Letter Re: Bullion Coins vs American Gold Eagles or Junk silver

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Hugh,

I saw this on Tuesday’s blog and thought I would expand the thinking a bit.

K.W. correctly pointed out that bullion coins, like Krugerrands and Maple Leafs, are often sales-taxed where legal tender coins are not is a notable observation. But it only tells part of the story. I recently wrote an article comparing the many ways to buy, sell, and hold precious metals in their various forms. One big advantage of U.S.-issued and denominated gold and silver coins is that both the current American Eagles and also many older coins are the only precious metal that qualify as U.S. legal tender.

Here’s why that makes a difference: While U.S. states cannot create their own currency, states are allowed under Article 10 of the Constitution to formally recognize and declare use of gold and silver coin as legal tender. As of this writing, the states of Oklahoma, Utah, Texas, and Louisiana have already done so, and 10 other states have considered similar legislation. With such a law in place, gold and silver coins may be used as legal tender (actual money) at least in those states, and they would have a value set at the current market price. It also means that the use or exchange of U.S. gold and silver coins in those states is not subject to capital gains tax or sales tax since they are no longer considered a pure commodity in the same way as non-minted bullion or bullion coins are. This gives U.S.-minted gold and silver coins an extra edge of legitimacy and acceptance not shared by other forms of bullion. Note that all officially circulated U.S. coins that contain silver or gold are included under this protection. Yet one more reason that pre-64 junk silver has such appeal. Most experts seem to agree that U.S. legal tender gold and silver coinage would be the least likely form of precious metal to face confiscation.

Wontogo in Tucson

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