Gold Certificate: Meaning, Overview, History

What Is a Gold Certificate?

A gold certificate, issued as U.S. currency equivalents until 1934, proves ownership of a specific amount of gold.

Understanding Gold Certificate

When the U.S. dollar was tied to the gold standard, gold certificates were worth their face value in U.S. dollars and could be used as legal tender. Gold certificates are still issued to investors as proof of ownership of gold stored by a bank.

The U.S. abandoned the gold standard in 1933. Gold certificates issued by the U.S. Mint are now collectors' items. A gold certificate can be purchased on eBay for about $10-$200 or more depending on its age, rarity, and condition.

Gold certificates represent ownership of a quantity of gold, similar to the way that stock certificates represent an ownership share in a company. In the U.S., from about 1879 until they were phased out, the certificates were identical in value to the same denomination in U.S. currency.

Gold bullion is difficult to carry around or exchange for goods or services. Gold certificates made it practical to own and use gold. Today, gold certificates continue to be issued to investors as receipts that prove ownership of the stated amount of gold.

U.S. gold certificates resemble paper banknotes made in the same period with some distinguishing features. The designs varied over the years but most had bright orange-colored backs and a gold-colored U.S. seal on the front.

A $1,000 gold certificate printed in 1907, for example, has the denomination in all four corners on the face but is inscribed "IN GOLD COIN" below a portrait of Alexander Hamilton. It also has a gold seal and a gold serial number on the front, and the distinctive orange back.

Gold certificates were in general circulation in the U.S. until President Franklin D. Roosevelt removed the dollar from the gold standard in 1933. Since the value of the dollar itself was tied to the value of gold, between 1879 and the time they were phased out, the certificates were essentially a parallel currency and were technically exchangeable as such, although they were not often used in routine transactions.

Gold Certificates Today

Some banks and investment companies in the U.S. and abroad still issue gold certificates. These generally specify an amount in ounces. Their dollar value fluctuates with the market. That makes them an investment in precious metals rather than an investment in currency.

It is worth noting that this modern trade in gold certificates can be risky. If the company that issues the certificate goes under, the certificate is as worthless as a stock certificate for a bankrupt company.