There’s good news for currency purists in Utah. If a shopper is so inclined, she could use gold and silver coins to make purchases. Technically, that has always been the case, but now there is a law on the books that makes it clear. There is a slight problem with this idea, however. The legal value of a coin is the face value, the amount that is listed on the coin through the minting process. The commercial value is not based on the coin’s intrinsic value. In other words, you may have paid $1,000 or more for an ounce of gold in coin form, but to a retailer, it’s only worth $50.
The true purpose of this law is to establish silver and gold coins or bullion as currency rather than an investment. With this in place, investors won’t owe state taxes for investment gains or sales taxes when they sell, but they will still owe federal taxes. Bullion is generally held for investment rather than transactional purposes, so until now, the capital gains tax would apply when gold and silver are exchanged for cash or other investments.
The secondary purpose of this law is to flaunt the state’s power in the face of the Federal Reserve. The Federal Reserve has effected the move away from using gold and silver as currency. Some influential people throughout the country are calling for abolishment of the Federal Reserve system and a return to a gold-based currency, but it’s unlikely such a drastic shift will take place.
Don’t start breaking your bullion out the vault for use at the grocery store, but with prices at historically high levels, it might be a good time to consider selling. This isn’t investment advice, though.
Updated October 9, 2016 and originally published March 30, 2011.
{ 20 comments… read them below or add one }
I’ll gladly sell you a hamburger today for some gold bullion :)
and how…i understand what they are trying to do, but this is just crazy. no one will even think of doing this. this whole issue is a waste of time.
Does this only apply to minted coins? Assuming that it’s only the written value on a coin, a silver dime will only be worth 10 cents, when it’s really worth a lot more. If it’s the true value, that would be a nightmare for retailers if people actually used silver and gold pieces for purchases.
The law in Utah recognizes the face value of the coins, so a silver dine is worth ten cents for purchases, just like it would be anywhere else in the country, and a gold eagle would be worth $20, just like it is marked on the face. You’d have to be a little crazy to take a gold eagle worth $1,300 or so in metal content and use it to buy something worth $20.
I should open a retail store in Utah and have a nice sign that says “we know take your gold and silver”. No need for markup on products, since the real value of the money given would be significantly more than one could earn with a typical markup.
Wish I had thought of this idea.
You’d have to be crazy to use gold at face value. Do they think it will work? Lucky merchants if it does, but I doubt it.
It depends on how the law is written, but this is possibly unconstitutional. A state is not allowed to coin money.
Well, states are prohibited from coining money, but what they’re doing would not be considered coining money — that’s the job of the U.S. Treasury Department (and the U.S. Mint) who create the coins and bullion. States are also prohibited from making anything other than gold or silver legal tender, and since this Utah law refers to gold and silver, I think they’re OK on that provision as well. I am not a lawyer, though.
Wow. I can’t imagine people actually using gold at such a loss, so what is the point of the law?
As mentioned in the post, the real point seems to be to prevent the state from collecting tax on the exchange of gold and silver, and possibly send a message that they’re not happy with the Federal Reserve system.
I’d rather pay the tax the lose the real value of the gold or silver coin.
I also see where a law like this can be used to benefit people down the road in the event something happens to the FED and our money.
seems like this is more of a political message at the Federal Reserve.
Welcome to Utah, home of green jello and ridiculous laws taxpayers are paying to have passed! (BTW-I live there!)
I’m sorry Flexo you are 100% incorrect on the value of the US coin as used in Utah.
“The core component of this new law is the legalized recognition of gold and silver coins (issued by the federal government) as legal currency within the state. They may be used voluntarily by consenting parties, and rather than recognizing the face value of the coin (a horribly distorted metric of the coin’s worth), the market price of the gold or silver content is recognized as its value.”
link
The face value of the coins means nothing.
Mark Herpel
[email protected]
Mark: the blog you linked to is not fully correct. There is nothing in the law that specifies that the transactional value of gold or silver bullion minted by the U.S. Mint is deemed to be the market value of the intrinsic value of the coin. Here’s the law, if you want to read it for yourself. Barring no definition of the value beyond “legal tender,” I would trust CNN’s analysis over a random blog: “So even if the actual precious metal in your $50 coin has a market value of $1,400, it still only has $50 dollars worth of purchasing power.”
Without it defined in the law, I would further say that people are free to assign whatever value they want as long as both parties agree. For investment purposes — and in Utah’s case, that means no more capital gains tax for gold and silver — the bullion would probably retain its value as defined by the market, but there is no such wording about this in the law for consumer purposes.
For practical purposes, if I were accepting gold for a payment, I would consider the market value of the metal — but the law doesn’t lay this out.
SKYLOG: At the very least, Utah is showing strength and independence. This is a start. Hopefully other states will follow and the gold standard will be forced back into use.
But a retailer could just say a 1450 dollar item would be 1450 in paper or 20 dollars in gold coin.
I think it opens the door for real money to be minted again..For instance a 10 dollar silver coin with 1/3 of an oz of silver etc.
The value of an item purchased is between the seller and the buyer. A Federal Reserve Dollar, a old U.S. Treasury dollar, a silver U.S. Eagle, a Morgan dollar or a Silver Certificate dollar are at face worth the same amount in dollars. A seller may specify type of money for the sale and may refuse to accept federal reserve notes. U.S. Code only specifies that a lender may not use the courts to enforce a debt if payment is offered in federal reserve notes and not otherwise specified. A contract with a gold clause, legal since 1986, may specify payment in gold.
A home sold for 6,000 U.S. silver dollars, has been sold for $6,000 dollars (face value). What the home seller does with the 6,000 silver dollars is his business. Hmmmm could this generate a capitol loss if it was originally purchased with federal reserve notes? Interesting concept.
If hyperinflation develops in this country, the value of gold and silver will become apparent and some who laugh today will watch sadly as their unbacked federal reserve notes become worthless in their hands.
Thanks to Ron Paul and other wise people for the knowledge about real money.