Hi,
If you’ve spent any time exploring the world of precious metals, you’ve probably come across the term “legal tender,” especially when looking at coins issued by national governments. But what does it actually mean, and how does it relate to precious metals like gold and silver? Let’s break it down and see how it fits into your investment journey.
What Is Legal Tender?
Legal tender refers to money that is officially recognized by law as acceptable for settling debts. In simpler terms, it’s the kind of currency that people are legally required to accept if offered to pay off a debt. This includes paper money and coins issued by a government.
When it comes to precious metals, legal tender status applies to certain coins minted by government authorities. These coins have a face value printed on them, making them technically usable as currency within the issuing country. However, their real value often comes from the gold or silver they’re made of, which can far exceed their face value.
Examples of Legal Tender Coins
Here are popular globally recognized legal tender coins:
American Gold Eagle & Silver Eagle: These coins are legal tender in the United States. The Silver Eagle has a face value of $1, moreover, the face value of the Gold Eagle depends on its weight.
Canadian Gold Maple Leaf & Silver Maple Leaf: Issued by the Royal Canadian Mint, these coins are legal tender with face values like $50 for the 1 oz Gold Maple Leaf and $5 for the 1 oz Silver Maple Leaf.
Austrian Gold Philharmonic & Silver Philharmonic: Minted by the Austrian Mint, these coins also carry legal tender status, with face values listed in euros.
Why Legal Tender Matters for Precious Metals
Legal tender coins bring something unique to the table when compared to other forms of precious metals. Here’s why:
- Mint Quality
Coins with legal tender status are produced by government mints, adhering to strict standards for weight, purity, and authenticity. This provides peace of mind to both investors and collectors.
- Tax Advantages
In some countries, legal tender coins come with tax benefits, like exemptions from value-added tax or capital gains tax. Be sure to check the rules in your area to see if you qualify for any of these perks.
- Global Recognition
Legal tender coins are recognized and trusted worldwide. This makes it easier to sell or trade internationally compared to privately minted bullion.
- A Backup Form of Currency
Although their face value is minimal compared to their intrinsic metal value, legal tender coins could still technically be used as currency in extreme situations.
Legal Tender vs. Bullion Bars
Legal tender coins are officially recognized as currency, but bullion bars and privately minted rounds are not. Bullion bars are valued purely for their metal content, with no face value. Choosing between legal tender coins and bullion bars often comes down to factors like liquidity, premiums, and personal preference.
What Investors Should Consider
If you’re thinking about adding legal tender coins to your portfolio, keep these factors in mind:
Premiums: Legal tender coins often cost more than bullion bars due to their collectibility, craftsmanship, and official status.
Storage: Coins are generally easier to store and transport than large bullion bars.
Resale Value: Legal tender coins are easier to resell because they’re widely recognized and trusted.
Conclusion
Legal tender coins combine the best of both worlds: monetary value backed by governments and the intrinsic worth of precious metals. While you could technically spend these coins, their real value lies in their gold or silver content. For investors and collectors, they’re a dependable and versatile choice, offering both beauty and credibility.
Ready to add some legal tender coins to your collection?
At AU Bullion, we offer a wide selection at competitive prices. Browse our Gold Maple Leafs, Silver Eagles, and more to find the perfect balance of investment and artistry for your portfolio!
