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Precious Metal And Coinage

( Originally Published Early 1900's )


THE law provides for the purchase of the gold production of the country. When the metal has been mined and milled, the owners transmit it to the assay offices and the Government purchases it at its actual value-$20.67 an ounce. A nominal charge is made, however, to cover the cost of melting and assaying.

Almost all that is produced finds its way either directly or indirectly to the assay offices. Practically all the gold received there contains a mixture of some of the other precious metals. The melting and assaying process determines the amount and the value of each class of metal found present. The price of the ,gold is fixed by law at the figure above quoted, but the commercial market sets the rate at which the Government accepts silver, nickel, and copper.


The amount of precious metal produced at our mines varies widely from year to year due to the variance in the market price of the metals other than gold and to the rates of pay for the day labor utilized to conduct mining operations. High labor costs and low market prices for silver obviously affect operation seriously, for many mines cannot operate at a profit under adverse conditions but can when the market is favorable and labor costs are low. Thus the production of gold is reduced by the fall in the price of silver and the other coinage metals notwithstanding the fact that the value of an ounce of gold is stabilized.

During the fiscal year 1930, our mines produced gold to the extent of about 2,440,000 ounces (about $48,000,000 in value) and silver to the extent of 48,630,000 ounces. The market price of silver during the year averaged $0.46291 an ounce, but it had fallen precipitantly toward the end of the year until it reached the then lowest price ever recorded—viz., $0.3325. Since that date the price has fallen still further until on June 1, 1931, it commanded but about $0.26125 an ounce.

On June 1, 1931, the Government had a supply of about $6,000,000 in bar silver—sufficient for the coinage needs for several years. The Government now purchases only such silver as is received at the mint in the delivery of gold that contains silver. The silver thus received during 1930 amounted to but about $2,800,000 in value.

The actual metal utilized as currency in the country, including gold and silver coin and gold and silver bars and also minor coins, aggregated on April 30, 1931, approximately as follows:

Gold coin and bullion $4,725,537,577
Standard silver dollars 529,958,879
Subsidiary silver 309,047,830
Minor coin 126,822,415
Total $5,701,366,701


The Government now coins practically no standard silver dollars, for of the 529,000,000 in existence, less than 40,000,000 are in actual use. There is no necessity for coining any more. The silver coinage at the mint is confined almost wholly to the production of the subsidiary silver coins and the minor coins. Those coins are used by the public so extensively that they rapidly become uncurrent, and recoinage is continually necessary to keep the coins up to weight and fit for circulation. Unless a coin is mutilated by chipping, punching, etc., and so materially reduced in weight, the Treasury honors it at face value. If mutilated, it is acceptable only at bullion value. Gold coin is redeemed at face value only if it is of full weight.


The cost of recoinage is borne by the Government. It involves rather a heavy expense, but as the Government makes a gain by issuing silver, nickel, and copper coins at face value when the market price of silver is but 26 1/8 cents an ounce and the less valuable metals proportionately low, the profit far exceeds the cost of the primary coinage and the recoinage of the coins that become unfit.

The silver and the less valuable metals used in coins have been purchased throughout the years at wide differences in price and, although the Government re-deems the silver dollars, subsidiary coins, and minor coins at face value on presentation, it is manifest that there has been a gain to the Government, for the difference between the market value of the silver, etc. contained in the coin and the face value of the coin is acquired by the Government without interest on that difference so long as the coin remains in circulation.


During the World War the price of silver rose to a great height. A shortage of silver in India caused Great Britain to purchase about 208,000,000 silver dollars from us. Our supply of silver dollars was more than was currently needed by us, and we supplied their needs. We received face value for what we sold to them. We reduced the coin to bullion. They recoined it and sent it to India. After the war we purchased silver from domestic silver producers at the same price at which those dollars were sold, and it was coined into dollars. We thus replaced what had been sold. Our Government conducted the sale and the replacement without expense to the Treasury. Great Britain paid the entire expense.

During 1930 the coinage at our mints produced an apparent net gain of about $10,000,000. The face value of the coins the mints produced during the year was about $12,000,000 more than the cost of the metal utilized, and it cost something like $2,180,000 to con-duct the coinage process; hence the apparent gain of about $10,000,000 to the Treasury.


The law requires that not less than one-third of the gold held by the United States shall be in coin. Approximately two-thirds of the Government's holdings are, in fact, in the shape of gold bars. They are all of approximately the same fineness and the value of each is about $8,000. The expense incident to coinage causes it to be inexpedient to coin all the Government's gold holdings. Maintaining one-third in coin is sufficient fully to satisfy the needs of business.


Coinage by the United States began under the act of April 2, 1792. The basis of the monetary system established by that act was the gold dollar, which was required to contain 24.75 grains of pure gold. Coins on that basis were minted in $10, $5, and $2.50 denominations. The silver dollar was required to contain 371.25 grains of pure silver. Both gold and silver were made legal tender under double standard at a ratio of 15 to 1.

As the adopted ratio was not in exact harmony with the world value, gold was undervalued at that proportional figure and, consequently, exportation of gold followed. That standard and the ratio were continued, notwithstanding the variance in the proportion, until, by the act of June 28, 1834, an attempt was made to correct the disparity. The mint ratio was changed to 16.002 of silver to 1 of gold. The weight of a gold dollar was fixed at 25.8 grains, and the fineness was changed from 0.916 2/3 to 0.899225. Thus the pure gold in a coined dollar was reduced to 23.2 grains. That change did not fully adjust the ratio. The European ratio at that time was 15 1/2 to 1, and thus our ratio was an undervaluation of silver. It caused the exportation of silver just as the former ratio caused the exportation of gold. By the act of January 18, 1837, a second correction was brought about. The legal weight of the gold dollar was continued at 25.8 grains but the fineness of the gold weight was changed to 23.22. The copper-alloy content of the coin, which was fixed at 10 per cent, represented the difference between the fine gold weight and the weight of coinage gold. The ratio of gold to silver was fixed by the latter act at 1 to 15.988. The changed ratio was expected fully to correct the difficulty experienced under the former rule, but silver continued to be exported.

By the act of February 21, 1853, the weight of silver coins of denominations less than $1 was reduced, but silver coins were made legal tender for amounts less than $5. The silver content of a half dollar was reduced to 192 grains, and the lesser coins were proportionately reduced in silver content. Prior to that act the silver content was in proportion to the content of a silver dollar according to the face value. That expedient put a stop to the exportation of the subsidiary coin.

By the act of February 12, 1873, the gold dollar was made the unit of value and the weight of 25.8 grains was continued with fineness reiterated at 9 parts pure gold to 1 part copper alloy; and gold coins of $20, $10, $5, and $2.50 denominations were authorized to be minted with gold content proportioned to the $1 unit of weight. The silver coins provided for by the act were the trade dollar, half dollar, quarter dollar, and dime. The weight of all were proportioned to the half dollar (which was continued at 192 grains in weight), except the trade dollar, which was provided for at 420 grains. The trade dollar was authorized to supply the demand for silver in Oriental countries and to be a substitute for the Mexican dollar. Its weight of 420 grains, being slightly greater than our standard coinage, caused the trade dollar to be exported in preference to the standard coin. The silver coins minted under this act were made legal tender at their nominal value up to $5 in any one payment. The legal-tender character of the trade dollar was withdrawn by congressional action July 22, 1876, and its coinage was restricted to an amount sufficient to meet the export demand for it. An aggregate of 35,965,924 trade dollars were coined. By the act of February 19, 1887, the trade dollars were retired by exchange at par for standard dollars. That privilege existed for six months only. About seven and a half millions were presented. Exportation and recoinage abroad account for those not exchanged.

On June 9, 1879, subsidiary silver was made legal tender up to the amount of $10. Minor coins were made legal tender up to 25 cents.

By the act of February 28, 1878, the coinage of silver dollars of 412% grains, troy weight, standard silver was directed. It made provisions as to weight corresponding with the act of January 18, 1837. It stipulated that such coins as were already minted were legal tender. It also directed the Secretary of the Treasury to purchase silver bullion from time to time to the ex-tent of not less than $2,000,000 and not more than $4,000,000 a month at the market price, but not in excess of $1 for 371.25 grains of silver, and to pay for the silver so purchased with Treasury notes payable in coin on demand at par at the Treasury. The act required the coinage of the purchased silver. The minting of the silver was required to be continued to the extent of not less than 2,000,000 ounces a month until July 1, 1891, and thereafter in quantity to provide for the redemption of the Treasury notes.


The act dated July 14, 1890, known as the Sherman Act, increased the amount of silver to be purchased by directing the Secretary of the Treasury to purchase 4,500,000 ounces of silver monthly and to make payment therefor by issuing Treasury notes redeemable on demand in coin. The notes were made legal tender for all debts public and private except where otherwise expressly stipulated in the contract. Under the act of February 28, 1878, exclusive of subsidiary silver coinage, 291,272,018.50 ounces of silver were purchased at a cost of $308,279,260.71. Under the act of July 14, 1890, 166,674,682.53 ounces were purchased at a cost of $155,931,002. The requirement to purchase was re-pealed by the act of November 1, 1893.

The act of March 14, 1900, provides for the retirement of the Treasury notes of 1890 in an aggregate equal to the amount of silver purchased and for which purchase they had been issued. As that class of notes is redeemed, silver certificates of like face value are issued to replace them. On June 1, 1931, all but $1,240,150 of the Treasury notes had been redeemed.

The act of March 14, 1900, declares the gold dollar of 25.8 grains and 0.900 fine to be the "standard unit of value," and the parity of all forms of money is required by the act to be maintained at par by redemption at the Treasury at the option of the holder.

Troy weights are employed in calculating coinage value. In accordance with the act of July 28, 1866, 15.432 grains are considered the equivalent of a gram. Standard bullion contains 900 parts of pure gold or pure silver and 100 parts of copper alloy.

The necessity for using an alloy with the pure gold or silver arises from the fact that these metals are a trifle too soft to withstand the wear of circulation. The alloy gives them the necessary hardness.

An ounce of pure gold is valued at $20.67183 and a standard ounce of coinage gold is valued at $18.60465. One thousand dollars in gold coin weighs 3.68 pounds avoirdupois, or 53.75 troy ounces. One thousand dollars in standard silver dollars weighs 58.92 pounds avoirdupois, or 859.375 troy ounces.

The Government's estimate of the amount of money in the United States on April 30, 1931, was $8,682,-179,320. That aggregate comprehends the gold held as coin and bullion, the coined silver and the minor coin, the United States notes (greenbacks), and the bank notes in circulation. It does not include the gold certificates and the silver certificates in circulation, because those classes of currency are merely due bills for the gold and the silver the owners thereof have delivered to the Government for safe-keeping. Obviously, it would be counting the same money twice to include such certificates in announcing the aggregate circulation.

Of the total money in the United States on April 30, 1931, the Government had in its possession $4,171,-968,497. Of course, the Government does not carry such a sum as funds it may use for current expenditures. But $54,329,990 of that aggregate was free to be paid out for ordinary purposes; $2,352,863,662 of it stood particularly obligated to meet outstanding gold certificates and silver certificates, Treasury notes of 1890, and as reserve to meet United States currency (greenbacks) ; $1,725,325,278 belonged to the Federal reserve banks and was being held by the Government for their account.

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