American Silver Eagle (1oz fine silver – one dollar) coins are guaranteed by the United States Government to have a face value of one US Dollar, and are certified by the US Mint to contain 1 ‘troy ounce’ of 99.9% pure silver. While that may sound impressive, what does it really mean?
Although not in circulation as a common currency, these coins are legal tender. Their real value today, however, is much higher than their face value. Their actual worth is determined by the weight and purity of the precious silver that they contain – according to the spot value of silver in the market place – and to some degree, by the higher quality and the rarity or limited mint production of proof and uncirculated versions of the coins.
The American Eagle Silver coin has been minted in bullion, proof, uncirculated and special issue versions in various years since 1986. In 2010, for example, bullion Silver Eagles (minted in the millions) have sold for around $20.00, while the rarer proofs and uncirculated versions (minted in the thousands) have been priced from $55.00 to $90.00. The special issue 2006 Anniversary set has sold for as much as $300.00, while the rarer 1995-W proof issue has been valued at $3,500.
So, why so much disparity with the US Dollar?
Historical Devolution of the US Dollar
A look at the history of the US Dollar will surely give you pause about its value or purchasing power and will make you feel much better about the American Silver Eagle.
The US Dollar today is considered a ‘fiat’ currency – money established by government decree, not guaranteed to be convertible to anything material, but acceptable for the payment of taxes and other legal trade. This has not always been the case.
As early as the 17th century, the American colonies used Spanish Dollar coins or ‘Pieces of Eight’ as their unofficial national currency. Later, the United States Constitution declared that money had to be coins and not printed and that only gold and silver would be acceptable as legal tender. The Coinage Act of 1792 defined the US Dollar as 371.25 ‘grains’ of Pure Silver.
The ‘Constitutional Dollar’ then devolved into Gold and Silver Certificates that came into being in 1863 and 1878 respectively. At least they were redeemable in ‘real honest’ gold coin and silver dollars. 71 years later, in 1934, Gold certificates were made illegal to own, by President Roosevelt, and then redemption was halted on Silver certificates by the Secretary of the Treasury in 1964.
From the late 19th century, monetary trade was conducted more and more using promissory notes or paper money with strict requirements for annotating with a ‘date payment due on demand’, the ‘amount to be paid’, the ‘maker of the note’ (or the Federal Reserve), and the ‘payee’. In 1963, the requirement for ‘due date’ and ‘payee were dropped, reducing their status from legal promissory notes to simply ‘promise to pay’ paper fiat money, not redeemable in either silver or gold.
The Federal Reserve Act of 1913 instituted the Federal Reserve Note (FRN or paper money) which has carried on until this day.
Thus, the ‘US Dollar’ has devolved from the pre-constitutional Spanish Dollar coin to Certificates redeemable in Gold and Silver Dollars to non-redeemable fiat paper money.
What’s worse is that the purchasing power of the US Dollar in the form of the Federal Reserve Note has shrunk since 1913 by about 95%, resulting in commodity prices (including precious metals) rising accordingly.
It seems that we would have been much better off with the US Dollar as originally defined in the Constitution in the form of a defined weight (371.25 Grains) of silver. Holding a value of silver (or gold) would certainly have been a hedge against this significant inflation of the US Dollar.
With the unrelenting creation of debt and Federal Reserve Notes in the current economic climate, this hedge is very likely to be valid for the foreseeable future. That makes holding the American Silver Eagle with its troy once of silver particularly desirable.
So, the silver content in the American Eagle considerably outstrips the value of the US Dollar, but how do we gauge the real value of the silver?
American Eagle’s Silver Worth
We are all familiar – in the United States, at least – with thinking in terms of plain ounces and pounds, and miles and gallons for that matter. Most of us are not certain at all about ‘troy’ terminology when it comes to silver weight, or what it means to be 99.9% pure. If we are confident about these measures, we will likely be much more comfortable about the real value of the American Eagle coin.
We already know from the history of the US Dollar above that it is the pure silver metal that renders the real value of this coin, and not the ‘one dollar’ face value imprinted and guaranteed by the US Government.
We needn’t be concerned about the validity of the purity of the Silver Eagle (99.9%) since, after all, it is certified by the US Mint. This used to be an issue hundreds or thousands of years ago with precious metal based currencies when the guarantees of issuing governments may not have been as compelling and when techniques for testing purity were more subjective and inconsistent. Suffice to say that the 99.9% pure silver in the American Eagle is more valuable and of a higher grade than, for example, the 95.80% silver minted in the 1997 British Silver Britannia coin.
A ‘touchstone’ was used for centuries as a coarse test for the purity of gold and silver. The color of the stripe resulting from rubbing the coin on the slate-like surface of the touchstone would be compared to that of known levels of purity to establish a nominal measure. In more modern times, finer testing with a solution of Nitric and Hydrochloric acids was used to obtain a more accurate measure of the quality, given that the concentrations of the acids were properly controlled.
With today’s technology, there is little doubt as to the precision and accuracy of purity measurements of precious metals.
That brings us finally to the weight of silver in the ‘Eagle’. This, too, is certified by the US Mint, but in ‘troy’ ounces.
Most of us are more familiar with ‘ounces’ or what is less commonly referred to as ‘avoirdupois’ ounces. Interestingly, there are 12 troy ounces in a troy pound, whereas the pound we are more familiar with (the avoirdupois pound) has 16 ounces. Although the troy pound is no longer used for trade, the troy ounce has survived history’s evolution of international measurement standards. It is still in use for measurements of gold, silver, platinum and other precious metals.
The troy measure of weight dates back to the Middle Ages and was originally used in Troyes, France. Long before that, from 3000 BC, barley and other grains were used as a measure of weight to value silver and other precious metals. Both the troy and avoirdupois systems of measurement were commonly related to these grains. In the troy system, a troy pound was equivalent to 5760 grains.
In the 13th Century, King Henry III of England decreed that an English penny (called a Sterling) was equivalent to 32 grains of wheat. Through various interpretations, this established that one troy ounce being 1/20th the weight of a Sterling was equal to 480 troy grains. Later, the pound (avoirdupois) was officially fixed to exactly 7000 troy grains.
Through this historical maze of evolving standards, the troy ounce can be determined to be equivalent to 1.097 avoirdupois ounces. Thus, the American Eagle coin contains more than an ounce of silver – in terms of the US usage of the avoirdupois ounce.
I hope this helps your understanding of why the American Eagle’s troy ounce of silver is more than a US Dollar’s worth.
Source by Tim MacKenzie
The American Eagle"s "Troy" Ounce of Silver - More Than a US Dollar"s Worth
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