28 May What is a Gold Coin?
Gold Coin – (n) a precious metal wafer struck in a coin form by a government mint that typically has a legal tender face value within the sovereign nation it is struck (one standout exception being the South African Krugerrand gold coin).
How long have Gold Coins been used?
According to monetary historians, the first gold coins used by humans were struck around 600 BC by the Lydian Empire. The first gold coins were made by a naturally found mix between silver and gold ore, called electrum.
Why are gold coins used?
Gold is used in coinage for the following reasons:
- Gold is highly tradable and liquid with a low cost between buy and sell prices.
- Gold is easily transportable with a high value to precious metal weight ratio.
- Gold is easily soft and easily divisible into tiny units. Gold is also virtually impossible to destroy. Gold coins can be made from gold bars, gold planchets, and eventually melted back down into gold bars again without losing much gold in the process.
- A gold coin is fungible thus one coin of the same strike is equivalent to another.
- A gold coin has a certain weight which is verifiably countable, often today troy ounce or gram weights are explicitly struk and stated on gold bullion coins.
- Gold coins are both durable and long lasting. No .999 fine gold coins will tarnish with exposure to air, 22k gold coins have an added mix of copper and silver typically making them more durable. Gold coins are not subject to decay or deterioration when safely stored.
- A gold coin has an inherent intrinsic tangible worth and fluctuating market value.
- Given that gold has always had more valuable than silver, gold has always had a much less practical application and use case for small everyday transactions in historical economic history. This is why Milton Friedman stated gold’s role as money throughout history is lesser than silver as the later was used more often in day to day transactions. Gold coins were often used in larger purchases.