Creation: In 1792 the US Congress passed an “act establishing a Mint and regulating the coins of the United States.”  The law created three gold coins (the “eagle”, worth ten dollars; the “half-eagle”, worth five dollars, and the “quarter-eagle”, worth two-and-one-half dollars), five silver coins and two copper coins.  The dollar was defined as being either 24.75 grains (0.0516 troy ounces or 1.6 grams) of pure gold or 371.25 grains (0.7737 troy ounces or 24.06 grams) of pure silver.  This established a silver-to-gold ratio of 15-to-1, which was believed to be the ratio then current in the major commercial centers of Europe.  (Defining an amount of money as being equal to a fixed amount of gold or silver is known as being on a Gold or Silver Standard.)  Gold coins were to be made of 22‑karat (91.67%) gold alloyed with copper and silver.  Only gold and silver coins were to be legal tender (accepted for all payments) in the US.  Foreign gold and silver coins were intended to be legal tender for only a few years, but remained legal tender until 1857.

Early Experience: While the 15-to-1 silver-to-gold ratio may have been correct in the late 1780s, inflation associated with the Napoleonic Wars (war broke out between England and France in 1793) drove up the price of gold relative to silver.  This inflation was made worse in 1797 when England suspended “convertability”, which is the ability of a holder of a banknote (essentially an IOU issued by a bank) to exchange that note for gold coin at its face value.  As the result of this inflation, US gold coins didn’t circulate.  Worn foreign gold coins were acceptable in payment of import tariffs (at that time, the US government’s only source of revenue) and commercial transactions, so the freshly-coined (and full-weight) US coins were hoarded or melted, and sold for their gold value.  Because of this, at the end of 1804 President Jefferson ordered that no more eagles be coined.  Over the next 33 years, very few quarter eagles were minted (none from 1809 to 1820) and few half eagles were minted.

Gold Coinage Revised: Because Americans needed coins to conduct business transactions, in 1834 the gold value of the dollar was reduced 6% to 23.2 grains (0.0484 troy ounces or 1.5 grams), and gold coins were made correspondingly smaller.  This reduction made it unprofitable to melt US gold coins and sell the bullion.  (It is estimated that about 1% of all the US gold coins minted before 1834 still exist.)  Mintages of gold coins increased substantially, and the coins stayed in circulation.  In 1837, the alloy of US gold coins was officially changed to 90% gold and 10% silver and copper.

The California Gold Rush: While America’s first gold rush was in North Carolina and Georgia in the 1820s and 1830s, those discoveries paled beside the California Gold Rush that began in 1848.  So much gold was mined in California that the price of gold dropped in comparison to silver, so silver coins disappeared from circulation as they were hoarded.  In response, in 1849 a law was passed creating the United States’ smallest and largest regular-issue gold coins.  The gold dollar was created to facilitate trade (storekeepers found it easier to make change for a dollar than for a quarter-eagle), and the $20 “double eagle” was created to provide a more efficient means of storing bank reserves and making international payments.

The United States goes on the Gold Standard: Silver coins had disappeared by early 1851 as the price of silver rose in relation to gold.  In order for silver coins to circulate, they were reduced in size in 1853 (as gold coins had been in 1834), which had the effect of putting the United States on a Gold Standard.  In 1854, in a late response to the disappearance of silver coins, the $3 gold piece was created, supposedly to provide a convenient means to purchase l00 three-cent stamps or 100 of the new three-cent coins.  Unfortunately, because silver coins returned to circulation after they were reduced in size, the $3 coin was never popular; however, small quantities continued to be minted until 1889.

The Civil War: The United States attempted to finance the demands of the Civil War by borrowing, a strategy that was rendered unsuccessful by the Union’s early defeats.  Gold coins were once again hoarded, and by the beginning of 1862, gold had completely disappeared from circulation.  As the result, the United States government introduced paper money (“greenbacks”), which were essentially US government IOUs.  This currency was not convertible into gold coins; however, greenbacks could be used in financial markets to purchase gold coins at a price that fluctuated in response to the Union’s successes (or lack of them) in the war.

Restoration of Convertibility: Following the Civil War, the US was left with massive debts and a paper dollar that was worth less than a legally defined dollar’s worth of gold.  The US economy did not recover from the Civil War until 1875.  By that time, the greenback was approaching equality with the gold dollar, so it was possible to enact legislation declaring that the greenback would be freely convertible into gold beginning January 1, 1879.

In 1879 and 1880, a $4 gold piece, known as the “Stella” was created to act as an international trade coin.  The concept was not successful, and only 460 coins, of two designs, were minted.

Starting in 1879, the United States was able to stay on the Gold Standard that had gone into effect in 1853, and in 1914 legislation was passed which made the Gold Standard official.  Despite the various financial panics of the last quarter of the nineteenth century and the economic strains of World War I, the US stayed on the Gold Standard until the Great Depression.

The United States goes off the Gold Standard: Because of the economic impact of the Great Depression, in May 1933 legislation was passed which gave President Roosevelt the power to reduce the gold or silver content of the dollar.  The convertibility of currency into gold was then abandoned, taking the United States off the Gold Standard, and all US gold coins, with the exception of coins of special value to collectors, were recalled and melted.  (It is estimated that fewer than half of the US gold coins made after 1833 still exist.)  US citizens were forbidden to own gold bullion and the gold value of the dollar (for international central bank payments only) was reduced 69%, to 13.7 grains.  It was not until 1974 that Americans were again permitted to own gold bullion.

Current Gold Coins: Beginning in 1984, commemorative gold coins, corresponding to the pre-1934 standard (five dollar coins contain 0.242 troy ounces of gold, and ten dollar coins contain 0.484 troy ounces of gold), made their appearance.

In 1986 the US began minting “gold eagles”—bullion coins minted in one, one-half, one-quarter, and one-tenth troy ounce sizes.  The “gold eagles” are coins because they have face values ($50, $25, $10 and $5, depending on their size), which protects them against counterfeiting, but the prices for which they are bought and sold are based on their gold content alone.

Circulation Patterns: It is generally believed that the gold coins minted before the Civil War saw significant circulation, as there was no trustworthy alternative, particularly for travelers, paying import tariffs and paying interest due to owners of bonds issued by the states and US government.  The paper money that existed before the Civil War was issued by private banks.  Few people were willing to accept money printed by a distant bank, as it was a common practice for criminals to pay a printer to print money for a non-existent bank and then pass it for whatever they could get.  Once federal currency was introduced during the Civil War and convertibility of that currency into gold was established in 1879, gold coins largely functioned as bank reserves, except in the West, as Californians and cowboys preferred to use coins rather than paper money.  Please note: mintage records bear almost no relationship to the surviving population of gold coins, as US gold coins were melted in wholesale amounts, particularly after the US left the Gold Standard in 1933.

U.S. Gold / Gold Content