) used to be circulated currency, as did US Constitutional silver. Those things still buy the same or more today as they did when they were abolished - e.g. a gallon of gas in 1964 used to cost $0.249. People would pay for that gallon with a single 90% silver quarter (25 cents). If you take that same 25 cent 90% silver coin from 1964, it will still buy you a gallon of gas today even in NYC (give or take depending on spot and premiums).

So the face values are partly legacy and partly a guide. The government isn't going to change the system and overshoot by putting like $2000 on a 1oz gold coin because if spot is below $2000 then people can make a profit at the government's expense. We know that's not how it works - the government are the ones who always profit at our expense

The USA and UK governments are not particularly fond of gold and silver as if people choose to buy precious metals they are putting less money into US Treasuries, stock markets and general consumer spending. The US has infamously made the personal ownership of gold a federal crime in the past and some are suggesting they might attempt to do so again

[SilverMike1127]

2 minutes ago, HonestMoneyGoldSilver said:

No worries my friend

I mean ultimately the US Mint's legal mandate is to produce enough ASEs and AGEs (American Silver/Gold Eagles) to meet public demand. They make em cause people buy em

You mentioned the narrative. Not everybody follows the narrative - there's about 1% of the population in the US who are smart enough to own physical gold and silver. They realise if you want generational wealth that's a good hedge against the stock market and a strong hedge against fiat currency, then gold in particular is where it's at

1% of the population of the US is still > 3 million people, each of whom are spending significant funds to create a large and stable demand pool

Why do they put $2 as the face value or £2 when that's tiny compared with the intrinsic value of the precious metal? Well, basically they've kept the same pricing structure since the official gold/silver standard was abolished. British sovereigns (£1) used to be circulated currency, as did US Constitutional silver. Those things still buy the same or more today as they did when they were abolished - e.g. a gallon of gas in 1964 used to cost $0.249. People would pay for that gallon with a single 90% silver quarter (25 cents). If you take that same 25 cent 90% silver coin from 1964, it will still buy you a gallon of gas today even in NYC (give or take depending on spot and premiums).

So the face values are partly legacy and partly a guide. The government isn't going to change the system and overshoot by putting like $2000 on a 1oz gold coin because if spot is below $2000 then people can make a profit at the government's expense. We know that's not how it works - the government are the ones who always profit at our expense

The USA and UK governments are not particularly fond of gold and silver as if people choose to buy precious metals they are putting less money into US Treasuries, stock markets and general consumer spending. The US has infamously made the personal ownership of gold a federal crime in the past and some are suggesting they might attempt to do so again

I think we just became friends.... HAHA. The gas statement was the EXACT then I was telling my friend about. Its really a sad state with what has happened to us since 1913 when the Federal Reserve was established by an unelected few and have been controlling the monetary supply thus control on a populous of people and we all go about our lives living in the matrix. I am proudly one of the 1% stacking devesting from the system. lol. Still have to participate in the madness, but I'm doing my part, teaching my kids the right way. 

[HonestMoneyGoldSilver]

If you like the silver story @SilverMike1127 there's another classic saying:

An ounce of gold 100 years ago would buy a man a nice suit. An ounce of gold in 2023 will still buy a man a nice suit and accessories.

The 1923 gold double-eagle (Saint Gaudens) has a face value of $20. Today it has a melt value of $1860 and a retail value of $2115, plenty enough for a professional suit, a nice pair of shoes, shirt, tie and belt, might even get some underwear for that too. The thing on everybody's mind right now is, "yea but give it 5 years and you probably won't be able to buy those nice things for $2115". Which is kind of the point of owning gold to make sure you survive regardless of what happens to the USD or GBP. Silver is much more volatile and speculative but it beats inflation over the long-term. Silver is better than real estate or 3-month US Treasuries and is slightly better than a 10-year US Treasury. The 3-month US T-Bill currently pays 5.478% and the 10-year currently pays 4.451%:

Some charts I like to roll out:

 

 

 

 

 

 

 

 

 

 

 

[Bratnia]

In 1934 the US Treasury bought up American gold and locked it away in Fort Knox, nationalized it. After WW2 America got common agreement to use the US Dollar for international trade settlements, where the dollar was backed by Gold. The Fed are the Custodians, and have non redeemable gold certificates issued by the Treasury at $42.22/ounce. Which is ammo for the Fed to support the dollar. A one ounce (gold) Eagle contains 1 ounce of gold, weighs a bit ore than that as its a alloy (mixed with other metals to strengthen the coin). The $50 legal tender value reflects the $42.22 official gold price that has been in place since the 1970's plus a cost to turn the gold into a nice looking coin.

If the dollar came under attack and started to sink, so the price of gold on the open market will tend to rise, as does the value of the gold certificates that the Fed hold. At recent near $2000/ounce market price of gold, the Fed have collateral of gold in effect priced at $2000, that 'cost' $42.22. Around 47x leverage factor. If gold priced in dollars rose to $4000, then the Fed's leverage factor would double up to 94x ... i.e. the more the dollar comes under pressure the more leverage the Fed has to combat that.

That isn't going to change any time soon. And in reflection of that legal tender gold coins are likely continue to be minted, at $50 face value - which for you and me is irrelevant as the value of the gold content is worth so much more. It is however a bottom line. If the price of gold sank to $10/ounce, at least you have a coin that you could spend or $50 of goods.

Up to the end of WW2 and the British official gold price was 4.25 Pounds/ounce. A gold Sovereign one Pound face value coin has 0.2354/troy ounces of gold in it, which multiplied by 4.25 = one pound gold value. That was legal tender that was used in everyday transactions in the 19th century. Some carried around a small balance like the image below, where you could measure the size and weight of Sovereigns/half Sovereigns

i.e the Pound (Sovereign) was worth its weight in value. Deposit those Pounds and that earned interest, whilst gold being finite generally saw inflation broadly average 0%. Banks were custodians.  Nowadays when you deposit money into a bank it becomes the banks money, that hopefully might be returned when you ask for that loan to be repaid to you (withdrawal).

[Bratnia]

52 minutes ago, SilverMike1127 said:

I am proudly one of the 1% stacking devesting from the system. lol. Still have to participate in the madness, but I'm doing my part, teaching my kids the right way. 

When economic/financial stresses rise, so there's greater inclination for the state to either ban or heavily tax gold, as well as potentially blocking its import/export. When such laws come to pass, that's likely a good indicator to hide your gold away. At some time that will come-to-pass and you'll have side stepped the pains. But you have to both get through that period and not permit others to steal away your gold. Freedom at times ... costs time/effort.

[SilverMike1127]

2 hours ago, Bratnia said:

In 1934 the US Treasury bought up American gold and locked it away in Fort Knox, nationalized it. After WW2 America got common agreement to use the US Dollar for international trade settlements, where the dollar was backed by Gold. The Fed are the Custodians, and have non redeemable gold certificates issued by the Treasury at $42.22/ounce. Which is ammo for the Fed to support the dollar. A one ounce (gold) Eagle contains 1 ounce of gold, weighs a bit ore than that as its a alloy (mixed with other metals to strengthen the coin). The $50 legal tender value reflects the $42.22 official gold price that has been in place since the 1970's plus a cost to turn the gold into a nice looking coin.

If the dollar came under attack and started to sink, so the price of gold on the open market will tend to rise, as does the value of the gold certificates that the Fed hold. At recent near $2000/ounce market price of gold, the Fed have collateral of gold in effect priced at $2000, that 'cost' $42.22. Around 47x leverage factor. If gold priced in dollars rose to $4000, then the Fed's leverage factor would double up to 94x ... i.e. the more the dollar comes under pressure the more leverage the Fed has to combat that.

That isn't going to change any time soon. And in reflection of that legal tender gold coins are likely continue to be minted, at $50 face value - which for you and me is irrelevant as the value of the gold content is worth so much more. It is however a bottom line. If the price of gold sank to $10/ounce, at least you have a coin that you could spend or $50 of goods.

Up to the end of WW2 and the British official gold price was 4.25 Pounds/ounce. A gold Sovereign one Pound face value coin has 0.2354/troy ounces of gold in it, which multiplied by 4.25 = one pound gold value. That was legal tender that was used in everyday transactions in the 19th century. Some carried around a small balance like the image below, where you could measure the size and weight of Sovereigns/half Sovereigns

i.e the Pound (Sovereign) was worth its weight in value. Deposit those Pounds and that earned interest, whilst gold being finite generally saw inflation broadly average 0%. Banks were custodians.  Nowadays when you deposit money into a bank it becomes the banks money, that hopefully might be returned when you ask for that loan to be repaid to you (withdrawal).

awesome response! that's great! Did not think of it like that!

[SilverMike1127]

Thank you for all the responses. Trying times ahead..........thats for sure!

[SilverMike1127]

water, food, brass, and PM's.......... gunna give it one hella of a go!