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100 Gold American Buffalo Coins
2008 SP70 FDOI American Buffalo $10 Gold Coin
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Frequently Asked Questions...
Why is a u.s. gold currency worth more than the stated amount?
My friend recently began to invest in commodities. He bought a $50 USD gold coin (http://en.wikipedia.org/wiki/American_Buffalo_%28coin%29) for somewhere around a thousand dollars. My question is why has society determined that this $50 gold piece is worth more than 50 dollars. I'm confused because gold is valuable because of its material properties (doesn't rust etc.) but once the U.S. government mints the coin or prints the money it doesn't matter what it is or what it is made of it has the value that is printed on it. A $100 bill is worth 100 even though it is printed on the same paper as a $1 bill and it seems to me that a $50 coin should be worth $50.
Answer:
As of today, gold spot price is $1183 per troy ounce. The coins you are describing are not intended to circulate, and only an utter fool would spend one for $50. The denomination is what makes it a coin and not merely a gold medallion. It is a marketing gimmick, if you will. The US Mint sells these coins at around 10% over the value of the gold, not face value.
The $1 American Eagle one troy ounce silver coins have a face value of $1, but you will never see one spent for a dollar (unless it is a stupid child that stole it out of Dad's coin collection, which I have seen before). The one ounce of silver is worth around $17.80.
Yet another example is pre-1965 US 90% silver coins, which actually were in general circulation at one time, but no more. It would be foolish to spend them when your friendly local coin dealer pays a minimum of 10 times face value for them.