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Gold Coinage


History of Gold Coins and Money


Coins are one of the oldest forms of money, and coins made of gold were introduced almost from the very beginning of the time when coins were first introduced as currency. One of the principle reasons that gold coins proved so popular was that for the rich they were able to provide a convenient store of value more so than any other metal. Coinage played a major role in advancing trade between willing parties from an ancient barter system and the then later alternative use of tokens, to our present day monetary system. From these very early times until the early part of the twentieth century, gold coins were in use as a principal form of money.

The history of gold coins extends from ancient times dating back to before BC to the present. While coins are still widely used for monetary purposes to this very day, most of the world stopped making gold coins for use as currency by 1933, and today gold coins are no longer in general circulation.

The first gold coins in history were coined by the Lydian king Croesus in about 560 BC, and were struck using a naturally occurring pale yellow alloy of gold and silver known as electrum. Numerous gold coins were also minted by the Byzantine Empire including very thin gold coins bearing the image of various Byzantine emperors while some were also produced bearing the Christian cross.

While most ancient coins were generally minted using a process of hitting a hammer positioned over an anvil (hence the term struck), most of the Chinese coins were produced using a cast. It was not until the early 1700s that coins were produced using presses, the method that is now currently in use.

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Australian Gold Coins or Bullion coins


During the period of 1855 and up until 1870 Australia also had its own gold sovereigns. All the dies for striking the coins were sent from London and were of the same design as the British sovereign, and samples of every production batch were sent back to London for testing. Any variation from the standard, even the use of dies with old dates, was rejected by the London mint masters.

The first Australian gold coins were made at the Sydney Mint and featured the word AUSTRALIA within a wreath as their reverse design. Even though these coins were made in Australia, they were not legal in any Australian colony until each colony proclaimed them legal tender.

The introduction of these Australian made British sovereigns was to coincide with the opening of the Melbourne Mint but there was a delay and Sydney Mint was the first to issue the new coins. The colony of Victoria, which wanted a mint of its own in Melbourne, was one of the last colonies to accept the Sydney coins.

From 1871 until the last issue in 1931, the gold sovereigns made in Australia were British sovereigns. They were identical in almost every way; only a tiny letter, called a mintmark, differentiated the issues of different mints. Indeed, the three Australian mints, situated in Sydney, Melbourne and Perth, were not Australian mints at all, but were actually branches of the Royal Mint in London, however due to their high standards and their ongoing quest for excellence, Australian mints ultimately advanced world standards in the purification of gold through their introduction of new chemical processes.

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How it was intended to be


The original concept of coinage was that each coin had a face value and that this value was represented by the actual content of the material used to manufacture that particular value coin. This concept introduced to coinage the unit of account – that a coin of a given denomination had a guaranteed quantity or weight of a given metal equal to it’s face value.

Using coins was an convenient means of exchange, as this meant it was no longer necessary to physically weigh a value of metal as it passes from a first party to a second party, as that because of the guaranteed content of any particular coin, it was then sufficient to just calculate the face value of the coins to be exchanged. This was particularly the case with gold coins as the coins were made from almost pure gold and the purity was exactly specified, in later years as refining techniques improved this was usually between 99.5% up to 99.99%. Gold is an extremely stable element and as such remains a material that very conveniently stores wealth.

This concept relied on the following conditions,
(a) That an individual could supply an amount of bullion of any value to a Mint, and in exchange, receive the exact same value in minted coin free of any deduction or charge.
(b) That at the same time, the law allow any individual to do what he pleases with the coin he owns, to export it from the country in which it is, or to melt it down at home for any purpose whatever.
(c) That it should be the case, a troy ounce of bullion is freely convertible into a troy ounce of coin, and a troy ounce of coin is freely convertible into a troy ounce of bullion, without a loss of value either way.

It then stands to reason, that should the gold coin to be worth more than an equal weight of gold bullion having the same purity, people would be carrying the uncoined gold bullion to the Mint in exchange for gold coin, and that should the gold coin be worth less than uncoined gold, they would be melting the coin down. Because of the fact that both uncoined gold and the coined gold continued to exist side by side, is ample proof that, they were weight for weight, of equal value.

Because of these conceptual requirements British sovereigns were only legal tender until they started to show wear, they were then withdrawn and replaced with new full weight coin at the cost of the British government. Half sovereigns, although technically covered by the same legislation, were used more frequently and so wore more quickly, making withdrawal too expensive. Production of half sovereigns was to be avoided by the mints if possible.

To have your gold turned into coin was a simple matter; you took it to the mint and came back a few days later to collect the coins. In London the government absorbed the costs of assay, purification, alloying and striking, but in Australia a small charge was made.

It has been written that a common lurk during the 1850s gold rush period was that when their claims were not producing well and they were down on their luck, some of the Chinese miners would spend their evenings tumbling gold coins in a blanket, continually rubbing the coins together so as to wear as much gold away from the coins as possible. They would then recover the gold shed from the coins to sell, and return the worn coins for replacement with new coin with which they would then repeat the lurk.

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The Corruption of Money as a True Means of the Exchange of Value


The original concept of barter trade was - that if a person possessed an article which you desired, you would offer to trade an item of equal value so that you may then take possession of the article that you wanted in exchange – this was the basis of the original barter system prior to the introduction of early tokens as money, and then following on later, coinage.

The introduction of money (coinage) enabled the early system of bartering alternative goods for trade to be made more efficient, as you no longer needed to possess goods of a nature that the other needed, or had a desire to own, as the face value of a coin offered for exchange was of a guaranteed value which was contained in the metal used to produce the coin. These coins were then readily accepted by all, and as such were freely circulated in exchange for all manner of goods.

This improved method of exchange worked well until rulers and governments started to cheat their subjects by producing coinage containing alloyed metals of a lesser value than the face value of the coin. This enabled them to produce a greater number of coins from a given amount of the more valuable metal, of which the proceeds of this debasement either went into their private coffers, or to fund their powerbase and the wars that they chose to wage. Today governments now resort to this practice quite openly and the face value of modern coins is a perceived value rather than an actual value.

Gold coins provided a considerable degree of protection against these practices of debasement, as gold being one of the heaviest metals made it considerably harder to substitute or alloy anther metal of a lessor value and still retain the same size and known weight.

When the First Fleet arrived in Australia, coins both in silver and gold contained their face value in metal. The system at that time was failing, as the relative values of gold and silver metals often changed. In 1816 the British introduced a new gold coin, the sovereign, and new metal content for their silver. The sovereign, with a face value of one pound, contained an amount of gold that was worth one pound, while the new silver coins contained just enough silver to deter forgery.
1888 Gold Sovereign
Gold Coins Gold Coin
Ultimately gold coins were replaced with paper money and in order to be accepted, early paper money had to be guaranteed in gold. (Paper as such has virtually no actual vale) The first Australian notes bore statements like: “The Treasurer of the Commonwealth of Australia promises to pay the Bearer One Pound in gold coin on demand”. This paper money was in effect a Promissory Note – a promise to pay on demand, which meant that governments had to physically posses the equivalent amount of gold to the value of the promissory notes they had issued, in order to be able to make payment on demand should they be called upon to do so. A person could take his paper note to a bank and demand the face value be paid to him in gold coin, thus paper money became known as banknotes.

The gold coins were legal tender to any amount; however they had the disadvantage of being heavy and cumbersome to carry on the person, and so initially paper money was then introduced for its convenience. Unfortunately this was the beginning of the end of money having a true value, and as gold coins were withdrawn from circulation, and then eventually the original paper money promise to pay gold on demand was withdrawn, thereby taking gold out of the equation, which meant that the one remaining protection that an individual had, that their monetary savings would retain its purchasing value, was ultimately removed.

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The Gold Standard


During the period when paper money was backed by payment of gold on demand by many countries, and the paper money issued by some other countries was not totally backed by gold, in order to maintain a balance for the purposes of international trade the Gold Standard was introduced.

The Gold Standard was a complex international arrangement, elements of which set the value of a nations’ currency as a specific amount of gold and guaranteed to accept gold bullion and coin. It really only became fully achievable with the great nineteenth century gold discoveries in Australia, North America and Russia. Although the economic turmoil of the First World War ended the arrangement, efforts to get it going again continued into the early 1930s.

Australia went on striking gold coin throughout the 1920s even though most of the coins were melted soon after leaving the country. The last issues were made in 1931 from Melbourne and Perth (The Sydney Mint had closed in 1926). In addition to the millions of gold coins made for circulation, the Australian mints also made some very rare coins for presentation purposes. These included five and two pound coins from the Sydney mint in 1887 (for Queen Victoria’s Jubilee) and 1902 (for King Edward VII's coronation). There were also coins produced with mirror-like fields (called proofs) made for presentation to VIPs, museums and for collectors.

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Paper Money


As paper money became accepted and trusted by the citizens of a country the promise to pay in gold was dropped and a banknote resorted to having a perceived value rather than an actual value. From here the rest is history and money was set to become corrupted over the years that followed as never before. Now in principal there was nothing to stop governments form printing as much paper money as they wished, except for the inescapable fact that in doing so, they inevitably increase inflation within their own country, and devalue their currency on international exchange markets. While many people still believe their paper money to be backed by gold. this is no longer the case and the only currency with any gold backing today is the Euro with a token backing of 15% gold.

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Gold is Forever


At the present time the price or value of gold is reported in US dollars on a daily basis. Generally the prices quoted for gold are the buy price which is usually a small percentage higher than the sell price. In a truly free market place the value of gold as an industrial material should reflect supply and demand (gold has many industrial uses as well as jewelery) however this is not always the case. Many citizens from countries across the world believe that in times of upheaval gold offers them a means of financial security, and a hedge against inflation, so therefore they store gold in one form or another (gold coins are very popular). This has the effect of increasing the demand portion of the supply versus demand equation, thus pushing the gold price higher. When there is an international crisis the value of gold usually rises, and it’s value is often distorted by speculation of what may happen in the future, also what should be a free market has in more recent times, been constantly interfered with by governments and central banks, who constantly attempt to distort and manipulate the gold price to suit their own agenda.

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Gold Coins as a Store of Wealth


In the past, gold coins were made to be used as a means of exchange and to circulate, and a common fear was that they would not contain gold to match their denomination. Today’s modern gold coins are a popular store of wealth for those who wish to own gold as they are of a known quality; difficult to counterfeit or interfere with; reasonably easy to store; of a size that if needed a small portion of a holding may be liquidated in an emergency; able to be readily sold without having to be assayed to ascertain their purity, and are readily available.

Many countries still mint gold coins and these are popular among people who desire to "hedge" against inflation or a store of value, these gold coins are often referred to as Bullion Coins. While bullion coins do have a nominal face value this is in no way meaningful as to their actual resale value, which is mainly dictated by their troy weight and the current market price of the gold actually contained within the coin.

One such country that mints bullion coins is South Africa who introduced the Krugerrand in 1967 to cater to this demand; and this market was without doubt the reason for its convenient gold content — exactly one troy ounce. South Africa being one the major gold producers at the time of minting the Kugerrand, was the first country to produce a modern, low premium bullion gold coin (priced only slightly above the bullion value of the coin’s gold content). Since then many other countries have started to mint gold coins of a guaranteed purity and weight for both collectors and those who buy them for their value both at the original time of purchase and as a hedge of value for the future.
1978 South African Krugerrand
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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.

The Perth mint in Australian still strikes gold coins. They are not made as legal tender for general circulation, but to sell to people who want to have some of their wealth stored in gold or who want gold in their coin collection. Since 1980 Australia has issued gold coins with face values between $5 and $3000.

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