Bullion coins are a popular investment—and to a growing extent, collectible—medium. But just what is a bullion coin? How is it different from any other precious metal coin?
The dictionary definition of “bullion” is “uncoined precious metal of precious metal fineness,” so at first glance, the term “bullion coin” seems to be contradictory. For our purposes, “bullion coin” can be defined as a noncirculating legal tender coin intended to sell for its precious metal content rather than for face value or at a collector premium.
From the earliest days of coinage to well into the 20th century, coinage was tied to the value of the metal in which it was struck. In theory, a silver or gold coin’s face value (denomination) was representative of its weight.
Before the South African Krugerrand, before Canada’s Maple Leaf and before the American Eagle, perhaps the world’s best-known bullion coin was the Austrian taler of Empress Maria Theresa. It is widely recognized as the first bullion coin. Since the time of her death in 1780, restrikes of a 42.5-millimeter, .8333 fine silver taler dated 1780 depicting her portrait have been minted by at least 15 mints, most of them outside Austria.
The taler coin long has been accepted internationally, not only in Europe, but in areas of the world where a firm local coinage did not or does not now exist. In particular, these included southeastern Africa and the countries around and including Saudi Arabia. The Maria Theresa taler can be found with chop marks and other banker test marks, indicative of a coin that was accepted in international trade. It was not the only coin that enjoyed wide acceptance but it is by far the best known.
The U.S. Trade silver dollar, struck from 1873 to 1885, is considered a contemporary bullion coin. It is another example of a silver bullion coin used throughout the world for trade. The coin was intended for use in Asian markets but primarily in China.
As recently as the mid-1960s in the United States, 90 percent silver coinage was issued for circulation. Production of U.S. gold coinage for circulation stopped in 1933, though in reality gold coins had not widely circulated in the United States for years.
The legalization of gold ownership in the United States on Dec. 31, 1974, changed the market. From 1933 to 1974, Americans could only own gold coins considered rare and unusual. They could not own bullion coins like the Krugerrand or modern commemoratives like Canada’s 1967 Centennial of Confederation $20 coin. With the elimination of all barriers to gold ownership in the United States, a worldwide market in silver and gold was developed where commodities prices change daily, and money could be made (and lost) in speculation. The stage was set for government-issued bullion coins.
Precious metals have been used in coinage since antiquity. Their durability, rarity and beauty have made silver and gold the most treasured of coinage metals.
Gold and silver’s use in modern coinage is primarily in commemorative and bullion coins issued by many of the world’s leading governments.