Fluctuating metal prices left mark on coins

History tells us that dramatic precious metal price increases only last for a relatively short period of time. In their wake they sometimes leave us with a host of new realities that will have an impact on the coin market for years and years. It’s not always the same, but what happens during a period of rising metal prices like we have today can well be a major factor in the coins that are available and the prices you may pay in the years ahead.

Realistically, there have been relatively few major periods where the prices of metals had a significant impact on the coins. That is partially because of the fact that the U.S. silver-to-gold ratio of 16-to-1 was actually fairly stable for decades. In more recent times there was the situation where the price of gold was basically controlled for decades and that prevented any significant changes in gold coin prices while discouraging many from considering a gold coin collection as the coins in their collection would basically never change dramatically in price.

As a result, if one is attempting to see major price market movements because of precious metal prices, the historical examples are relatively few. That said, there are instances where because of gold or silver price movements there were periods of coin melting and hoarding which would eventually change the supplies of coins available both at the time but also today.

Some collectors today when looking at the mintages of gold half eagles for the period from roughly 1821 until 1834 might question why half eagles of that period are so expensive. Certainly they would be tough as the mintages were low but realistically the prices and availability of many dates suggests that the mintages are not an accurate indication of the numbers of many dates that can be found today. Those who reach such a conclusion would be correct.

Understanding why half eagles especially, but also other early gold coins are so tough requires that the situation back around 1821 be understood. The American 16-to-1 silver-to-gold ratio was actually slightly different from the rest of the world. The result of the difference was that the American gold coins were actually slightly too valuable. That made it possible to melt them and have a slight profit over their face value.

In fact, the idea of melting coins of all types was not particularly unusual at the time. Face values at least in the early days of coinage of the United States mattered so little that the gold coins produced up until about 1808 did not even carry any indication of the denomination. All that mattered was the gold and how much of it there was, as in circulation were gold coins from assorted nations, although certainly Spain and its empire’s 8 escudo pieces was the leader in terms of numbers at the time.

Eventually there would be more U.S. gold coins in circulation, but for many years up until 1857 the average store would be ready, willing and able to deal with a wide range of gold and silver issues.
Right around 1821, the possibility of buying U.S. gold coins and shipping them to Europe was a very real possibility. A simple profit of a few cents per dollar may not sound like much today, but this was 1821 and brokers were fairly common who would buy U.S. gold coins exporting them for a profit to be melted in Europe.

The entire situation lasted from basically 1821 until 1834. During that period there were basically no U.S. gold coins to be found in circulation as they were all being sold and exported. The loss of so many coins can be very clearly seen in the market today. There were sometimes decent mintages at the time in terms of gold coins, but our available supply especially of gold half eagles, which were the largest and most popular denomination of the period, is poor to say the least. In the most extreme cases you have a date like the 1822 which at least according to official records had a mintage of over 17,000 pieces, but where we know of only three examples today. Certainly, the mintage figure could have been wrong, but even if it was, the survival of the 1822 was at best terrible. Moreover, while it is the most extreme case, it is also far from the only case. We do not expect to find evidence of a lot of saving of gold coins in collections during the era, but certainly the lack of numbers especially of gold half eagles from 1821-1833 is extreme and it was because they were too valuable when compared to other gold issues of the time and that saw them melted.

The discovery of gold in California in 1848 also upset the prevailing 16-1 ratio. There was a huge new supply of gold, which saw gold seem more “common” than in the past once large shipments from California began to arrive in the East. Beginning in 1850, the melt value of the silver coins began to rise, topping their face value.

The situation essentially was the reverse of what prevailed in the 1820s and early 1830s. Congress was slow to respond. It took no action other than to approve a 75 percent silver three-cent piece in 1851. For a couple very awkward years there were basically no silver coins in circulation. The Mint was stuck. If it made silver coins, it lost money, but if it did not, it could be criticized for doing nothing in the face of a national coin shortage.

Of course, if it tried to produce silver coins they were only going to be hoarded or melted, so no choice was a good one. In the end, there were a number of cases where we suspect the Mint tried to make the best of a bad situation by simply producing lower mintages than might normally have been the case.

The Coinage Act of Feb. 21, 1853, solved the situation by slightly reducing the authorized weights for silver issues from the half dime through half dollar, although, interestingly, it did not change the dollar, which resulted in the Seated Liberty dollar being basically a coin that was produced not for use in regular commerce, but rather for international trade. In a sense long before an official Trade dollar was ever authorized, the silver dollar of the United States had become a dollar produced virtually exclusively for international trade.

We do not have the same sort of clear evidence from this period of melting that we find in the case of gold coins from 1821-1834. It is at least partially a situation where demand today is relatively low for the silver coins of the period, so the supplies are not really tested. That said, especially in the case of half dollar dates like the 1850 and 1851, which potentially would have been melted in some numbers, we see higher prices than might normally be expected based on their mintages.

The 1853-O half dime is another case as its 160,000 mintage of the heavier type would not normally produce the current $285 G-4 price and the best way of explaining it and the prices of the half dollars is that the coins were melted at the time for their silver value.

The 1853-O with the arrows at the date denoting the reduced silver weight is much more common.

The impact of metal prices was seen in other ways in the years shortly after the problems of the early 1850s. Rising copper prices were at least partially at the root of the change from a large cent to a smaller copper-nickel Flying Eagle cent in 1857.

Joining the large cent in the pages of history was the half cent, although by 1857 the half cent had little use in commerce and was seeing very limited mintages. There was a massive turning in of both large cents and half cents at the time of the switch and certainly that had an impact on our supplies today.

The next time metal prices clearly mattered in terms of coins and their potential for survival came in the mid-1870s. Just as the gold in California had caused some problems in terms of the price of silver, the vast wealth of the Comstock Lode was doing the same with the huge outpouring of silver, causing the price to drop.

Congressional action in 1873 increased slightly the amount of silver in silver coins. There was also legislation that approved a slightly heavier Trade dollar, which seemed to kill two birds with one stone, as it used more silver and the purpose behind the Trade dollar was to be sent to China to be used in trade there as the merchants of China wanted silver.

The whole idea might have actually had some merit considering the situation at time, but as the price of silver was declining, the Congress got the bright idea of revoking the legal tender status of the Trade dollar. That might have mattered relatively little in China, although it would not have helped encourage the Chinese merchants to accept Trade dollars, but their prime interest was the silver so the impact would have probably been minimal.

Where the action created a problem was with the supplies of Trade dollars circulating in the United States. Suddenly, they were not legally a dollar, but rather were worth whatever their silver was worth on any particular day. That saw some who had accepted a Trade dollar as a dollar receive not only less than a dollar, but less than 90 cents for their coin. Ultimately, the government would be forced to redeem Trade dollars years later and that saw millions melted.

The whole period during the 1870s was very unsettled in terms of metal prices and that almost certainly saw a wide range of coins melted. We know of a few cases. When the amount of silver was changed in early 187,3 some of the coins made early that year with the old, lower amount of silver were melted to the point that entire mintages were destroyed, making issues like the no arrows 1873-CC dime and the 1873-CC no arrows quarter great rarities today, while the 1873-S no arrows half dollar and 1873-S Seated Liberty dollar while reportedly minted are unknown. What other dates may have had their numbers reduced significantly because of melting during the period is hard to say, although the 1873-CC Seated Liberty silver dollar is one very good candidate for a date where a significant percentage of the mintage, but not all of the mintage was destroyed.

The silver problem nagged until the government adopted the gold standard in 1900. At that point the policy of silver coins having less than face value in silver was set in concrete.

The two largest and most important examples of coin melting of U.S. coins by the government had a great deal to do with the metal value of the coins. The first came in 1918 when the Pittman Act was passed. The act authorized the melting of up to 350 million silver dollars that were sitting in government vaults. The prime reason for the melting, which eventually just topped 270 million silver dollars, was to send the silver to India to shore up the rupee. We cannot be sure what dates were claimed in what numbers by the melting, but certainly the loss of 270 million pieces which otherwise would have been released into circulation or acquired in $1,000 bags by dealers has certainly hurt the Morgan dollar supplies of some dates especially in top grades.

The situation was similar in 1933 when all gold coins and Gold Certificates with the exception of gold coins of recognized numismatic value were ordered surrendered. The reasons were different from those behind the Pittman Act, but the basic reason can be understood in the fact that the coins were valued at $20.67 an ounce in contrast to the $35 an ounce being paid at the time for newly mined gold.

Millions of gold coins were lost to posterity and that included over 30 percent of all of the gold eagles and double eagles minted in the history of the United States. In addition, some fearing the consequences of saving gold coins in the face of the order or simply not knowing any better turned in early issues as well as gold dollars and $3 gold coins.

Once again we have no listing of the losses, but certainly we have a classic case like the 1927-D double eagle. The 1927-D double eagle had a mintage of 180,000. That would have made it a better date Saint-Gaudens double eagle, but certainly not a $1 million or more coin. The fact is there are somewhere between perhaps 8 and 16 examples known and the reason is that they were melted after the recall order of 1933.

Moreover, the case can be made clearly that were it not for the fact that millions of U.S. gold coins were sitting in bank vaults primarily in Europe where they could not be melted and were later discovered and brought back to the United States, a number of other dates such as the 1924-S and 1926-D to name a couple might be $1 million coins today as there were only a few of each known in the United States before some small numbers were discovered in Europe.

It can probably be stated that rising metal prices have in some cases produced additional saving of some coins even though most cases show mass destruction and no saving. Rising silver prices would see silver removed from the dime and quarter in 1965 while being reduced to 40 percent in the half dollar. Even that small amount was eliminated after 1970. The interest in silver at the time, however, did result in a of couple cases where we can clearly say many coins which otherwise might have been lost were saved.

The most important case were the $1,000 bags of silver dollars sitting in Treasury vaults. Since the Pittman Act bags and bags of Morgan and later Peace dollars were simply sitting in Treasury vaults. Periodically some would be paid out for one reason or another but basically the silver dollars were there primarily to serve as backing for Silver Certificates. The silver situation caused a literal run on those $1,000 bags, which were a good deal as you could not lose paying $1,000 and receiving 1,000 silver dollars. The run on those bags at the time almost certainly saved many not from being destroyed but rather from being circulated.

The massive hoarding of silver coins which began in the mid 1960s probably did not save any coins of special numismatic interest. Any better dates still in circulation were few and they would have in all probability been found eventually by a collector or dealer. As silver and gold rose in price in the 1970s, however, the good dates lost to melting began to mount in number.

There were probably very few truly better dates of silver or gold coins lost to melting in the late 1970s and early 1980s. After all, virtually all the coins being sold for their metal value were passing through coin shops where they would have been checked before being sent on for melting. That said, what were lost were significant numbers of proof sets and large numbers of Mint State coins that at the time had a numismatic value less than their silver value. That applied to some silver dollars as well as when silver was close to $50 an ounce silver, dollars were worth $20 or more just as silver.

To this day we cannot be even remotely certain as to what dates in what grades might have been melted in what numbers. It is, however, very likely that Mint State supplies of all silver coins from the mid-1950s through 1964 were reduced by significant numbers. Whether those losses will translate into higher prices in Mint State in the years ahead will probably depend largely on demand, but it is certain that millions of coins and many of them in Mint State as well as some proof sets were destroyed.

With prices of gold and silver now soaring again, we face the prospect of a new round of potential melting. The situation, however, has now changed significantly. If there is to be any melting at all, what coins will it hit the hardest?

The coins that were melted in the past were always assumed to be common with no numismatic value. Yet the potential exists that any melting could create new dates of assorted denominations that become suddenly much tougher than was the case before the metal price increases.