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The History of Gold

Gold Prices, Historical Charts, its Origin & Value

Gold Rush | Gold History
This article is from Gold Rush,
by Arlyn Sieber & Mitchell A. Battino

It provides none of the basic necessities required for human survival. Yet gold has been one of the most cherished substances for as far back as historians can document civilizations. It is a symbol of material wealth. It is a symbol of royalty. It is coveted as an adornment. When configured into standard sizes and shapes as coins, it has also been valued as a medium of exchange.

In its base form, gold is an element found in a variety of rocks. It is principally found in either lode deposits or placer deposits. Lode deposits are found in mineralized rocks and are mined. Placer deposits are sometimes called “secondary deposits” because they are derived from the lode deposits. Gold is more dense than the rock enclosing it in a lode deposit. When erosion or other deterioration causes the enclosing rock to fall away, the gold can be washed away in small pieces – flakes or even larger nuggets. Placer deposits conjure images of scraggly 19th-century prospectors panning a Western stream for a windfall.

Maybe it was a glint of gold in a stream that caught the eye of the first human to recover the metal, value it, and go back in search of more. In the Periodic Table of Elements, gold’s symbol is “Au,” which is derived from the Latin word aurum, meaning “glowing dawn.” As humans recovered more of the metal and worked with it, they discovered it was durable and retained its luster over time. Medieval alchemists called it a “noble” metal because it does not oxidize under normal conditions.

They also discovered that gold was malleable and could be worked and shaped into decorative forms. There is no greater evidence of ancient civilizations’ lust for gold than the tomb of Tutankhamen, discovered in 1922 by English archaeologist Howard Carter. Egypt’s boy king of the 1300s B.C. died at the age of 18 to 20. His tomb was a gold treasure trove of unimaginable proportions – gold figurines, gold funerary objects, the king’s famous gold death mask, and much more.

The Use of Gold in Coinage

In time, gold and other precious metals became mediums of exchange – items of value that could be traded for goods and services that did contribute to basic needs. At first, gold traded in base form; each quantity had to be weighed and tested for purity with each transaction. The kingdom of Lydia, which was located in part of modern-day Turkey, is credited with producing the first coins in 700-650 B.C. They were made of electrum, a natural alloy of silver and gold found in the region’s rivers. King Croesus of Lydia is credited with producing the first pure-gold coin about a hundred years later.

Great Britain, 5 guineas, Charles II | Gold History

Great Britain, 5 guineas Charles II,
ruled 1660-1685

The concept of coinage gave new form to gold and other precious metals. Coins were produced in standard sizes and purity, if but crudely at first, thus eliminating the need to determine the precious metal’s value with each transaction. Civilizations that followed, including the Greeks and Romans, continued to advance the concept of coinage. Advancements in coinage methods allowed for more elaborate designs to be placed on coins, such as images of rulers and other icons of a people and nation. Thus, coins became symbols of sovereignty and nationalism.

Nations continued to strike gold coins for circulation in the centuries that followed and continued their quest to find more of the precious metal. In the 15th and 16th centuries, that quest led to exploration of the New World by Europe’s most powerful nations. Hernando Cortés, for example, conquered Mexico for Spain and claimed Emperor Montezuma II’s gold as his reward. In December 1606, three ships loaded with supplies and men of various skills left the London-area docks and headed down the Thames for the open water of the Atlantic. Their destination was Virginia in the New World. Their goal was exploration and riches – “to get the pearl and gold.” Their ultimate accomplishment was the first permanent English settlement in North America – the Jamestown colony.

Introduction of "The Gold Standard" in the U.S. & Internationally

Gold issues remained a staple of world coinage into the 1600s and 1700s. In the 1800s, paper money became an economical substitute for precious-metal coinage, but the paper issues remained backed by gold or silver. Nations guaranteed that the paper issues could be exchanged for precious-metal coinage – either gold or silver. A guarantee of exchange in gold became known as the “gold standard.” It required that nations retain a certain amount of gold so they could meet demand for redemption of paper issues. It prevented nations from printing an unlimited supply of paper money and thus stabilized monetary systems. Major trading nations agreed to fix the price of gold at $20.67 a troy ounce. This meant that a U.S. gold $20 coin had to contain 0.9677 ounces of gold for its intrinsic value to match its face value.

Lydia, gold stater of King Croseus | Gold History
Lydia, gold stater of King Croseus | Gold History

Lydia, gold stater
of King Croseus

Ultimately, however, the system proved to be too inflexible. Nations could not adjust their money supply in response to economic conditions. The financial demands of World War I caused many nations to abandon the gold standard. They continued to strike gold coins for circulation into the 20th century before abandoning the yellow metal and eventually all circulating precious-metal coinage later in the 1900s.

Today, gold plays a diminished but still important role in the world economy. The International Monetary Fund, which has 184 member countries and is based in Washington, D.C., holds 103.4 million troy ounces of gold at designated depositories. The IMF promotes “international monetary cooperation, exchange stability, and orderly exchange arrangements” among its members. The IMF says gold provides “fundamental strength to its balance sheet,” but it no longer is the common denominator in determining exchange rates and is no longer used in transactions between the IMF and its members.

The United States is an IMF member and also retains its own gold reserves. They are stored at the U.S. mints in Denver and Philadelphia, the San Francisco Assay Offi ce, the West Point Bullion Depository in New York, and, the most famous one of all, the Fort Knox Bullion Depository in Kentucky. The Fort Knox facility was completed in December 1936 and consists of a two-story basement and attic building constructed of granite, steel, and concrete. The U.S. Mint says the gold stored in the depository is in the form of bars of almost pure gold. The bars measure 7 inches by 3 5/8 inches by 1 3/4 inches and contain 400 troy ounces of gold each.

Many countries today issue gold commemorative coins and gold bullion coins. The commemoratives are legal tender but are not intended for circulation. They are sold at a premium above face value directly by the national mint issuing the coin. The U.S. Mint, for example, strikes and sells gold commemorative coins, as mandated by laws authorizing specific issues. Bullion coins are also legal tender and have a face value, but they are usually bought and sold solely for their precious-metal content. Gold bullion coins come in various sizes from a quarter troy ounce to one troy ounce and offer private citizens a convenient medium for owning the precious metal.

The Ever-Changing Value of Gold Coins: Market Demand & Prices

Gold is weighed in troy ounces. A troy ounce (31.103 grams) is slightly heavier than an avoirdupois ounce (28.350 grams). Twelve troy ounces equal one troy pound. When used in coinage, gold is alloyed with a small amount of other metal to facilitate production. The purity of gold in a coin is called “fineness,” which is expressed in parts per thousand. For example, a oneounce American Eagle gold bullion coin is 0.9167 fine, which means it has 916.7 parts of pure gold for every 1,000 parts of total metal in the coin.

Gold Prices: Historical Chart
1850 -- $18.93
1855 -- $18.93
1860 -- $18.93
1865 -- $18.93
1870 -- $18.93
1875 -- $18.94
1880 -- $18.94
1885 -- $18.94
1890 -- $18.94
1895 -- $18.93
1900 -- $18.96
1905 -- $18.92
1910 -- $18.92
1915 -- $18.99
1920 -- $20.68
1925 -- $20.64
1930 -- $20.65
1935 -- $34.84
1940 -- $33.85
1945 -- $34.71
1950 -- $34.72
1955 -- $35.03
1960 -- $35.27
1965 -- $35.12
1970 -- $36.02
1975 -- $160.86
1980 -- $615.00
1985 -- $317.00
1990 -- $383.51
1995 -- $383.79
2000 -- $279.11
2005 -- $444.74
Average daily price. Source: National Mining Association.

Gold coins with collectible or numismatic value sell for a premium above their gold bullion value. The extent of the premium depends on the coin’s grade or condition, its rarity, and the demand for the coin in the collector market. Premiums over gold value can vary from a few percentage points for bullion coins to several hundred percent for high-quality or rare collectible coins. If the premium is high, the coin is not affected as much by fluctuating market prices for gold bullion. If the premium is low, the coin’s value is more likely to be affected by the ups and downs of the gold bullion market.

Just as their ancient predecessors made transactions easier, gold coins today are an attractive means for investing in precious metals because of their standard sizes and known gold content. They also provide the satisfaction and enjoyment of pursuing a collecting hobby.

Local coin dealers base their prices on the world gold markets when buying and selling gold bullion coins or gold coins whose values are affected by their bullion content. The benchmark price per troy ounce worldwide is the twice-daily fixings of the London Bullion Market Association. The fixings allow association market participants to buy and sell large quantities of gold over the counter at a single quoted price. They also provide a reference price for many small, private transactions at local outlets, such as coin shops.

The fixing is based on the price at which gold has been trading and is a balance between dealers’ buy and sell orders. Many trades worldwide are settled at the London p.m. fix. In New York, gold trades daily on the New York Mercantile Exchange from 8:20 a.m. to 1:30 p.m. “New York spot” is the price at which gold is trading at any given moment during normal trading hours and is another way to determine a gold coin’s value. “New York close,” or the day’s last price, is also a benchmark for some gold trades.

Great Britain, 1839 5 pounds, proof | Gold History

Great Britain, 1839 5 pounds, proof

A number of Web sites and financial news services publish the London fixings and New York spot prices throughout the trading day as well as historical charts and data. The price of gold is published in most daily newspapers, too. The London and New York exchanges also operate futures markets, where contracts for future delivery of gold in standard form can be purchased.

Factors that can affect the price of gold include supply, demand, the rate of inflation, the U.S. dollar’s value against other major currencies, local and international economic conditions, and major world events. Because gold is priced in U.S. dollars, it often, although not always, has an inverse relationship to the dollar’s value. If the dollar rises against other major currencies, the price of gold tends to fall. Conversely, if the dollar decreases in value, gold often rises.

For many years, gold was considered a hedge against inflation. Inflation decreases the dollar’s buying power, but gold tends to hold its value by increasing in price during high inflation. Although this is the trend, it is not always the case. The world economy is now more complicated. Markets are connected among many countries, where many factors can influence the price of gold. Gold’s future value, therefore, is difficult to predict.

In the United States, gold ownership was restricted to coins with collectible value from 1933 until 1974. On January 31, 1934, the United States raised its official price of gold to $35 a troy ounce. The official price was raised again to $38 a troy ounce in 1971 and $42.22 a troy ounce in 1973. U.S. restrictions on private ownership of gold were lifted in 1974, and the price of gold was now determined by the free market.

Gold prices rose steadily, reaching a high of $852 a troy ounce in January 1980. The post-1980 low of $256 an ounce was set in May 2001. Since then, gold has trended upward. The financial crisis of 2008 put people on edge. This in part helped push the metal over $1,900 by August 2011.

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