Gold coin

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thumb|right|A_Krugerrand gold coin from South Africa]

A gold coin is a flat, disc-shaped piece of gold that has been minted and issued by a government or private organization. The first gold coins in history were coined by Egyptian Pharaohs around 2,700 BC. These gold coins were used primarily as gifts and not for commerce. Several centuries later, King Croesus, ruler of Lydia between 560-546 BC, began issuing gold coins for general circulation. King Croesus' gold coins follow the first silver coins that were minted by king Pheidon of Argos around 700 BC. The Ying Yuan was another gold coin minted during this time by the Chinese in the 6th or 5th century BC.

Gold coins then had a very long period as a primary form of money, only falling into disuse in the early 20th century. Most of the world stopped making gold coins as currency by 1933, as countries switched from the Gold Standard due to hoarding during the worldwide economic crisis of the Great Depression. In the United States, this was following Executive Order 6102.

However, gold-coloured coins (not made of real gold) have made a comeback in many currencies. Furthermore, many countries continue to make legal tender gold coins, but these are primarily meant for collectors and investment purposes and are not meant for circulation.

Collector coins

Many factors determine the value of a gold coin, such as its rarity, age, condition and the number originally minted. Gold coins coveted by collectors include the Aureus, Solidus and Spur Ryal.

In July 2002, a very rare $20 1933 Double Eagle gold coin sold for a record $7,590,020 at Sotheby's, making it by far the most valuable coin ever sold to date. In early 1933, more than 445,000 Double Eagle coins had been struck by the U.S. Mint, but most of these were surrendered and melted down following Executive Order 6102. Only a few coins managed to survive.

In 2007 the Canadian Mint produced a 100 kg gold coin with a face value of $1,000,000, though the gold content was worth over $2 million at the time. It measures 50 cm in diameter and is 3 cm thick. It was intended as a one-off to promote a new line of Canadian Gold Maple Leaf coins, but after several interested buyers came forward the mint announced it would manufacture them as ordered and sell them for between $2.5 million and $3 million. As of May 3 2007 there were five confirmed orders. [cite news| url=http://www.cbc.ca/money/story/2007/05/03/goldcoin.html| title=Finally! A 100 kg Canadian gold coin| publisher=CBC News| date= May 3, 2007] Austria had previously produced a 37 cm diameter 31 kg gold coin with a face value of €100,000 ($153,000). [cite news| url=http://www.cbc.ca/cp/Oddities/070503/K050308AU.html| title=Royal Canadian Mint introduces world's first 100-kilogram pure gold coin| date= May 3, 2007| publisher=CBC ]

In October 4, 2007, David Albanese (president of Albanese Rare Coins) stated that a $10 - 1804-dated Eagle coin (made for President Andrew Jackson as a diplomatic gift) was sold to an anonymous private collector for $5 million. [ [http://ap.google.com/article/ALeqM5idRo2xGIIQrV8p_bNNoUcuQqC3XAD8S2KIU80 Afp.google.com, Collector Pays $5M for 1804 Gold Coin] ]

Bullion coins

While obsolete gold coins are primarily collected for their numismatic value, gold bullion coins today derive their value from the metal (gold) content - and as such are viewed by some investors as a "hedge" against inflation or a store of value. South Africa introduced the Krugerrand in 1967 to cater to this market; this was the reason for its convenient and memorable gold content—exactly one troy ounce. It was the first modern, low premium (i.e. priced only slightly above the bullion value of the gold) bullion gold coin. Bullion coins are also produced in fractions of an ounce – typically half ounce, quarter ounce, and one-tenth ounce. Bullion coins do not carry a meaningful face value, as their value is mainly dictated by their troy weight and the current market price of the precious metal. (If a face value is minted on the coin, it is done for legal or other reasons and it is nearly always significantly less than the actual value of the coin.) Gold has an international currency code of XAU under ISO 4217.

Gold bullion coins usually come in 1 oz, 1/2 oz, 1/4 oz, 1/10 and 1/20 oz. sizes. Most countries have one design that remains constant each year; others have variations each year, and in most cases each coin is dated. A 1/10th oz bullion coin is about the same size as a U.S. dime. A 1 oz. gold bullion coin is about the size of a U.S. half dollar.

Other gold bullion coins, many named after their design features, include:
* Austrian Philharmonic
* British Britannia
* Chinese Panda
* Gold Dinar
* Russian Chervonets
* Swiss Vreneli

Counterfeits

For most of history, coins were valued based on the precious metal they contain. Whether or not a coin was actually made by the party that it is claimed to be made by was of secondary importance compared to whether or not it contains the correct amount of metal, that is, right weight and fineness (purity). Genuine appearance was simply a convenient shortcut to avoid time-consuming tests in everyday transactions.

Unlike silver, gold is denser than almost all other metals, whether something is made of gold is extremely hard to fake. Simple determination of weight and volume should be sufficent. A coin that is the right size but is not gold, or has too much base metal, will be "light"; alternately, a coin that weighs right will be somewhat larger. (Platinum was unknown in ancient times; platinum "is" denser than gold, but since it is about twice as expensive, making a fake coin out of platinum would make no sense. In theory, fake coins could be made of uranium, but this does not appear to be a practical problem.)

Of course, if a coin has mostly numismatic value, whether it is authentic is critical. A coin that is not genuine would (assuming it is made of gold) have the same "melt value" as a genuine coin, but this may be next to nothing, relatively speaking, for a rare coin.

There are well made counterfeit gold coins in circulation. For example, the St. Gaudens Double Eagle omega counterfeit is infamous for its complexity; and has fooled many numismatics experts. It is a high relief business strike, and due to the extensive wear on the die, these coins were not made for many years. For poor counterfeits, a good scale can usually tell if it's counterfeit or not; however, there are many well made counterfeited ancient coins that not only use gold, but the correct amount as well.

The US $20 gold coin ("double eagle") has raised lettering around its rim. If the coin is uncirculated, the letters will be flat on top. If slightly rounded, and the coin is uncirculated, it is a counterfeit. However, some counterfeits do not have this defect.

There are other counterfeit double eagles in which the gold and copper alloy was not thoroughly mixed. These counterfeits will have a slightly mottled appearance.

An old practice to test whether a gold coin was counterfeit was to bite down on it. Since pure gold is relatively soft any base metals mixed with the gold to lessen its value will also harden the coin, and so make it harder to bite on. The majority of bullion counterfeits (of all types) are rare, and fairly easy to detect when comparing their weights, colors and sizes to authentic pieces. This is because the cost of reproducing any given coin precisely can easily exceed the market value of the originals.

Further reading

* Robert Friedberg, "Gold Coins of the World: From Ancient Times to the Present - An Illustrated Standard Catalogue with Valuations" (Coin and Currency Institute, 2003)

ee also

* Carat (purity)
* Gold bar
* Gold as an investment
* Gold standard
* Silver coin
* Palladium coin
* Platinum coin
* History of coins
* Numismatics
* Precious metal
* British sovereign
* Euro gold and silver commemorative coins

References