What Is a Gold Certificate?
A gold certificate is a paper document that represents a claim on a specified amount or value of gold. When the U.S. dollar was tied to the gold standard, gold certificates were worth their face value in U.S. dollars and could be used as legal tender. Gold certificates are still issued to investors as proof of ownership of gold stored by a bank.
The U.S. abandoned the gold standard in 1933. Gold certificates issued by the U.S. Mint are now collectors' items. A gold certificate can be purchased on eBay for about $10-$200 or more depending on its age, rarity, and condition.
Understanding the Gold Certificate
Gold certificates represent ownership of a quantity of gold, similar to the way that stock certificates represent an ownership share in a company. U.S. gold certificates served the same purpose. In addition, from about 1879 until they were phased out the certificates were identical in value to the same denomination in U.S. currency.
- The U.S. issued gold certificates that were identical in face value to their dollar denominations from 1879 until 1934 when the country abandoned the gold standard.
- U.S. gold certificates now have only collectible value.
- Gold certificates are still issued by some banks and other companies as proof of ownership of the stated amount of gold bullion.
Gold bullion is difficult to carry around or exchange for goods or services. Gold certificates made it practical to own and use gold. Today, gold certificates continue to be issued to investors as receipts that prove ownership of the stated amount of gold.
Gold Certificate Designs
U.S. gold certificates resemble paper banknotes made in the same period with some distinguishing features. The designs varied over the years but most had bright orange-colored backs and a gold-colored U.S. seal on the front.
A $1,000 gold certificate printed in 1907, for example, has the denomination in all four corners on the face but is inscribed "IN GOLD COIN" below a portrait of Alexander Hamilton. It also has a gold seal and a gold serial number on the front, and the distinctive orange back.
Since the value of the dollar itself was tied to the value of gold, between 1879 and the time they were phased out, the certificates were essentially a parallel currency and were technically exchangeable as such, although they were not often used in routine transactions.
A gold certificate proves ownership of a quantity of gold just like a stock certificate proves ownership of a share in a company.
Gold certificates were in general circulation in the U.S. until President Franklin D. Roosevelt removed the dollar from the gold standard in 1933.
Gold Certificates Today
Some banks and investment companies in the U.S. and abroad still issue gold certificates. These generally specify an amount in ounces. Their dollar value fluctuates with the market. That makes them an investment in precious metals rather than an investment in currency.
It is worth noting that this modern trade in gold certificates can be risky. If the company that issues the certificate goes under, the certificate is as worthless as a stock certificate for a bankrupt company.