Why are U.S. Early Gold from the 1820s and early ‘30s So Rare?
BillJones
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Since I have opened up my collecting horizons to British coins, I have gotten some new insights into why of the monetary problems existed in America. For example, the American colonists complained that England would not provide them with coins that they could use in the domestic economy. Oddly enough, there was a huge coin shortage in England also because their system was badly in need of reform.
One of the other problems that the United States had was that so much of its gold coinage was exported and melted from 1795 to August 1834. This problem became acute in the 1820s and ‘30s when virtually entire mintages of U.S. gold coins were exported and destroyed. One of the reasons was the gold content of coins that I call “5 dollar-ish” in size.
The U.S. half eagle or $5 gold coin contained .2829 ounces of gold. The British guinea, which was worth 21 shillings, contained .2646 ounces of gold. This provided an incentive to export the American coin abroad. Yet, a fair number of early U.S. gold coins, minted from 1795 until 18-teens remained in the U.S. Some of these coins were undoubtedly saved by wealthy Americans.
A 1795 U.S. half eagle
A 1798 "spade guinea"
Starting in 1817, the British reformed their coinage. Part of that reform reduced the weight of the guinea sized coin .2546 to .2354 ounces of gold. The new coin was called the sovereign which had a value of 20 shillings. Since the weight of the U.S. coin remained at .2829 of an ounce, the incentive to export and melt it became even greater.
An 1817 British Gold Sovereign
The result was that the flow of U.S. gold coins out of the country became a flood. Coins like this 1834 "old tenor gold" $5 became rarities despite that fact that over 50 thousand pieces were minted.
In 1834, Congress finally addressed the problem as part of President Andrew Jackson's "hard money" monetary reform. The weight of the $5 gold coin was reduced to ,2651 of an ounce of gold which was much closer to the weight of the British gold piece. Therefore for flow of gold out of the United States receded to normal levels, and much more of the "Classic Head" gold coin mintage survived.
Comments
It is great to be able to read a post like this that does not reference some recent microscopic "error" or "variety".
Excellent information!
Awesome post Bill, and some spectacular coins there! They are all examples id be proud to own, your 1795 is VERY tough to find with color and skin like that.
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Well done Bill!
Nice info, thanks
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Great post indeed!
It’s too bad the quick buck artists of their time
were able to so readily take advantage of the profitable arbitrage opportunity. It would be nice if more of these early issues were still around.
Great thread and coins!
I’ve lately been getting into sovereigns.
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Very impressive post and coins! Thanks Bill!
Excellent post Bill well done and thanks for sharing it
Mike
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Very interesting information. A variation on Gresham’s law that “Bad money drives out good”?
This is why I look forward to every post. I don't even collect gold, but it was so educational and well written.
I am a newer collector (started April 2020), and I primarily focus on U.S. Half Cents and Type Coins. Early copper is my favorite.
Excellent post!
Very nice coins and write up.
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Good info as always... and the coins pictured are amazing. Now I have to step away and grab a napkin from the kitchen to swipe away the drool.
Mark
Thanks for sharing, Bill. I always enjoy seeing your ‘95 Half Eagle… lovely coin.
thanks for sharing those insights and a part of your wonderful collection, Bill
Excellent piece. Just to add, contrary to numerous numislore writings, after 1834 only small amounts of "old tenor" gold were turned into the U.S. Mint for melting in exchange for "new tenor". As Bill points out, they were largely lost to export and melted.
If you turned in "old tenor" gold were you paid more than face value?
Mike
My Indians
Danco Set
Yes, for about a 6.3% premium. Interestingly, the Mint wrote to the Treasury Secretary for clarification as to whether it was legal for the Mint to accept "old tenor" coins for deposit. The vast majority of those deposits were from the reserves of large banks.
Most people didn't have much money to buy those coins that were quite dear in that era, farm workers and those who lived on farms predominated. Times were not economically that good for most.
LOL, so it seems that the large banks made a lot of money, some things never change
Mike
My Indians
Danco Set
Yet Andrew Jackson thought that small denomination gold coins would bring wealth and economic stability to the yeoman farming class.
Don’t get me wrong. Jackson’s support of reducing the gold content of the coinage was sound. It just didn’t produce the results that he had hoped.
Awesome Thread…I love reading esoteric pieces of history line that!
I really appreciate these historical pieces by Bill Jones. The series of them you ran in the CAC forum were excellent.
Incidentally, I am putting together a half eagle type set and have 8 of 9 coins. The missing piece is the 1829-34 small bust small size issue, a very difficult coin to find nice that is nevertheless in my price range.
"Look up, old boy, and see what you get." -William Bonney.
Were the US $5s tradeable for guineas and sovereigns on a 1-1 basis? Why did the US holders of these coins allow this arbitrage to take place?
Dream coins in high grade!
Like your draped bust half dime date set, probably took a very long time to find at fair prices.
Good information, thanks.
Good information, thanks.
I don’t know the answer to that, but there was obviously a profit to be made made from doing it.
The old heavy U.S. gold coins were probably send to Europe to pay for goods imported to America. The importers probably got credits based on their melt value, not the face value. Once in Europe, the coins were melted down because they were worth more than $5 U.S. it was more convenient to convert them into sovereigns and other European gold coins.
By this time (the 1820s and early ‘30s), the “old terror gold coins” were almost useless in the U.S. They hardly circulated here. The banks could not use them to back the paper money they issued because even the most reliable $5 note was worth less than an old $5 gold piece. The banks used lettered edge, Capped Bust half dollars and an array of foreign coins instead.
Most collectors forget that there were not enough U.S. coins in circulation to run the economy at this time. That was why the Spanish Empire coins had legal tender status until 1857.
I am glad you enjoyed those articles. It seemed like the collectors over there were more interested in buying and selling than in history.
As a collector and dealer, you have to know the market. Still, why collect something for fun if profit is the only reason to have it? A good story is far more interesting to me than trumped up rarity and promotion induced high prices.
The gold for the coins presumably was coming from the Reed gold mine near Charlotte and the later one near Dahlonega? https://en.wikipedia.org/wiki/Reed_Gold_Mine https://en.wikipedia.org/wiki/Georgia_Gold_Rush
Bill,
Thanks for the history lesson on early gold. Been a while since I read an interesting artifact about collecting on the forum. Agree it adds value to collecting when you learn the history behind the coin.
@BillJones ... Thank you for an interesting bit of history on these gold coins. Cheers, RickO
In 1834 the gold content of each denomination was reduced, and the older coins were recoined.
I would have thought otherwise, but according to those who have researched the Classic gold coins, the mint didn’t get that much “old tenor gold” back for recoinage. It appears that most of them were melted in Europe. If you had submitted 15 of the old coins back, you would gotten 16 in return.
Great post. Very informative. Thank you.
The speed bureaucracy moves today sure hasn't improved much, has it? Why did it take so long (30 to 40 years) to figure out that they had a problem with the gold coins floating away to other countries? There must have been the incentive of wanting them to take/accept our coinage for imports.
Leo
The more qualities observed in a coin, the more desirable that coin becomes!
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Great stuff, scanning through the PCGS "number known", starting in 1815 there are very small numbers every year until the Classic Head arrived, thus astronomical prices.
It required an Act of Congress and the President’s signature to change the weight of the gold coins.
Back in those days many people believed in what economists call, “the commodity theory of money.” The idea was a piece of money had to have metal content that was equal to its face value. Some people still believe that.
The truth is a piece of money has to have an intrinsic value that is less than its face value to say in circulation. Otherwise it is hoarded, melted or sold for its melt value. If you think that's false, when was the last time you saw a piece 90% or 40% U.S. silver coinage in circulation?
@BillJones
Thanks for another great post/thread. I always enjoy them.
You underestimate the value of such and how many folks read, learn, and appreciate. Both here and at the CAC forum.
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It always helps to get feedback. A "Like" is good, but questions and comments are better. If you don't hear anything from the readers, you come away with the feeling like Abraham Lincoln had after he got scattered applause for the Gettysburg Address. He was reported to have said, "That speech didn't scow." (A plowing term for the tool didn't turn the dirt very well.)
Great post @BillJones and it could be the basis of an excellent research article.
More facts and data about how "gold is sent to Europe, and especially to Great Britain" and "hence the inferiority in value of our coins tends to hasten their exportation." This is from an original 116 page 2/19/1834 Congressional report that I have from the "Select Committee on Coins" that provided analysis leading to the 1834 coinage revisions:
page 36 excerpt
page 41 excerpt
page 67 amount exported
page 68 exports, imports amount
Thanks for another excellent article. I truly enjoy reading your educational threads whatever the topic is.
I suspect that the exporting of gold for commerce made the "Old Tenor" gold scarce to very scarce, but that it took the recoinage by the Mint to make it rare.
Thanks for the history lesson!!
I agree with Nic. There are many coin collectors that can never get enough history, both of the coins themselves but also the of the fabric of the times that the coins signify. Most US coins are directly tied to history by the date imprinted on the obverse. I think this is one reason so many history enthusiasts are drawn to coin collecting.
But there are other collectors who have little interest in history. Some focus almost solely on rarity and value. Others love the swap meet nature of the hobby and the pursuit of the coins.
Numismatics is a big tent and has room for all different types of collectors.
"Look up, old boy, and see what you get." -William Bonney.
Awesome!
The whole concept of setting any fixed ratio between gold and silver, to establish the bimetallic monetary system is fatally flawed. The 16 to 1 ratio used to stick in everyone's minds because it was the standard in the United States for a century, and it was the prime slogan in political campaigns at the turn of the last century.
The truth is there is set no ratio between gold and silver. If you use round the numbers today at $25 an ounce for silver and $2,000 for gold, it's 80 to 1, but it's changing every second.
The only reason why 16 to 1 worked for so long was the massive gold and silver discoveries that occurred in the United States in the 19th century. Because of those strikes the supply of gold and silver was such, that the coinage was really token coinage. The coins melted for less than their face value. Therefore they stayed in circulation. As soon as the commodity prices made it profitable to melt the coins or trade them on the commodity markets, they disappeared from circulation.
Bill,
As always a great post, informative and educational. I always look forward to them and appreciate them.
Edited to add: Your coins are amazing!!!
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As a new comer I am appreciative of the history lesson-- super cool stuff!
It's also obvious that the amount of gold produced in the US was TINY prior to the California Gold Rush.
You can see all of this in the Mint Director's reports from the era (NNP https://nnp.wustl.edu/library/publisherdetail/51?Year=1834&displayAmt=50 , StL Fed has some posted).
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Virginia $1.1m over 25 years
North Carolina, $4.1m over 25 years
Georgia, $2.3m over 25 years
California $5.5m in 2 years
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