A History of Gold Coins
Gold and Silver coins have played a vital role in commerce since the rise of early civilizations in Sumer and Ancient Egypt. Once considered “the lifeblood of Mediterranean trade”, gold coins were initially traded by weight and could be cut up into small chunks or drawn into wire.
Historically, gold coins were associated with accounting purposes and tax payments to ruling parties, rather than circulation amongst the general public. The first real gold coins documented were made in Lydia (modern-day western Turkey) in 6th Century BC, and were made from electrum, a natural alloy of gold and silver found in the region’s rivers. These coins, varying in weight from 17.2 grams (0.55 troy oz) to as little as 0.2 grams (.006 troy oz), usually displayed an image of a lion or a bull on the face, while a punch mark or seal could be found on the other side.
The introduction of gold coins into commerce is generally credited to the Lydian king Croesus (561-547 BC). Developments in the refining process soon led to the minting of distinct silver and gold coins.
Gold coins were quick to surface in the blossoming Greek city-states just across the Aegean Sea, though they predominantly used silver until Philip II of Macedon (359-336 BC) acquired gold and silver mines in Thrace (modern-day Bulgaria). His son Alexander the Great (336-323 BC) defeated the Persian Empire, expanding the Greek empire and creating one of the largest empires in ancient history.
In his defeat of the Persian Empire, Alexander secured the immense wealth and vast collection of gold coins that the Persians had accrued from gold sources on the Oxus River in northern Afghanistan. Alexander is alleged to have looted over 22 metric tons (700,000 troy ounces) of gold coins from the Persians. For both Philip II and Alexander, gold coins became the ideal method of payment for various military costs. During the rule of the Greek empire, gold coins were stamped with the head of the king—in contrast to the lions, bulls and rams that had adorned the faces of coins previously.
Gold coins were critical for the Romans, who used them to pay their legions. The Romans also adopted the custom of striking their aureus gold coins with the image of the Emperor’s head. Aureus gold coins were generally 950 fine (22 carat) and weighed 7.3 grams (0.23 troy oz). In fact, 45 aureus gold coins weighed one roman pound (libra). Although these coins were far too valuable for most common, everyday transactions, they were used as payment for administrative and trading costs, as well as for the compensation of military officials (a legionnaire received one aureus gold coin per month). In Britain, one aureus gold coin bought 400 litres (28.57 gallons) of cheap wine or 91 kilos (200 pounds) of flour. The solidus coin, weighing in at 4.4 grams (0.14 troy oz) and smaller in size, was introduced after 300 AD in conjunction with the diminishing supply of gold coins from Spain and Eastern Europe.
The Romans minted gold coins on a scale previously unseen and unparalleled until modern times. Between 200 and 400 AD, hundreds of millions of gold coins were struck and distributed throughout the Roman Empire. The extent of their circulation is evidenced by the multitude of Roman gold coins than have surfaced all over Europe, particularly in Britain. These coins are displayed in various museums, most notably the British Museum in London. The British Museum’s HSBC Money Gallery provides a unique illustration of the evolution of early gold coins. The Roman Empire unified much of Western Europe through its cohesive public institutions and widespread gold coins. With the fall of Rome after 400 AD, gold coins also largely disappeared; only one thousand years later did gold coins reappear on a widespread scale. Solidus coins, however, survived the fall and endured as the primary coins of the Mediterranean, minted by the Byzantine emperors in Constantinople as the nomisma or bezant.
After the fall of the Roman Empire, the bezant was the staple gold coin, and endured until the rise of Venice with its famed silver and gold coins. Yet, due to a lack of new gold sources, minting became very scarce, and the value of gold coins was increasingly on the decline.
By 1081, the gold content of most coins was a mere 250 fine (six carats). The Emperor Comenus was able to restore some of the gold coin’s credibility and cache in 1092 with the introduction of a new gold coin, the hyperpyron, which weighed 4.4 grams (0.14 troy oz). Yet, these gold coins never attained much prestige, as gold supplies were nonetheless limited.
Indeed, much of the gold that was available from Africa after 700 AD was coined as the dinar by rulers of the expanding Islamic empire, which extended throughout the Middle East and along the coast of North Africa. Originating from Damascus, Baghdad and Tripoli, these coins were beautifully inscribed with Arabic script instead of imagery, since the depiction any human likeness was forbidden by Islam. Due to the Venetians’ rising power, by 1200 AD trade between the Europeans and the Islamic Empire increased drastically.
The growing prosperity of Europe, particularly Venice, absorbed the gold that had long traveled across the Sahara from West Africa to North Africa. Using African gold, coins were minted in Sicily In 1231, and then in Florence and Genoa in 1252. With the opening of its gold mint in 1284, Venice soon became the predominant gold supplier. A year later, the first ducat gold coins of 3.55 grams (0.114 troy oz) were introduced. These coins endured as a symbol of wealth and power for the next 500 years, becoming the most widely accepted gold coins since the Roman aureus and solidus.
Around 1300 the gold supply was replenished by the discovery of new mines in Hungary. Suddenly it was as if all of Europe was producing gold coins, and abundantly so; from 1338-39, the king of France minted nearly 10 tonnes (350,000 troy oz) of gold coins. In 1344, the mints of Florence, Genoa, Venice, Bruges, and London collectively coined over five tonnes (170,000 troy oz) of gold.
By 1500, the production of gold coins was evolving contemporaneously with supply. For example, in1457 Portugal issued new cruzado gold coins made of African gold, made possible by the large influx of gold that flowed into Europe overseas from West Africa. By 1503, the mint in Seville was utilizing gold from the Americas. King Henry VII minted the first British sovereign gold coins in 1489. At 15.55 grams (0.5 troy oz) and 958 fine (23 carats), they were valued at £1.00.
In South America, the availability of gold was relatively limited in comparison to silver, and thus the 16th and 17th centuries were marked by widespread European silver coinage. In England, however, Queen Elizabeth I did mint new gold coins and crowns in 1558 so as to restore the prestige of gold coins that her father, King Henry VIII, had so greatly debased. Yet, annual gold coin production in that era was generally limited to less than 300 kilos (10,000 troy oz).
Gold coins were only able to make a comeback upon the discovery of new gold sources in Brazil circa 1690. This added a new dimension to global coin production, and England adopted an unofficial gold standard, with gold replacing silver as the primary currency in circulation.
Brazil’s gold coins, moedas de ouro, were minted in Rio de Janeiro and Lisbon (as Brazil was then a Portuguese colony). Yet, multitudes of these gold coins surfaced in England and were re-coined into guineas, starting in 1663. The guinea gold coin, named after Africa’s “Gold Coast”, weighed 0.27 troy oz (8.7 grams) at 916.6 fine, with a nominal value of £1. Between 1713 and 1716, the British mint in London coined over 31 tonnes (one million troy oz) of gold into guineas.
The newfound abundance of gold brought with it a slight over valuation of gold coins. Silver, by contrast, had undergone a comprehensive re-coinage program a few years prior and was more mainstream. Thus, traders found it profitable to send gold to the mint and ship silver overseas for sale in India and China, where it commanded a higher premium. With the British mint often striking 3 to 4 million gold coins annually, vast quantities of guineas circulated; silver coinage in Britain was comparatively nonexistent.
The value of gold coins was established and solidified in 1717 when Sir Isaac Newton, Master of the Mint, set gold at the historic price of £4.4.11½d (£4.35), where it remained for the next 200 years. His decision confirmed a national preference for gold and unintentionally placed Britain on a de-facto gold standard. Gold coins remained the predominant coin currency in circulation until the outbreak of World War 1 in 1914.
The British gold standard was formally made official by the execution of the Coinage Act of 1816, which saw the guinea replaced by the British sovereign gold coin. The sovereign gold coin, at 0.25 troy oz (7.77 grams) and 916 fine, was the standard of valuation, and had unlimited legal tender.
The gold coin’s ultimate historical triumph occurred with the gold rushes in the US and Australia in the mid-19th century, during which time gold production increased five-fold. The minting of gold coins soared in the US and France during the 1850’s, and by 1900, most nations had switched from a silver to gold coin currency. It was in 1900 that the US finally adopted a single gold standard, abandoning their previous bimetallic gold and silver policy.
Virtually all gold mined during the 19th Century was converted into coins. During the gold standard’s reigning era prior to WWI, all of the Sovereign gold coins in Britain and Australia, Eagle coins in the US, Marks in Germany, Rubles in Russia, Crowns in Austria, Florins in Hungary and Napoleon coins in France accounted for over 13,000 tons (418 million troy ounces) of gold.
When the world went to war in 1914, governments began to hoard their gold, and the minting of gold coins was largely suppressed. During the Great Depression—in 1933, specifically—the United States government recalled almost all gold and gold coins from its citizens. This ended the universal dominance of the gold coin.