A gold certificate in general is a certificate of ownership that gold owners hold instead of storing the actual gold. It has both a historic meaning as a US paper currency (1882–1933) and a current meaning as a way to invest in gold.
Banks may issue gold certificates for gold which is allocated (non-fungible) or unallocated (fungible or pooled). Unallocated gold certificates are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the issuing bank’s gold on deposit. Allocated gold certificates should be correlated with specific numbered bars, although it is difficult to determine whether a bank is improperly allocating a single bar to more than one party.
The gold certificate was used from 1882 to 1933 in the United States as a form of paper currency. Each certificate gave its holder title to its corresponding amount of gold coin. Therefore, this type of paper currency was intended to represent actual gold coinage. In 1933 the practice of redeeming these notes for gold coins was ended by the U.S. government and until 1964 it was actually illegal to possess these notes. (In 1964 these restrictions were lifted, primarily to allow collectors to own examples legally; however the issue technically converted to standard ‘legal tender’ with no connection to gold.) When U.S. paper money was modernized (made smaller, with fewer variations or “types”, as with current paper money) in 1928, gold certificates ceased to be issued.
When the U.S. was taken off the gold standard in 1933, gold certificates were withdrawn from circulation. As noted above, it was illegal to own them. That fact, and public fear that the notes would be devalued and made obsolete, resulted in the majority of circulating notes being retired. In general, the notes are scarce and valuable, especially examples in “new” condition.
Historic US gold certificates (1882-1933)
The early history of United States gold certificates is somewhat hazy. They were authorized under the Act of March 3, 1863, but unlike the United States Notes also authorized, they apparently were not printed until 1865. They did not have a series date, and were hand-dated upon issue. “Issue” meant that the government took in the equivalent value in gold, and the first several series of Gold Certificates promised to pay the amount only to the depositor, who was explicitly identified on the certificate itself. The first issue featured a vignette of an eagle uniformly across all denominations. Several later issues (series 1870, 1871, and 1875) featured various portraits of historical figures. The reverse sides were either blank or featured abstract designs. The only exception was the $20 of 1865, which had a picture of a $20 gold coin.
The Series of 1882 was the first series that was payable to the bearer, it was transferable and anyone could redeem it for the equivalent in gold. This was the case with all gold certificate series from that point on, with the exception of 1888, 1900, and 1934. The series of 1888 and 1900 were issued to specific depositors, as before. The series of 1882 had the same portraits as the series of 1875, but a different back design, featuring a series of eagles, as well as complex border work.
The fronts of all gold certificates from 1870 to 1882 had the portrait off to one side (usually left, but occasionally the right) and a large denomination counter opposing it. The middle section held the correct verbiage and signatures, both of which varied extensively over the years.
The issues of 1905, 1907, and 1913 featured different designs, more like “modern” currency. These featured a central portrait and the customary “numbers in the corners, words on top and bottom”. The reverse design was abstract, and incorporated the Great Seal of the United States.
Gold certificates, along with all other U.S. currency, were made in two sizes—a larger size from 1865 to 1928, and a smaller size from 1928 to 1934. The backs of all large-sized notes, and also the small-sized notes of series 1934, were orange. The backs of the series 1928 bills were green, and identical to the corresponding denomination of the more familiar Federal Reserve Notes, including the usual buildings on the $10 through $100 designs and the less-known abstract designs of denominations $500 and up. With the 1934 issue, the promise to pay was amended with the phrase “as authorized by law”, as redemption was now restricted to only certain entities. The phrase “in gold coin” was removed as the physical amount of gold represented would vary with changes in the government price.
Another interesting note is the Series of 1900. Along with the $5000 and $10,000 of the Series of 1888, all 1900 bills ($10,000 denomination only) have been redeemed, and no longer have legal tender status. Most were destroyed, with the exception of several 1900 $10,000 bills that were in a box in a post office near the U.S. Treasury in Washington, D.C. There was a fire on December 12, 1935, and employees threw burning boxes out into the street. The box of canceled high-denomination currency burst open. Much to everyone’s dismay, they were worthless. There are several hundred outstanding, and their ownership is technically illegal, as they are stolen property. However, due to their lack of intrinsic value, the government has not prosecuted any owners, citing more important concerns. They carry a value of several hundred dollars in the numismatic market. This is the only example of “circulating” U.S. currency that is not an obligation of the government, and thus not worth the full face value.
Summary of Gold Certificate series. All designs are black obverse and gold reverse, unless otherwise noted.
to depositor variants:
- 1865: eagle on front, abstract design on back
- 1870, 1871, 1875: portrait on front, same abstract design on back
- 1888: similar to 1875, except blank reverse
- 1900: similar to 1888
to bearer variants:
- 1882: slightly modified front from 1875, with offset portrait. New back design featuring eagles.
- 1905–1913: new design, similar to modern currency, central portrait, Great Seal of the United States on reverse.
- 1922: design elements taken from 1882 or 1905–1913.
- 1928: similar to Federal Reserve Notes, green back.
- 1934: similar to above, gold back, for bank use only to settle gold balances. “As authorized by law” replaced “in gold coin” in the promise to pay. Still not legal to privately own.