first majestic silver

Why American Gold?

May 13, 2002

Now don't get me wrong! Gold is gold is gold is gold, and it matters not from where it came. All gold is a superb inflation hedge, beautiful, desirable, fungible, universally recognized for value, etc. However, there is one possibility with American Gold and Silver Eagles, that might possibly make them even more handy to own. Let's do a supposition, OK? Lots of suppositions.

Suppose (and this is all supposition) you bought a home for $100,000, and it is now worth $600,000, either in inflated dollars or actual increase in value due to improvements in neighborhood, or physical improvements. Suppose you decided to move, wanted to sell, weren't over 55, and didn't want to pay a 20% capital gains tax. Suppose you found a buyer who was willing to pay you the $600,000 you desired for your home. Suppose he didn't want his property taxes to go up, because he paid so much for the home. Suppose the buyer had $600,000 in cold hard cash, and he wanted to buy your house, didn't want his taxes to go up, and you didn't want to pay taxes on your gain. With me so far? Impossible? Maybe not.

You might go to the buyer, and say something to the effect of, "Look Joe, I'll take an official $100,000 for my house in legal, mint issued coin, with a face value of $100,000. I merely want 100,000 American Silver Eagles, with an official $1 stamped on each one."

Joe might then say, "Those Silver Eagles are worth over $600,000, but are officially $100,000, correct?"

"Yup," might be your answer.

What would be the result of such a sale? I am no lawyer, but it just seems to me, that an American Silver Eagle, with $1 imprimatured on it, or a Gold Eagle with $50 on it, and which are all made by the US mint, must be worth that amount…officially…or am I wrong? If you went to a title company for settlement of a property, and the buyer paid you in Silver or Gold Eagles to the amount of face, how could that be illegal? I mean the US Government made these coins, and stamped on them ONE DOLLAR, FIVE DOLLARS, TEN DOLLARS, and FIFTY DOLLARS, didn't it? Are we to accuse the almighty government of lying? Did they produce coins that do not carry that official value? If they are the imprimatured value, why cannot they be used as such? Well? How can the plain fact of the "value" being stamped onto a coin, not mean just that? If you spend a current "quarter" does it have the purchasing power of a quarter? Yet a pre 1965, 90% silver "quarter" is worth close to a dollar. Could you buy a dollar's worth of stuff for a silver quarter? Why not? When the junk coins first came out, people spent the silver ones as they did the new ones, and Gresham's Law quickly took out the silver ones. They are still "QUARTERS" aren't they, in spite of being worth close to a dollar?

How could any lawyer deny this or argue against it…and win? If what the government puts on coins doesn't mean anything, what does it mean when it says "ONE DOLLAR" on a Silver Eagle? Pristine paper money goes for more than its face value all the time, and we can assume it must "officially" carry the value printed on it…correct?

So how is my supposition wrong?

If you found 100,000 brand new dollar bills that were 60 years old, and had been stashed away by a miser, and were worth $5 each, because of their age and condition, why couldn't you "buy" $500,000 worth of stuff for $100,000 worth of these bills, and declare that you had paid $100,000 for the stuff? Obviously, the buyer and seller had to reach agreement on the transaction, but it would be done with US LEGAL TENDER AT FACE VALUE.

Wouldn't it make a dandy case, if the powers that be, didn't approve? "Hey man, is this a dollar or not? Your guys made it in your mint, and it says right here United States of America, One Dollar. See, there's the eagle with the US shield, and look; on the other side, there's Miss Liberty with the rising sun, and In God We Trust. You trying to tell me this isn't a legal dollar? Well, I am getting 100,000 of these for my property, and this means I am getting $100,000 in legal US coin." How could anyone deny it?

That's one advantage of US gold and silver coins.

People often ask me why the South African Krugerrand is cheaper than the American Gold Eagle. The answer is that the Krugerrand is made where the gold is mined, labor is cheaper in South Africa than in America, and they have been around for so long, and are so numerous, that they just are about 5 bucks cheaper. The "Krug" is actually the most gold for the least dollars at $2.50 over spot. The only cheaper way to buy gold is with a "kilo" bar, (32.15 ounces), which is $2 over spot. The Eagles are simply beautiful however, and are supposed to be made with US gold, and with US workers. The "Krug" and American Gold Eagle both have .09oz of hardener in them to make them dent and scratch proof…virtually anyway. They thus weigh in at 1.09 troy ounces. The Canadian Maple Leaf has no hardener in it, and is soft, easily damaged, and weighs exactly one troy ounce.

Ever wonder how much silver the US silver coins have in them? The dimes had .07234 oz, quarters had .1808 oz, and halves had .3617 oz of silver. This works out to a bit over 723 ounces of silver, per $1,000 face value "bag," but with use, I figure some has worn off, so I call it 715 ounces. "Bags" are silver at about 33 cents over spot, 100 ounce bars are 50 cents over, and US Silver Eagles are $1.45 over. Stay clear of thousand ounce silver bars, because first of all, they are very heavy, and none weigh in at exactly 1,000 ounces. There are "light" and "heavy" thousand ounce bars, and before they can be sold, they will usually have to be assayed. They are virtually impossible to ship, heavy, undesirable, and usually need to be assayed. Stay clear of thousand ounce silver bars.

I wish someone would do the above deal with official $50 Gold Eagles, or $1 Silver Eagles, and officially buy something for the imprimatured price. Maybe it has been done a lot of times, and I just have not heard of it. It's just an idea. But by all means protect yourself.

Someone wrote to me, asking what I mean by "protect yourself," which I end my pieces with, and I said it means to have gold silver, guns, and bullets. Good protection, huh?


In 1792 the U.S. Congress adopted a bimetallic standard (gold and silver) for the new nation's currency - with gold valued at $19.30 per troy ounce
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