Gold has always fascinated mankind, and today the lure is no less than it was in the last century the most noble of metals, the king of elements, the stuff of which dreams and treasures are made. From the very outset, gold was conceived as a part of the federal coinage system. The first United States gold coinage consisted of $5 pieces, called half eagles, delivered in 1795 followed by $10 or eagle pieces. An additional denomination, the $21/2 piece or quarter eagle, had its advent in 1796 from the Philadelphia Mint . Within the United States and abroad, there was a great distrust of paper money (previously issued Continental Currency notes were virtually worthless, so obligations of the new American government were viewed with suspicion), and emphasis was on intrinsic value.
The weights of gold and other coins were equal to their intrinsic or melt-down value. The gold $10 piece was established at a weight of 270 grains, consisting of nine parts gold and 10 parts copper, the copper being added to give strength to the alloy. The intrinsic value concept was quite satisfactory so far as promoting the acceptance of new federal coins, but whenever the value of gold metal rose on international markets, vast quantities of minted quarter eagles, half eagles, and $10 pieces went into the hands of bullion brokers who melted or exported them. The $5 half eagle, made in greater numbers, tended to be the "workhorse" denomination.
Gold coins of this value were struck more or less continuously from 1795 onward, with typical years generating production in the tens of thousands of pieces. There is the curious notation in the mint record that although 17,796 half eagles were minted in 1822, just three are known! An example in EF-40 grade, catalogued by the present writer for the sale of the Eliasberg Collection of U.S. Gold Coins in 1982, realized $687,500! As of today, 33 years later, in 2015, the price for one single $5 half-eagle gold coin dated 1822 goes for MORE THAN $5,000,000!! The price of gold rose during the 1820s and early 1830s, so that by the end of the period very few pieces had escaped the melting pot. A freshly-minted 1822 half eagle, or any other half eagle of the era, could be melted down and return more than $5 in value!! Congress passed legislation on June 28, 1834, effective August 1, 1834, mandating a change in the authorized weight of gold coins. After that time, gold coins were worth less in melt-down value than face value, so they were once again seen in the channels of circulation.
Until the 1820s, there was no significant known source of native gold in the United States, and Bullion to make gold coins came from a variety of origins, including foreign gold coins melted down (an important source), bullion from Central and South America, and the reduction of various wrought items such as jewelry. By the 1820s, gold discoveries in North Carolina became important. In 1838 mints were established at Dahlonega, Georgia, and Charlotte, North Carolina, to produce coins from bullion found in those areas, with additional amounts coming from international payments, the melting down of foreign coins, and other traditional sources In the United States, gold coins were commonly used in large commercial transactions. As an example, if you were having a ship built, say a whaling ship, it would cost you around $35,000 in 1841, and paid for in gold coinage, NOT currency! At the time, during the middle of the 19th century, the country was inundated with a flood of privately-issued paper currency notes, with most values being from $1 to $10, but with abundant quantities of values from $20 to $100 as well, plus some stray examples of higher denominations. Just about every bank in existence issued its own currency.
The enforcement of laws was loose, and many were the so-called "wildcat banks" which had little or no substantive backing, but which issued hundreds of thousands of dollars in worthless notes. The public distrusted these notes, and many demanded gold in payment for transactions. On the international scene, privately issued bank notes were not accepted, and gold coins were the norm. Thus, quantities of United States gold coins found their way to England, France, and other trading centers. The discovery of gold at Sutter's Mill on the American River in California in January 1848 ignited the Gold Rush, which saw the migration westward of tens of thousands of individuals. Soon, vast quantities of gold were extracted from the rivers and soil of California. Shipped to the Eastern markets, the yellow metal became "common" in relation to earlier supplies. In view of the increased availability of gold, in 1849 two new coin denominations were created. The first was the gold dollar, which was to become the smallest federal gold coin. The second denomination was the $20 double eagle, minted in pattern form in 1849 and for general circulation beginning in 1850. This new, large, heavy coin made it economical to convert large amounts of bullion to struck form, for it took much less manpower and effort to make one double eagle than it did to coin an equivalent amount of gold in four $5 pieces or eight $21/2 pieces.
By 1853, gold had become so plentiful in relation to silver that silver had risen sharply on the market, and federal silver coins were worth more in bullion value than in face value -- the same situation which confronted gold coins two decades earlier. In general, United States gold coins were widely used for commercial transactions in America from 1795 up until about 1880, for reasons stated, and after 1880 found their main use on the international market. This history and background has important implications for the rarity of gold coins as we perceive such today. Although today it is common to read that the United States was on the "gold standard" from 1795 onward, in actuality our country did not adopt the gold standard system until the year 1900, at which time the United States was one of the last developed nations to do so. Under the gold standard, countries participating in this stored gold coins and bullion in central banks and simply exchanged currency or certificates among themselves to settle transactions. Thus, after the year 1900 large quantities of American coins were stored in European, South American, and other vaults and were seldom moved. In the meantime, within the United States gold coins were rarely seen in day to day commerce If you had been a typical citizen in the year 1900, chances are that during everyday grocery purchases, real estate transactions, and any other business transacted during a given 12-month period not a single gold coin would have been encountered, particularly if you lived in the East (gold coins were seen in circulation with more frequency in the West).
Although gold issues were not needed in everyday circulation, they continued to be minted in record quantities. For example, the year 1904 saw a coinage of over six million double eagles at Philadelphia and over five million in San Francisco. What happened to them? Most were shipped overseas. Gold coinage continued in large quantities, and in the 1920s, when gold coins were mainly kept in banks and rarely seen in circulation, record numbers were produced. The year 1928 saw a production of 8,816,000 double eagles, an all-time high! From 1929 onward, the economic situation in the United States deteriorated (i.e. the Great Depression) in 1933 there was widespread concern for the security of the American monetary system. On April 5, 1933, President Franklin D. Roosevelt proclaimed that gold coins were to be returned by the public to the Federal Reserve System by May 1st, with the exception of pieces of numismatic value. Citizens were prohibited from holding gold with minor exceptions In the same year, 1933, the government issued several notices to the effect that the United States would remain on the gold standard and that citizens should not be alarmed, which, of course was a bald-faced lie. The Gold Reserve Act of January 30, 1934 provided that: "No gold shall thereafter be coined, no gold coins shall hereafter be paid out or delivered by the United States... all gold coins in the United States shall be withdrawn from circulation..." This legislation effectively ended gold coinage production and removed the gold backing of paper money. In the same year, 1934, the United States withdrew from the gold standard. At the time of the decrees of 1933 and 1934, millions of dollars worth of gold coins, primarily of the higher "bullion" values of $5, $10, and $20, were held by various world banks. The idea of shipping them back to the United States in exchange for currency seemed patently ridiculous to foreign bankers, Accordingly, foreign banks held on to United States gold coins more tightly than ever! Years later, when gold coin ownership regulations for United States citizens were relaxed, then dropped entirely, European, South American, and Asian banks became a prime source for gold coin specimens.
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