The Coin Analyst: Should the U.S. Mint Sell Precious Metal Coins at Face Value?
by Louis Golino for CoinWeek ………
For years collectors and buyers of modern precious metal coins issued by the U.S. Mint have been puzzled and a bit annoyed by the unusually low face values of such coins, both bullion and collectible.
A one-ounce American gold eagle, for example, has a face value of only $50, but is currently worth about $1500 in the bullion version and even more in proof, and a one-ounce American platinum eagle has a face value of only $100 and sells for a little more than a gold eagle in bullion and close to $2,000 in proof.
Probably the most egregious case is the five-ounce America the Beautiful silver coins, which have a face value of only a quarter. As many people have suggested, such a low face value has probably deterred some buyers from purchasing these coins. Whether that is also true of American silver, gold, and platinum eagles is less clear.
At a minimum for the sake of consistency the five-ounce coins should have a face value of $5, but the U.S. Congress, in its infinite wisdom, specified that the coins had to be exactly the same as their quarter counterparts.
For several years now the French Mint and Royal Canadian Mint have taken the opposite tack, namely, issuing collectible silver and gold coins with high face values. And the coins are also sold at face value, providing the buyer a degree of protection against falling metal prices, which can be very useful in a market as volatile as precious metals are.
But while the French coins are sold at face values that are closer to their metal content, the Canadian coins have a metal value much lower than their face value. And unless one buys the coins from the respective mints at face value, dealers charge a premium over face value for the coins, though in most cases a small one. That is until the coins sell out and prices then rise on the secondary market.
The RCM first started with a series known as the $20 for $20 coins, which are quarter ounce silver coins that have been issued for the last several years, and which depict primarily iconic Canadian images like maple leaves, polar bears, and a hockey player. These coins have a mintage of a quarter million and most have sold out fairly quickly, especially the earlier issues. The coins all sell at a premium on the secondary market, but could be purchased for face value from the Mint when issued.
Earlier this month the RCM issued a $100 face value matte proof coin with three charging bison. The coin is very attractive and has one ounce of silver. Bison are very popular themes on coins. The coins have a mintage of 50,000 and sold out quickly. Since one-ounce numismatic silver coins from the RCM typically cost $100 but have face values of $20, these coins seem like a good deal.
I have read online about people in Canada trying to use the $20 coins for purchases, or even trying to cash them in at banks, and being refused.
This raises an important issue, which is the difference between normal circulating coinage and bullion or collector coins that are known as non-circulating legal tender. In the U.S. it is at the discretion of the merchant as to whether or not they accept such coins for purchases, and the same rule applies in Canada.
Alex Reeves, the communications director for the RCM, told the Star newspaper in Canada on July 5 of last year that banks and businesses are not required to accept such coins and that banks have procedures for converting them to cash, but not all tellers will be familiar with that process, which may require the assistance of a manager. **
It is, of course, far better to take such coins to a coin store in any event, where you can always get at least face value for them.
In France’s case, the classic sower coin (which is believed to have been the major inspiration to Adolph Weinman when he designed the widely-collected Walking Liberty half dollar) was modernized starting in 2008 with an intriguing series of silver and gold coins sold at post offices and through the French Mint.
The sower coins when placed in a row create the impression of a moving figure.
The coins had mintages that ranged from a high of 2 million for the smallest silver coins to a low of 25,000 for the 500 euro gold coin. The higher the face value, the lower the mintage is the general approach of these coins.
In 2010 the French mint issued another face value series since the sower series had been so successful with many coins selling out very quickly. This time another classic French coin was modernized, specifically, the Hercules design.
Again silver and gold coins were issued in a variety of denominations from a 50 euro silver coin in 2010 with a mintage of 100,000 to a 5,000 euro gold coin in 2012 with a mintage of only 2,000.
Despite the extremely high face value that corresponds to about $6500, the coins sold out very quickly. They contain about 2.7 ounces of gold. It is also important to remember that in the European market gold bullion coins sell at higher premiums over melt than they do in the U.S., especially in countries like Greece and Cyprus in the midst of economic crises when common gold coins sold for multiples of their gold content.
In addition, France has been issuing another face value series since 2010, a 10 euro silver series dedicated to the many regions of France which depict famous people from those regions such as Frederic Bartholdi, who created the Statue of Liberty.
On May 21 the French Mint started a new three-year face value series dedicated to the values of the French Republic. The ones highlighted in the 2012 coins are liberty, equality, and fraternity as well as justice, secularism, respect, and peace. The coins display the words themselves in an unusual, post-modern arrangement. Each one has portions of the letters R and F for Republique Francaise, or French Republic.
Three 25 euro coins and three 5 euro coins were made available that day as well as a 250 euro gold coin. In September a 500 euro gold coin will be sold. These coins can be purchased from the mint’s e-shop: http://www.monnaiedeparis.fr/en_US/e-shop
All of this raises the question of whether the U.S. Mint should, provided it receives the appropriate congressional approval, follow in the footsteps of its long-time allies France and Canada and issue precious metal coins with high face values and sell them at those values.
I do think that would be an interesting approach to consider and believe it might help increase sales, especially of numismatic coins, which have been declining in recent years. The RCM’s latest annual report says that the $20 for $20 program brought in 67,000 new customers, half of whom later bought other coins.
In addition, with the major decline in gold and silver prices that occurred recently, buyers are likely to be attracted by higher face values, especially if the coins were also sold at those values.
Since precious metal coins do not circulate, although a number of states have passed laws allowing them to be used in certain transactions such as the payment of taxes, I do not think seigniorage loss would be an issue.
Finally, even if the U.S. Mint did not go as far as issuing high-value coins and selling them at face value, it could raise the denominations currently used on American eagles and other precious metal coins to more realistic levels.
I invite readers of this column to express their views on this idea and whether they would be more likely to buy coins with higher face values.
** Mr. Reeves told CoinWeek that in Canada even the acceptance of circulating legal tender is at the discretion of the recipient. So there is no difference in Canada in the way circulating and non-circulating legal tender coins are treated.
Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.