American Gold

NOWADAYS MONEY SEEMS to have become a pure idea, a universally agreed-upon fiction conveyed by pieces of paper, plastic cards, computers, and coins made of nearly worthless metal. But until just fifty-one years ago, money meant solid gold, that precious, rare, beautiful, glamorous, and nearly indestructible element which had stood throughout history as the invulnerable guarantee of financial security. For 138 years, from 1795 through 1933, the United States grounded its currency in gold (as well as silver part of the time) and issued hundreds of millions of gold coins, valued at one to twenty dollars apiece. They were worth their weight and were traded freely. Today most of them are gone—they were melted down for bullion, both by citizens and by the government.

Those that remain are treasured for their gold content, their rarity, their age, their glimmering beauty (though some are much more attractive than others), and as the legacy of America’s long affair with gold cash—an affair that, like many, seems much sweeter in retrospect. It was an uneasy, if colorful, relationship. The money system of the last century seems primitive and disorganized today. The new nation had to invent its own currency and struggle to establish it at a time when the nature of money itself was changing. A broad variety of gold coins were produced over those years, and while they dazzle the eye, their surfaces also reflect the development of America’s money and the rise and fall of gold’s central part in it.

The first gold coins known to be made in the United States were doubloons turned out in 1787 by a New York goldsmith named Ephraim Brasher. At the time, most business was transacted in an assortment of foreign and colonial moneys; the doubloon was equal to sixteen Spanish dollars. Brasher’s coin bore the words Nova Eboraca , for New York, and Columbia , for the nation, plus Unum E Pluribus and Brasher . One face showed a stiffly drawn American eagle, the other a sun rising over a mountain. Nobody knows how many of these coins Brasher produced—only seven still exist—or even why he made them. They may have been designed for general circulation, as souvenirs, or as samples to impress the New York State Legislature, from which Brasher sought a contract to mint copper coins. In any case, they are today among the most valuable coins in the world. In 1979 one of them was sold for $725,000, the highest price ever commanded by any coin anywhere.

WHILE BRASHER was making his doubloons, Congress was inventing American money. Spanish silver dollars were a popular currency, known as “pieces of eight” because each was worth eight reales , or “bits,” and in 1792 Congress sensibly adopted a decimal monetary system conceived by Thomas Jefferson and based on the dollar. Each dollar was to divide into ten “dismes” and one hundred “cents,” and ten dollars would become one “eagle.” The value of the new American dollar was pegged at 24.75 grains of gold, or exactly fifteen times as much silver.

A new Philadelphia mint issued its first gold coins in 1795. There were pieces valued at $2.50, $5, and $10—quarter eagles, half eagles, and eagles—all with nearly identical Liberty profiles on the front and eagles on the back. Since they were to be worth their weight in metal, they carried no mark of denomination—they were expected to trade for less as they wore down. Coins of a dollar or less were minted of silver and copper; paper money, which had gotten a bad reputation during the Revolution, was not part of the system.

During its early years the mint provided free coinage—it accepted gold and silver from anyone and converted it, free of charge, into U.S. coins. Merchants provided much of the gold—they brought in jewelry, foreign coins, and gold bars taken in payment for international trade.

Two major problems beset the nation’s coinage early on and persisted for many decades—the widespread acceptance and familiarity of existing foreign currency and the unwieldiness of a strict tie to two metals at once. By 1799 gold had increased in value relative to silver on the European markets, so gold coins began to disappear from circulation and be hoarded or traded for their gold content. Meanwhile, speculators found that they could buy U.S. silver dollars with worn Spanish dollars worth slightly less and thus end up with free metal, so silver money also disappeared. American money was off to a weak start. In 1804 the minting of both silver dollars and gold eagles was suspended.

In 1834 an attempt was made to right the balance between the two metals by reducing the size of U.S. gold coins, and the gold-silver ratio was reset at sixteen to one. This, however, turned out to be a slight overcompensation. Another run on silver coins resulted, so, in 1837, the weight of silver coins was reduced. At the time, American silver and gold coins were still uncommon in general circulation. Until the 185Os various coins were often hoarded or exported for their intrinsic worth, and foreign money and bank notes (sometimes of dubious value) predominated in the marketplace.

Private, independent minting of coins for circulation was legal until 1864—as long as the coins produced were clearly distinguishable from the real thing. At times entrepreneurs thrived on minting gold money, setting up business where gold was plentiful, legal tender was scarce, and the U.S. government was not around to help convert the former into the latter—that is, wherever gold had recently been discovered. The first substantial private minting started after commercial mining began in Georgia during the 1820s. In 1830 Templeton Reid, a gunsmith, established a mint in Georgia. He bought gold from miners and stamped it into coins valued at $2.50, $5, and $10. Before long people discovered that his coins contained less than their face value in gold, and by the end of the year he was out of business. In 1838 the government opened its own mints in Dahlonega, Georgia; Charlotte, North Carolina; and New Orleans. All three operated until the Civil War.

The discovery in January 1848 of gold at Suiter’s mill, on the American River in California, opened a rich chapter in the history of gold coins as well as of gold itself. In 1848 and 1849 the average gold seeker mined an estimated ounce a day, about fifteen dollars’ worth in San Francisco. More fortunate or energetic prospectors often made one hundred dollars a day, and reports of one thousand dollars a day were not unusual. At first most business was transacted in gold dust, traded by weight. Money was scarce, and the nearest government mint, in New Orleans, was more than a month’s travel away. But before long an assortment of bankers, assayers, and entrepreneurs began making their own coins. By late 1849 there were more than half a dozen mints in San Francisco, and gold was also being minted in Oregon City, capital of the Oregon Territory, and Salt Lake City, where the official Mormon currency, designed by a team that included Brigham Young, was manufactured in a little adobe building.

In 1851, after California had become a state, the United States Assay Office of Gold, a sort of provisional federal mint, was opened in San Francisco under the direction of a former watchcase maker, Augustas Humbert. It stamped out ten-, twenty-, and fifty-dollar gold pieces, but bureaucratic confusion prevented their being accepted by the United States Customhouse in the same city. Private coiners—those not discredited by distributing underweight coins—continued their activities unharassed. From 1849 through 1855, numerous businesses produced gold pieces that were circulated around California. Today these coins are extremely rare and highly valued; in 1852, gold was so common that some firms even used it to make minute twenty-five- and fifty-cent pieces. In 1854 Congress established a full-scale mint in San Francisco.

Paper money, in the form of notes issued by banks, became more and more common as the century progressed, and American coins finally began to be universally accepted by the 1840s. In 1849, the government added to its $2.50, $5, and $10 denominations new gold coins worth one dollar and twenty dollars. The former were devised as a less cumbersome alternative to the bulky silver dollar; the latter were invented for large transactions and as a simpler way of turning gold bullion into coin.

In 1854 the mint added a three-dollar gold piece. Its authorization had been tacked onto a bill reducing the amount of silver in coins of less than a dollar—in effect making them little more than tokens and moving the nation toward a single gold standard. The United States now manufactured gold coins in no fewer than six denominations. The three-dollar coin may have been intended to facilitate the purchase of three-cent stamps and coins by the hundred. It never caught on and was discontinued in 1889.

Gold strikes in Colorado in the late 1850s engendered a wave of private coinage in that territory, including some ten- and twenty-dollar pieces bearing a likeness of Pikes Peak. A federal mint was soon authorized for Denver. In 1870 a Carson City U.S. mint opened its doors. It coined some gold, but its chief product was silver; it lasted until 1893.

THE CIVIL WAR had as sweeping an effect on money as on everything else in national life. To finance it, the Union began printing paper money for the first time. As federal greenbacks proliferated and the Union’s military fortunes wavered, the paper dollar sharply depreciated—this was when the word inflation entered the nation’s vocabulary—and silver and gold began yet again to be hoarded and exported. A serious shortage of large and small change followed, with federal “fractional” notes and postage stamps becoming common in trade. After the war, the greenbacks remained in circulation and eventually regained full value. Thus federal paper money became a permanent part of our system.

In the South, Confederate paper money was issued and, without metal backing, quickly became valueless. But the Confederacy did manage to mint a few gold coins—all stamped “United States of America. ” This happened in 1861. Confederate troops seized the Dahlonega mint, and the gold and dies on hand were used to manufacture one- and five-dollar pieces. The mint had not previously struck any dollars that year, so all surviving 1861-D one-dollar coins are known to be Confederate-made. Today they command up to twenty-three thousand dollars each.

In 1873, silver dollars were discontinued, and gold coins effectively became the sole hard measure of the worth of American money. (Silver “trade dollars” were issued for several years, but only for use overseas.) The silver dollar was reintroduced in 1878, but thanks to an intervening plunge in the price of silver, its value was thenceforth subsidiary. The protests of silver-mining interests over the demise of the bimetallic standard became a major feature of the politics of the next quarter of a century—often the argument was raised that a decline in the value of gold had weakened the American economy and that a return to silver would revive it. In 1896, silver was the focal point of one of the most emotional presidential elections ever. William Jennings Bryan clinched the Democratic nomination with his electrifying pledge: “You shall not crucify mankind upon a cross of gold.” However, the pro-gold Republican, William McKinley, prevailed in the general election. The single gold standard became law with the passage of the Gold Standard Act in 1900.

The last and oddest new denomination of gold coin was proposed in 1879, when the U.S. minister to Austria concocted the idea of a four-dollar piece to serve the needs of international trade—its value would approximate that of certain foreign coins. Despite the fact that it would obviously seem redundant in this country, where pieces worth $2.50, $3, and $5 already were circulated, Congress took up the idea. A new name, the “stella,” was authorized, and two designers came up with faces for the piece, one a traditional Liberty in profile, the other a similar lady with a more stylish coif, her hair up in a braided coil. Samples of both versions were struck and made available to congressmen and well-connected numismatists; the coin was never released into circulation. Fewer than five hundred examples survive. Today they are among the most highly treasured of all U.S. gold coins, worth as much as $115,000 apiece.

During the nineteenth century, ten dollars represented more than a week’s wages for the average American, and one might suspect that few such high-denomination coins would have been issued. Indeed, they were almost always rare in general circulation, yet in 1852, when about five million one-cent and eighteen million three-cent pieces were made, well over two million twenty-dollar double eagles also were turned out. This is partly because large-denomination gold coins were important as bank reserves and for international payments; European manufacturers shipping goods to the United States wanted gold, not paper. Also, gold coins were important as statutory backing for bank notes and thus sat in vaults everywhere. And with the government buying gold from the public whenever bullion was presented, a great deal of California gold was converted into ten-and twenty-dollar pieces.

By the early twentieth century more gold was being produced than ever before. It had been discovered in Alaska and the Yukon in the 1890s, and hundreds of enterprises there and in the States maintained a steady flow of bullion to the government. As a result, great quantities of ten- and twenty-dollar gold coins were produced. But by now the public was accustomed to paper money and no longer demanded “hard money.” Even the small quarter eagle was rarely seen outside of banks.

Nonetheless, this was when American gold coins reached their artistic peak. President Theodore Roosevelt considered all the nation’s coins “artistically of atrocious hideousness,” and in 1905 he asked his friend Augustus Saint-Gaudens, the world-renowned sculptor, to redesign them. Saint-Gaudens died in 1907 before getting to any of the smaller coins, but his eagle and double eagle, which first appeared that year, are generally considered the most beautiful of all American coins. Roosevelt asked for—and got—“figures in high relief, like the figures on the old Greek coins”; as a result, each double eagle as originally designed had to be stamped several times before the deeply sculpted Liberty figure emerged correctly. The design was twice modified—first to a lesser, but still high, relief, of which 11,250 were minted and released, and then to a flat relief, which was used exclusively after the first year. Roosevelt also instructed Saint-Gaudens to omit the words “In God We Trust” from the coins—the President considered their use there “irreverence which comes dangerously close to sacrilege.” Congress reinstated the motto in 1908, the second year of issue. The coins were minted until 1933. During the same period, new quarter and half eagles, with an Indian-head design by the Boston artist BeIa Lyon Pratt, were also issued.

In 1933 the great age of American gold coins abruptly ended. In the midst of the Depression, with Americans hoarding or exporting any gold they could get hold of, President Franklin Delano Roosevelt proclaimed that all privately held gold coins were to be returned to the government, with the exception of any specimens “having a recognized special value to collectors of rare and unusual coins.” The gold standard was abandoned, and gold-coin production ceased. Many gold coins were turned in, and the vast majority already in government hands were melted down. In later years American citizens would again be permitted to own gold coins, as they are now, but by then hundreds of millions of dollars’ worth had become gold bars at Fort Knox. Foreign banks that held onto their U.S. gold are responsible for most of the coins that have survived.

The story is not over, however; the American gold coin is making a come-back of sorts. On Tuesday, September 13, 1983, in a special ceremony at the United States Bullion Depository at West Point, the Treasury Secretary, Donald Regan, pushed a button to strike the first United States gold coin in fifty years—a special piece marked $10, dated 1984, to commemorate the Olympic Games at Los Angeles. The coin is priced at over three hundred and fifty dollars but contains less than two hundred dollars’ worth of gold and is meant purely as a collector’s item. Yet it just might set the stage for renewed U.S. coinage in gold. Even if it does, though, any future coins that are not just for collectors will surely have to trade for their bullion content—as do Krugerrands, for instance—not for a fixed dollar amount. The day of the circulating gold twenty-dollar piece is almost certainly gone forever.

Even on the level of international payments among nations, gold is no longer a standard, and has not been since 1971, when the Federal Reserve announced that it would cease to give foreign countries gold for dollars. Gold, formerly the fundament on which money stood, is now often perceived as just the opposite—a safe ground for retreat from money. Its appeal as such was demonstrated in 1979 when, after the freezing of Iranian assets in America and the Soviet invasion of Afghanistan, its price more than doubled, from four hundred to eight hundred and fifty dollars an ounce. John Maynard Keynes called gold “this barbarous relic,” but though it is gone from our money, it will not likely soon be gone from our finances.