What is the gold certificate?

Many countries issue what is known as a “gold certificate” as evidence. What does this mean? Mainly, that there are countries and financial institutions that show this type of certificate to ensure that the amount of gold bullion they have in their possession is real or that it corresponds to the money in dollars or other currencies declared.

However, not all countries are still guided by the gold standard. For example, from 1879 to 1934, the United States issued gold certificates for the same face value as their dollar denominations. After 1934, the country abandoned the gold standard making these documents currently only have a collectible value.

But, What is it and how do gold certificates work? How important are they to savers or the market? Let’s explore it together.

Gold certificate: what is it?

A gold certificate is a document that basically represents a claim on a specific amount of gold or on a value linked to it. When the US dollar was pegged to the gold standard, these certificates had a value associated with the face value of the dollar and could be used as is as legal tender.

Now, the fact that the United States has broken with the gold standard does not mean that this type of certificate is not issued in the country. Some banks are still generating them as a test for their investors.. Proof of what? Well, that their vaults or security accounts have a specific amount of gold stored that supports the money they declare annually to the market.

The United States abandoned the gold standard in 1933.. Today, gold certificates issued by the United States Mint have become collector’s items. If you search on eBay, you can find gold certificates for sale for prices ranging from $10 to $200, or even more. It all depends on its age, rarity and conservation condition.

What is a gold certificate?
1934 $10,000 gold certificate.

How do gold certificates work?

Gold certificates demonstrate that an institution or country has a specific amount of gold. This certificate works similarly to stock certificates, which are documents that represent an ownership interest in a company.

United States gold certificates were used for the same purpose. As a fun fact, you might like to know that from 1879 until its phase-out, all certificates issued by the United States were equal in value to the number of US dollars in circulation.

But why do gold certificates exist? Its issuance is usually presumed to solve a practical problem. And it is that a gold ingot is difficult to transport or to exchange in the market for goods and services. Gold certificates came to make gold easier to trade.

The savers could buy gold certificates as a means of investment and keep them at home or in the safe, or also exchange them in the purchase of certain goods -mainly real estate- or services.

What does a gold certificate look like?

United States gold certificates are similar to paper bills, although they have some distinctive features. The design of the certificate, like others, has varied over the years, but most of them have a bright orange backing paper and a gold-colored US security seal on the front.

A $1,000 gold certificate from the year 1907, for example, shows the denomination in all four corners of the certificate with a caption written “IN GOLD COIN” below the portrait of Alexander Hamilton. Additionally, they have a gold seal and a serial number -also gold- written on the front. As for the back, it is of that distinctive orange color of these types of certificates.

Since the value of the dollar itself was pegged to the value of gold—from 1879 until its elimination—gold certificates were essentially legal parallel currency and could be traded on the market just like cash dollars. However, due to their high value, they were not used in routine transactions, such as shopping at the supermarket.

A gold certificate is similar to a security and gives the bearer a right of ownership over that amount of money.either in gold or its equivalent in dollars.

Gold certificates were in circulation in the country until President Franklin D. Roosevelt removed the dollar from the gold standard in 1933..

Gold certificates today

Some banks and investment firms in the United States, and also abroad, issue gold certificates. These generally express the amount of gold in ounces. Their value in dollars fluctuates in the market and they have become one of the preferred ways to invest in precious metals instead of hard currencies, such as the euro or the dollar.

It is worth noting that the gold certificate market also carries its risks.. If the company that issues the certificate falls, that document will not have as much value. As you can see, something similar happens stock certificates when the issuing company goes bankrupt.

In short, what is the gold certificate?

Practically, it is a document that certifies that the amount of gold bullion that a country or financial institution has is the same as the amount of dollars in circulation or capital.

  • From 1879 to 1934, all gold certificates issued by the United States had the same face value as the number of dollars in circulation and in reserves.
  • Currently, United States gold certificates that were issued by the Mint They only have collectible value and can be found at pawn shops or online platforms such as eBay.
  • Some US banks and companies continue to issue gold certificates as proof of ownership. What this document says is that the amount of dollars declared by the bank corresponds to the amount of bullion that belongs to it.

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