Author Topic: Why do governments mint gold and silver coins and sell them above spot?  (Read 1526 times)

seattleite

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I'm trying understand something. Several governments of the world (US, Canada, South Africa, China) mint gold and silver coins that are official currency but which they sell above spot and far far above the face value of the coin.

What I would like to understand is why.

The argument could be made that South Africa was trying to help its mining industry market gold around the world.

But what about everyone else? Here are possible reasons that I've thought of off the top of my head:

- It's a profitable business and thus provides more money for gov operations... But the total premium they bring in is probably minuscule compared to tax revenue.
- They don't like seeing other country's currency brought into their country so they decided to make their own. Pride I guess... Would congress really waste their time on pride. Seems likely.
- They are trying to get rid of their gold reserves since that gold is just sitting in underground doing nothing... I don't know about this. Seems like they don't really actually need physical gold reserves anymore. They could go 100% fiat and be fine. But this sounds too conspiratorial to me.

Any other ideas?

daverobev

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It's a business. That's all.

AFAIK the Canadian Mint doesn't use the country's bullion reserves to make their coins; they buy it in from wherever, and sell it after minting it.

People buy it because "official" stuff carries a greater premium than "generics" because they are more recognisable (ie, an American Eagle, or Canadian Maple Leaf, or British Sovereign are very well known in precious metal circles - you can easily trade them in, should the Global Financial System collapse).

Some people collect stamps, some collect... I don't know, whatever. Some like coins.

Some like just owning silver/gold and will buy the cheapest vs spot - be it bars, ounces, whatever. But others prefer limited edition, 'special' stuff.

But, yeah, it's basically supply and demand - as long as people want to pay $50 for 1Oz of silver (when spot is $20 or whatever), of course the government is happy to sell it to them.

IIRC in Canada the Mint is a separate Crown Corporation - they are there to make money and, er, make money while they are at it :)

effigy98

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Read this: https://www.govtrack.us/congress/bills/107/hr4846/text

Profit and jobs basically. At first it was to reduce the stockpiles.

MustacheAndaHalf

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It's possible you're comparing a freshly minted gold eagle to the price of raw gold per ounce, which skips over some key differences.  Check a third-party seller and you'll see gold eagles sell above the bullion price.  In addition, the U.S. mint has fresh coins - no time spent in circulation, so if you're collecting the quality could be higher.  A third-party seller may have circulated gold eagles you could compare prices against.

glassgost

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Also, I'm pretty sure the coins I see on commercials here in the States aren't actual money made by the US Mint.