One possibility is that they would be subject to compulsory purchase (confiscation) by a government at a significant discount to their real value - as happened in USA in 1933. Meanwhile should an economic meltdown occur your gold coins would probably not be very useful. Then, when it comes to sell, you will have to accept a substantial discount for your gold coins too. Yet even now you will pay a premium of 6-10% above the underlying gold price for trading small numbers of gold coins with a gold coin dealer. Nowadays gold coin dealing is perfectly legal and there is open trading of gold coins - usually tax free. They benefit from the value of their specialised knowledge, and you pay for your lack of it. Then what tends to happen is that the skill to deal in gold coins (without getting duped by fakes) concentrates on a few expert gold coin dealers, and that increases the cost of dealing. They soon neither recognise the gold coin offered nor understand its value. Where there are lots of fast depreciating bank-notes about few people ever handle a gold coin, so they stop even accepting them when they are offered. It means that their good wealth storage characteristics means they don't circulate. Not being used does not mean that gold coins are somehow inferior to bank-notes: quite the opposite in fact. That's all there is to it! Bad money is losing value all the time, so people wisely spend it, and save the good money. You are about to pay for something and both are accepted by the merchant. Imagine you had a pocket full of fast depreciating dollars (or any other currency), and a gold coin. Many gold bugs struggle to understand why gold is not a popular and widely circulating medium of exchange. Gresham's Law states that "Bad money drives good money out of circulation". There is nowhere in the world that any of these gold coins circulate as money. The mints themselves take a premium over the gold content (known as seignorage), and the agents add a further intermediary margin. Instead the mints have arrangements with distributing sales agents who deal with the public. Generally these gold coins are not available direct from the producing mint. Then, once the private demand for gold ownership had been nearly extinguished, it was finally the South Africans who started minting again in earnest from 1967.Īs you can see, several governments are now minting gold coins again. Gold coins were hardly produced anywhere between 19.
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