Is gold a commodity or a currency? This discussion continues in and on the various internet sites and has become a very controversial question. To understand the answer from my perspective, it would be best to determine first what is a commodity and what is a currency. Here are my reasons for discussion on this subject.
What is A commodity: A commodity is something that is bought with a currency or some medium of exchange. A raw material or primary agricultural product as an example, that can be bought and sold, such as copper or coffee. This is a commodity. The wikipedia explains it this way: A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. A commodity has full or partial fungibility; that is, the market treats it as equivalent or nearly so no matter who produces it. Examples are petroleum and copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereo systems, on the other hand, have many aspects of product differentiation, such as the brand, the user interface, the perceived quality etc. And, the more valuable a stereo is perceived to be, the more it will cost. Here is the wikipedia site on this question: http://en.wikipedia.org/wiki/Commodity
What is A currency: Items produced by an agency that use a medium of exchange with the stated face value are considered currency. Even a gift certificate can be considered a currency to be honored by the terms of the certificate and the company who produced it. 1) Gold used to be a currency but not for nearly 100 years now. Gold became a commodity when two things happened 1. it was removed from circulation in 1933 by the then U.S. President Franklin D. Roosevelt who issued Executive Order 6102, which outlawed the private ownership of gold coins, gold bullion, and gold certificates by American citizens, forcing them to sell these to the Federal Reserve and then 2. when the face value of it exceeded the face value of its stated coin value. If the gold coin was $20 value, then it would naturally weigh out to $20 worth of gold, because 1oz of gold at that time was worth $20. Today 1oz of gold is worth $1,627.20 at the time of this writing in July of 2011 and appears to be loosing value daily. 2) You would be foolish to attempt going into a retail outlet with a $20 gold coin and purchase something for $20 when the gold coin was worth much more at bullion value. This is what currency does. A $20 bill will buy something at $20 value. Of course you would be foolish to spend a 90% silver coin in a laundry machine too. But most people don’t know the difference between a 90% silver coin and a coin minted after 1964 which is all made of base metals. And you would be foolish to spend a currency note which would be considered a collectable (but all of this type of discussion is determined for another blog at a later time). There’s just so much to talk about on line.
Now . . . back to the subject. 3) Governments of lands create fiat currencies for commodity exchanges in their lands. Planchets mixed with alloys such as nickel, brass, copper or silver create coins. Gold is also an alloy that when mixed with copper made coins. Some coins are made from .999 (sometimes shown as 99.999) pure gold. But often it is the coin size by weight and stated purity that indicates what the coin is worth. 4) Gold is easily marketable, which means it is acceptable to men in exchanges of all kinds. Gold is also trusted because it is practical: it’s durable, so it won’t perish or rot; it’s small in bulk, so it is easily transportable. It’s a metal, which means it can be used in different forms, such as bars or coins; and, since gold does not evaporate, it will lose neither quantity nor quality if or when men should decide to melt their coins into bullion or melt their bullion for use in production. There is one more thing that gives rise to men’s trust in gold: the knowledge that gold cannot be counterfeited; To me, the answer is simple. Gold, like silver, copper or brass is not a currency, it is a commodity out of which currency or coin planchets can be produced. But be careful in investing in Gold. Why? Unlike other assets, gold does not provide any income. Whereas equities have dividends, bonds have coupons, and homes provide rents, gold is solely a play on capital appreciation. And some might argue that many highly indebted governments have large stocks of gold, which they may decide to dump to reduce their debts. If this happens, the markets get flooded with an abundance of Gold thereby reducing the market value even further until the inventory is all bought up. A currency serves three functions, providing a means of payment, a unit of account, and a store of value. Gold may be a store of value for wealth, but it is not a means of payment; you cannot pay for your groceries with it. Nor is it a unit of account; prices of goods and services, and of financial assets, are not denominated in gold terms. While gold prices may temporarily move higher in the next few years, they very well may also be very volatile. Collecting Gold is not for the faint hearted.
If it is your choice to collect silver, then you have to decide what kind of silver? There is .999 silver and then there is 40% or 90% junk silver. Don't let the word junk scare you. Junk silver is just that, it is silver that used to be used as a currency and actually still can because the coins look identical but one is worth 20+times face value because of its silver content. In todays currency, you may still be fortunate enough to find some 90% silver mixed in with your actual change. Search them out and put them aside. One way to identify 90% silver coins is when you look at the rim of the coin, one has a copper colored edge and the other looks shiny silver. Another way is to check the date. All 90% silver coins were minted in 1964 or before. If you find a quarter and wonder if it's 90% silver or not and suppose you cannot read the date, simply put the quarter in a stack with other quarters and look at the edge and you will see what I mean. If you want to begin collecting silver coins, here is one scenario.
Remember, If you are only buying a small amount, I'd recommend silver coins or junk silver, Junk silver which is typically sold in bags of at least $50 - $100 (USD) face value from coin dealers, which contain about 71.5ounces or about 4 1/2pounds of silver. The most commonly collected junk-silver U.S. coins were minted before 1965 (1964 or before not 1965).
Those coins include:
◾Morgan and Peace dollars.
◾Liberty Head "Barber," Walking Liberty, Franklin and Kennedy half-dollar coins.
◾Liberty Head "Barber," Standing Liberty and Washington quarters.
◾Liberty Head "Barber," Winged Liberty Head "Mercury" and Roosevelt dimes.
◾And Jefferson "Wartime" nickels.
As you can see from this list, the small denominations are part of what's so intriguing, If you believe that your coins may be used to pay for things in the future, junk silver would be perfect for that. The $100 Face Value Bags currently sell for about $2,000, (or 20 times face value as of March 2013 at around $28.50oz) and the premium over the silver price you would pay is pretty low.
One reason some people believe that silver might hold a higher value to purchase commodities rests in the issue of Fiat Currencies. Fiat currencies world wide have taken a beating because of mis-use of spending by the worlds governments. Many feel that the use of these currencies in the near future may be on their way out and would be replaced by only buying and selling using PMs or Precious Metals. This is like an "End of the World" scenario which may or may not be in the near future. Some reference scriptures like Ezekiel 7:19 which says“‘Into the streets they will throw their very silver, and an abhorrent thing their own gold will become. Neither their silver nor their gold will be able to deliver them in the day of Jehovah’s fury." They might think that fiat currencies will be exhausted first then those with the silver and gold will be the only ones left to trade for their needs. But they will also have to consider what Zepheniah 1:18 says, "Neither their silver nor their gold will be able to deliver them in the day of Jehovah’s fury; but by the fire of his zeal the whole earth will be devoured, because he will make an extermination, indeed a terrible one, of all the inhabitants of the earth.” In any event, collecting silver and gold can still be enjoyable for those that simply want to hedge their portfolio using a commodity that seems better than fiat currencies. So back to PMs.
If that's too large an outlay for one item, there are a few other options. You can buy in smaller quantities from various sources, but remember your fuel costs to get to your place of purchase or your shipping costs are all considered the cost of the coin. Another option is to consider pure silver coins. Silver coins go for as little as $29 right now (March 2013). Some of the most recognized are the American Eagle silver coins and the Canadian Maple Leaf silver coins.
The Eagles, however, are 99.9% pure and often cost a little more than the Maple Leafs, which are also 99.99% pure but because of their size and actual weight, Maple Leaf coins gives you a little more silver for an often lower price. The American Silver Eagle is the official silver bullion coin of the United States. It was first released by the United States Mint on November 24, 1986. It is struck only in the one-troy ounce size, which has a nominal face value of one dollar and is guaranteed to contain one troy ounce of 99.9% pure silver. The Silver Eagle has been produced at three mints: the Philadelphia Mint, the San Francisco Mint, and the West Point Mint. The American Silver Eagle bullion coin may be used to fund Individual Retirement Account investments, but that conversation is set aside for another discussion on other blogs, not in this blog. That is the business for a licensed advisor.
Actual Value
1.00 U.S. dollar (face value) The Edge is Reeded or commonly called Coin Edged
Mass: 31.103 g (1.00 troy oz)
Diameter; 40.6 mm (1.598 in)
Thickness: 2.98 mm (0.1193 in)
Composition: 99.9%
Years of minting: 1986–present (bullion) and 1986–2008, 2010–present (proof) 2006–2008 and 2011–present in (uncirculated)
If you want to get into Special Issues of silver American Issues then
In the 1990s
In 1993, the "Philadelphia Set" was issued to commemorate the bicentennial of the striking of the first official United States coins at the Philadelphia Mint in 1793. The set included proof American Gold Eagle coins in 1/2 ozt, 1/4 ozt, and 1/10 ozt sizes, a proof Silver Eagle coin, and a 90% silver proof "U.S. Mint Bicentennial" medal, all with "P" mintmarks.
In 1995, in addition to the regular proof coin minted at Philadelphia, the United States Mint also issued a proof coin minted at West Point. Known as the "1995-W Proof Silver Eagle," the coin was sold only as part of the "10th Anniversary American Eagle Five Coin Set" which also included the four 1995-W proof American Gold Eagle coins in 1 ozt, 1/2 ozt, 1/4 ozt, and 1/10 ozt sizes; 30,125 sets were sold.
In the 2000s
In 2000, the Mint issued the "United States Millennium Coinage and Currency Set" which included a 2000 Silver Eagle bullion coin minted at West Point (but without a "W" mintmark), a 2000 Denver-minted Sacagawea Dollar with a burnished finish, and an uncirculated 1999 series one-dollar bill with a serial number beginning with the numbers "2000". The sets sold out at the issue limit of 75,000 units. In fewer than twenty known sets, the Sacagawea Dollars do not have a burnished finish.
In the 2010s
In 2011, the Mint issued an "American Eagle 25th Anniversary Silver Coin Set" to celebrate the program's 25th anniversary. The set includes five coins in a lacquered presentation case: one proof coin minted at West Point, one uncirculated coin minted at West Point, one uncirculated coin minted at San Francisco, one reverse proof coin (frosted background with polished, mirror-like design elements/foreground) minted at Philadelphia, and one bullion coin.
In June 2012, the Mint issued the "San Francisco American Silver Eagle Two Coin Proof Set" to commemorate the San Francisco Mint's 75th anniversary. The set includes a 2012 proof Silver Eagle coin and a 2012-S reverse proof Silver Eagle coin, both minted in San Francisco.
In August 2012, the Mint issued the "Making American History Coin and Currency Set" which includes a 2012 proof Silver Eagle coin (minted in San Francisco) and a Series 2009 five-dollar bill with serial numbers beginning with "150". The set celebrates the Mint's 220th anniversary and the Bureau of Engraving and Printing's 150th anniversary.
In November 2012, the Mint offered for sale the "2012 United States Mint Limited Edition Silver Proof Set" which includes a 2012 proof Silver Eagle coin (minted at West Point), five proof 90% silver quarters from the America the Beautiful Quarters program (minted in San Francisco), one 90% silver Kennedy half dollar (minted in San Francisco), and one 90% silver Roosevelt dime (minted in San Francisco)
For value, it is important to note the mintage or quantity minted of each coin to maximize on the collector value of the coin.
1986 5,393,005 1,446,778 - 6,839,783
1987 11,442,335 904,732 - 12,347,067
1988 5,004,646 557,370 - 5,562,016
1989 5,203,327 617,694 - 5,821,021
1990 5,840,110 695,510 - 6,535,620
1991 7,191,066 511,925 - 7,702,991
1992 5,540,068 498,654 - 6,038,722
1993 6,763,762 405,913 - 7,169,675
1994 4,227,319 372,168 - 4,599,487
1995 4,672,051 438,511 - 5,110,562
1995-W - 30,125 - 30,125
1996 3,603,386 500,000 - 4,103,386
1997 4,295,004 435,368 - 4,730,372
1998 4,847,549 450,000 - 5,297,549
1999 7,408,640 549,796 - 7,958,436
2000 9,239,132 600,000 - 9,839,132
2001 9,001,711 746,398 - 9,748,109
2002 10,539,026 647,342 - 11,186,368
2003 8,495,008 747,831 - 9,242,839
2004 8,882,754 801,602 - 9,684,356
2005 8,891,025 816,663 - 9,707,688
2006 10,676,522 1,092,477 466,573 12,235,572
2007 9,028,036 821,759 621,333 10,471,128
2008 20,583,000 700,979 533,757 21,817,736
2009 30,459,000 Not offered Not offered 30,459,000
2010 34,764,500 860,000 Not offered 35,624,500
2011 40,020,000 950,000 TBD TBD
2011-S - - 100,000 100,000
2011-P Rev. Pr. - 100,000 - 100,000
Total 282,011,982 - 17,299,595 - 1,721,663 - 301,033,240
The Obverse Design is a Walking Liberty
Designer Adolph A. Weinman
Original Design date 1916
Design Heraldic eagle with shield and thirteen five-pointed stars
Designer John Mercanti
Original Design date 1986
Like the American Gold Eagle and American Platinum Eagle bullion coins, Silver Eagle bullion coins are not sold directly to the public by the United States Mint. In order to provide "effective and efficient distribution, which maximizes the availability of the coins in retail markets as well as major investment markets" the Mint utilizes a network of "authorized purchasers" to distribute the coins.[60] The coins are sold in bulk at a premium or about $2.00 per coin over the spot price of silver. (effective October 1, 2010) The coins are then sold to banks, brokerage companies, coin dealers, precious metal firms, and wholesalers that meet the following requirements:
• Must be an experienced and established market-maker in silver bullion coins
• Must provide a liquid two-way market for the coins
• Must be audited annually by an internationally-accepted accounting firm
• Must have an established broad base of retail customers to which to distribute the coins
• Must have a tangible net worth of $5 million (this requirement may be met using a letter of credit)
Authorized purchasers must order a minimum of 25,000 coins which they sell to secondary retailers that sell them, in turn, to the public. When sales of Silver Eagle bullion coins began in November 1986, the Mint had approved twenty-eight authorized purchasers to market the coins throughout the world. Most dealers, coin collectors and population in general (3rd party collectors) are all buying from these 2nd party select distributors, the first party being the mint.
Bullion coins are shipped in so-called "monster boxes." Each green plastic box holds 500 coins which are packaged in 20-coin plastic tubes. On the lid of each box are two raised Department of the Treasury seals and the phrase "United States Mint" in raised lettering. Before shipping, the boxes are sealed with straps by the Mint and labeled with the year of issue and a serial number.
Coins are distributed in a green plastic box used by the United States Mint for shipping American Silver Eagle bullion coins. Each "monster box" holds 25 smaller plastic tubes (shown) which hold 20 coins each for a total of 500 coins. This coin box with the clear tubes with green lids when empty costs about $45.
SILVER MAPLE LEAF
Canadian Purity Actual Weight Diameter Thickness
1 Ounce $5 Face 9999 31.150 g 30.00 mm 2.87 mm
If you want to buy silver at the lowest possible premium to the spot price, then have a look at silver bars or rounds. You can typically find them in the following sizes: one ounce, 10 ounces, 50 ounces and 100 ounces. Personally, I suggest staying away from 100oz bars because of their value and difficulty of reselling them or using them for a cash purchase at some later date. My personal preference is 1oz and 10oz bars and 1oz rounds.
If gold is your preference
GOLD MAPLE LEAF
Canadian Gold Content Diameter Thickness
1 Ounce
$50 Face 1.0000 troy oz
31.1033 g 30 mm 2.87 mm
1/2 Ounce
$20 Face 0.5000 troy oz
15.5517 g 25 mm 2.23 mm
1/4 Ounce
$10 Face 0.2500 troy oz
7.7758 g 20 mm 1.78 mm
1/10 Ounce
$5 Face 0.1000 troy oz
3.1103 g 16 mm 1.13 mm
1/15 Ounce
$2 Face 0.0666 troy oz
2.0733 g 15 mm 0.98 mm
1/20 Ounce
$1 Face 0.0500 troy oz
1.5551 g 14.1 mm 0.92 mm
If you choose the American Eagle then Each of the four sizes contains 91.67% gold (22 karat), 3% silver, and 5.33% copper.
Specifications for the 1/10 troy oz coin
Diameter: 16.50 mm
Thickness: 1.19 mm
Gross weight: 0.1091 troy oz (3.393 g)
Face value: $5
Specifications for the 1/4 troy oz coin
Diameter: 22 mm
Thickness: 1.83 mm
Gross weight: 0.2727 troy oz (8.483 g)
Face value: $10
Specifications for the 1/2 troy oz coin
Diameter: 27 mm
Thickness: 2.24 mm
Gross weight: 0.5454 troy oz (16.965 g)
Face value: $25
Specifications for the 1 troy oz coin
Diameter: 32.70 mm
Thickness: 2.87 mm
Gross weight: 1.0909 troy oz (33.930 g)
Face value: $50
Gold Eagles minted 1986-1991 are dated with Roman numerals. In 1992, the U.S. Mint switched to Arabic numbers for dating Gold Eagles. The 1/10, 1/4, and 1/2 troy oz coins are identical in design to the 1 troy oz coin except for the markings on the reverse side that indicate the weight and face value of the coin (for example, 1 OZ. FINE GOLD~50 DOLLARS). These bullion coins carry face values of $5, $10, $25, and $50. These are their legal values reflecting their issue and monetized value as coins. They are legal tender for all debts public and private at their face values. These face values do not reflect their intrinsic value which is much greater and is mainly dictated by their troy weight and the current precious metal price. Therefore, these coins become a commodity and not a currency due to this very important factor.
Now, if Platinum is your preference
PLATINUM MAPLE LEAF
Canadian Purity Actual Weight Diameter Thickness
1 Ounce
$50 Face 9995 31.160 g 30 mm 2.62 mm
1/2 Ounce
$20 Face 9995 15.590 g 25 mm 1.96 mm
1/4 Ounce
$10 Face 9995 7.80 g 20 mm 1.50 mm
1/10 Ounce
$5 Face 9995 3.132 g 16 mm 1.01 mm
1/15 Ounce
$2 Face 9995 2.100 g 15 mm 0.83 mm
1/20 Ounce
$1 Face 9995 1.581 g 14.1 mm 0.79 mm
For other continued reading on this subject of gold v. silver v. US dollar, please read my blog #12. The Future of Money. There is some very interesting reading going on out there and I have pulled together some of my ideas and that of others into a compact story that should open your eyes to "The Future of Money." Please always remember, these are only discussions and opinions from myself and others that should be considered just that. Where possible I always try to reference the source of materials. If you are a contributor and find an error in my reporting, please contact me and I will make the necessary adjustments as soon as I am notified.
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