Bullish on Gold Bullion
The dictionary definition of "bullion" is: 1) gold or silver considered in mass rather than in value, or 2) gold or silver in the form of bars or ingots. Over 60% of gold bullion trading today comes in the form of gold coins - and, in particular, in gold coins that are.999 pure, or 24-karat gold.
These gold coins are generally not bought by collectors but by investors. Collectors do buy them as well, but not in such vast quantities as investors do.
Until 1933, the United States produced gold coins (and silver coins) as legal tender. President Roosevelt put a stop to that, and indeed to private ownership of gold itself - except for numismatic purposes. In 1986, however, the United States decided to enter the bullion market, to take advantage of the income opportunities of this lucrative market.
In 1986, the U.S. Mint began producing the Gold Eagle. This coin is offered in 1/10 oz, 1/4 oz, 1/2 oz, and 1 oz denominations. The gold contained in each coin is guaranteed to come from American sources. It is not pure gold, but rather 22-karat (mixed with an additional alloy of silver and copper to produce a more wear-resistant coin of .91670 fine gold ).
The U.S. has competition in the gold bullion industry, however. South Africa produced Krugerrands that were also 22-karat gold, but Canada produced the Maple Leaf that was 24-karat, or .9999 pure gold, and investors much preferred the pure gold to the fine gold.
Therefore, in 2005, when the $1 Presidential Coin Act was passed, it included provision for the U.S. Mint to start producing gold coins in 24-karat. These consist of the First Spouse $10 series (containing ½ oz. Of gold) and the $50 Gold Buffalo (containing 1 oz of gold). There are two versions of these coins.
Proof sets are sets designed especially for the collector. To quote the U.S. Mint's own description: "The term "proof" refers to a specialized minting process that begins by manually feeding burnished coin blanks into presses fitted with special dies. Each coin is struck multiple times so the softly frosted and highly detailed images seem to float above the field."
The U.S. Mint sells proof coins directly to collectors. Its bullion coins, however, are sent in bulk to coin dealers, who sell them to investors. With the value of the dollar tumbling, investors feel that gold coins are the hedge against an uncertain future.
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