I don't mean to sound crackpot, but I'm curious about the face value
on American gold coins. We have a fiat currency, so the value of any
money is whatever the Treasury prints on it. But when it comes to,
say, an 1oz American Gold Eagle, its face value of $50 is dwarfed by
its gold value.
So, what does it mean exactly? If I use one such coin to fill up the
tank at a gas station, I'll probably not get any change, I suppose.
However, does the government always considers their face value? If
not, when does it look at its face value and when at its gold value?
Did you buy them at face value? The only issue I can imagine you
alluding to here is calculating proceeds and basis for taxable gain. I
doubt you can use face value for either, and I hear that you get a
special high tax rate based on collectables, as if it were fine art.
Maybe the same applies to silver American eagles, but not platinum
ones? BTW gold eagles are not 24 karat like Canadian maple leafs are.
Anyway in the last couple months, gold has been relatively dead money
compared to silver or palladium:
(if that link looks broken up due to a brain dead parser, then copyand paste it).
Even gld etf apparently gets the collectable rate, so some invest in
ticker cef instead. I mentioned slv in my "historic trends by a
netkook" thread, but that was for nontaxable roth ira and would prefer
even more hyperbolic miner SIL for taxable uses.
Well, my 3 proposed netkook portfolios posted a week or two ago have
skyrocketed and made more than SP500 does in most years, and could
even be ripe for cashing in. I did swap some of the eastern Europe
etfs for PALL although it's doing worse than ultra hyperbolic BAL or
SGG. Of course these are super volatile, and you have to be ready to
embrace sudden grand-canyon sized dropoffs in price.
"American Eagles are imprinted with their gold content and legal
tender "face" value. An American Eagle's value is based on the market
price of its metal content, plus a small premium to cover coinage and
In the same paragraph, it's stated that their legal tender value is
$50 and that their value stems from their gold content and
manufacturing costs. I'm left wondering if one is the value as fiat
money and the other as purchase price.
through certain dealers. These dealers operate as a gold exchange,
hence the customer pays at least the market rate for gold. Second the
coins may be used as currency when say, shopping, but cashiers and
such are obligated only to treat the coins' value at the value
embossed on them.
The coins are a way to invest in gold. The government values them at
the price of gold and sells them accordingly, as long as the price of
gold means the coins' are valued over their embossed value.
The fiat price and the value of the medium almost always diverge.
In most cases, the fiat price is vastly higher than the medium
price. Think of a dollar bill. The paper is worthless, so it
trades at the fiat price. Currency generally trades at whichever
price is higher.
Pre-'64 silver coins illustrate this nicely - a pre-64 dime
has a fiat price of ten cents, just a it always had. But you'd
be nuts to give one away for ten cents because the silver from
which it's stamped is worth more. You could melt it down and
sell the raw silver and make more. So folks pay (closer to)
the value of the underlying materials. (As late as the early
'90s, I used to periodically find pre-64 silver amongst change
I'd get and I always used to keep an eye out for it. I'm
pretty sure nobody's given me any pre-64 silver in at least
15 or 16 years and I've long since stopped looking. But when
it happened, I always felt like I'd won a prize or something.)
Note, though, that when they were actually being pressed, the
fiat value was higher than the materials value. Silver went
above a buck/oz around '65 and has never fallen below $4/oz
since the very early 70s. Quarters and dimes (and half
dollars) haven't been the same since.
At one point or another, the value of materials going into a
penny was worth more than the fiat stamped value on them (or
close enough that it was starting to look ugly). In '82,
they switched to copper plated zinc for this reason.
As far as I know, the American Eagle Gold, Silver and Platinum
bullion coins are the only money being pressed by the US Mint
which has a fiat value well below the value of the materials,
which makes the fiat value on them basically just a matter of
nostalgia. Unless, as someone else pointed out, gold goes
below $20/oz, silver goes below $1/oz, or platinum goes below
Some nice pictures of the current coins here: