How much was a gold $20 Double Eagle worth in the late 1800s?

There are two problems with common stocks that prevent it from being a good hedge against inflation:

1). The value of common stocks is measured in dollars. If the value of the dollar crashes so does the value of one’s stocks.

2). Unlike gold which can be put in the back of one’s safe or buried and forgotten about, stocks carry risk. Many companies that someone might have invested in 50 years ago are no longer in business.

Gold isn’t meant to be a capital growth investment like stocks. It’s meant to be a wealth preservation technique to preserve purchasing power.

BullionNow did a great video explaining what I’m trying to say if you’re interested.

Here is the link:

 

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The value of gold "is measured in dollars". Does that mean that if the dollar crashes, so does the value of gold? Of course not.

Of course. On the other hand -- twenty years ago, I could've bought ten ounces of gold for $2750, or I could've divided that money equally among ten stocks. Suppose nine of those companies went bankrupt in the interim, but the tenth one was Apple. Today, the gold would be worth almost $19,000 -- but that $275 worth of Apple would be worth well over $100K. And that's ignoring dividends.

 

The difference is that gold can be sold for other currencies as well as used as a form of barter.

If the US Dollar is suffering from hyperinflation or something like that it’s easy to take one’s gold and sell it for British Pounds or Euros or something and still get the same purchasing power for it.

Also no one is saying not to buy stocks.

Most financial advisors recommend 90% stocks and 10% precious metals.

You’re also assuming that you pick the right stock like Apple.

Most people buy ETFs which would earn you on average about 9% per year. Way below what Apple’s return has been.

 

At the level of big market makers, it's easy to take one's stock and sell it for other currencies, too.

No, I'm assuming that nine times out of ten you pick the worst POSSIBLE stocks, and you get lucky only 10% of the time. In reality, you might not pick Apple or Amazon or Tesla -- but you also wouldn't pick nearly so many dogs and ride them into the ground.

Apple's return over 20 years has been 37% per year -- but, again, we only guessed right with 10% of our initial stake.

If you'd put that $2750 into a fund paying 9% per year, it would only be worth a bit over $15K now, a bit less than the gold.

But. BUT. Gold in early 2001 was at its lowest price in the last 40+ years, and today it's only 10% off of its all-time historic high (in nominal dollars). That's a prime example of picking your window. If you'd bought gold in 1981, you would've spent all of 2001 under water, with a 20-year return that was negative in nominal dollars, and much worse in actual purchasing power.

I do agree that gold is a good hedge in small quantities, though. I wouldn't be completely surprised if it loses half its current value (in nominal dollars) at some point in the future, but I would be surprised if it lost 90%, or went to zero. I'd be less surprised if Apple itself went to zero.

 

There was a pattern $50 struck in 1877. Only two struck in gold, both now in the Smithsonian. Called a "Half Union". [So now you have a great trivia question: What denomination is the Union? Answer" ten Eagles.] And there are the Panama-Pacific commemorative $50's, but 1915 is a bit after the "old west" ended.

 

The price of gold is also in dollars, so it's a wash.

Also, since you are an American and buy stuff in dollars, a fall in the dollar doesn't directly impact you unless you want to buy a Porsche or spend 3 months in Europe.

Ever hear of FDR's EO on gold ?

Yes, companies come and go, but overall the stock market goes up over time.

He's talking his book.

I have gold bullion and coins...but they are SPECULATIONS not INVESTMENTS.

 

Specie (a.k.a hard currency in the form of coins of various metal composition) was used as the standard for value and trade from about 2,600 years ago through the late 1800's; Gold and Silver being precious metals had intrinsically more value than Copper or Bronze coins and therefore the issuers (i.e. King or Government Body) would peg the value of the Gold or Silver in a ratio of say 10:1; 20:1; or 100:1. Over time (due to inflation or the need to raise capital for wars or projects, or just for reasons of greed) the issuers would revise the ratios, or reduce the actual weight or content of precious metal in the coins but keep the stamped face value the same. Ancient coins by their nature of manufacture lent themselves to being altered by debasement of alloy, by clipping or by filing. Eventually, issuers introduced standards of purity, weight and dimensions to make their coinage uniform so that they would more easily be accepted for international trade (NOTE: since the advent of balances for weighing, Governments weighed all coins that were obtained from other countries and did not rely on their face value alone to determine value), and to prevent widespread clipping or filing the Spaniards introduced milled (i.e. Reeded) coinage around the year 1500.

Coinage of Silver and Gold coins started in 1794 and 1795, but at first, these coins didn’t circulate as European coins and some Central and South American coins were acceptable and considered Legal Tender for use in commerce up until 1857 (also Colonial and Privately Minted coins that generally circulated in the area around their issuance). The Coinage Act of 1792 set the ratio of Silver to Gold at 15:1, which was lower than the world market and therefore U.S. Gold coins were undervalued compared to Silver, so they were exported and melted. Silver Dollars were also exported for use in international trade or stored as bullion.

During the early 19th century, depositors such as banks supplied the silver and gold for coining and chose which coins they wanted back. Their preference was for the largest denominations of each metal. The Mint rarely coined the smaller denomination silver coins--half dimes, dimes, and quarters--needed for daily transactions.

Up until the Civil War, Paper Currency was only in general use in the Eastern U.S. and was not generally accepted for use west of the Mississippi, as mining in Alaska, California, Colorado, the Dakotas, Nevada and Utah supplied the requirements for Gold and Silver coins out West (also, some did not trust Paper Money as the backing from the issuing local or national Banks were not necessarily secured by sufficient bullion or Specie reserves, and many of these Banks failed in tough times). Eventually, migration of "Easterners" with their Paper Currency eventually forced the Westerners to accept Paper Currency in trade.

To answer your posted question "How much was a gold $20 Double Eagle worth in the late 1800s?" in 1875, for example, the New York Market Price was pegged at $23.75 per troy ounce, which affected the commercial markets, but the official Treasury valuation was still $20.67 per troy ounce. In the Eastern and Middle States the $20 double Eagle would be taken for face value in trade or exchange for other coin or Currency (exceptions were in times of national distress, such as the Civil War, where Specie was hoarded and Silver and Gold were bartered for on an unequal ratio to the face value of the coins), but in the Western states it was common to trade or barter in weight of coin, bullion, cakes or dust. Average wages in those days were very low in comparison to the $20 face value of a Double Eagle; as an example, a Farm Laborer earned an average of $19.87 per month. In that time period, the higher denomination Eagle and Double Eagle coins were generally reserved for large commercial, inter-bank, or international transactions; leaving the Half and Quarter Eagles (and for a limited period the $3 and $1 Gold coins) to use for wages and general commerce, but mostly in the Western states.

 

The way to eliminate timing bias is to use ROLLING TIME PERIODS.

So over the last 40 years, you compare the 30 year annual returns for stocks and golds from 1980-2010.....1981-2011.....1982-2012....etc.

When you do that over a long period of time, you see that stocks win in most time periods in addition to higher annual average returns.

 

Remember, most Liberty and Saint-Gaudens DEs did not circulate in the economy, but were used to settle trade balances. Liberty's saw a bit more circulation demand.

 

$20

 

A double eagle was worth $20 in the late 1800's. Your question should be: "What would $20 buy in the late 1800's?"
Prices for goods and commodities varied over time and by location.

 

The multiplier is about 25x for 1870 or so.

It's really not comparable since the items purchased then were not those purchased in 1920 or 1950, let alone 2020.

 

That's a key part. I'd love to be able to buy 1870 furniture or glassware at 1870 prices, but I'd want no part of 1870 medical care. And don't even get me started on 1870 cars, never mind smartphones...

 

The GDP was much smaller and income/wealth much lower. A millionaire back then might be someone with $25 MM equivalent today...but the millionaire in 1870 was much higher up than the guy with $25 MM today.

 

My citation of the Spanish Milled Dollar was not meant to indicate that other countries had not also introduced some type of edge marking as an aid to prevent alteration. My recollection of the 1500 date came from some books and articles that I had read in the past, one of which is: http://www.columbiagazette.com/smd.html

 

Many items can be compared though.

For example:

They drank coffee back then just like today.

They ate cheese back then just like today.

They drank beer back then just like today.

So even if a lot of things are different today there are still some things that can be compared.

 

Really? Are you serious. "most people don't spend all of their pay" . geez, do some research. "most people" don't have shit for savings and they even had less in the 19th century. American citizens are wealthier than they have ever been and half the country can't raise $2000 in an emergency. "Most" People in the 19th century lived in poverty, few had any savings. Real wages were even less than today. Ever heard of the "shirt waist fire?" Do you suppose those women were working 12 hours days for about $1 a day in 1911 because they wanted to save money. No, they wanted to pay the rent and eat (and yes, they paid rent, they didn't own shit). Sometimes it astounds me what people think people's lives were like in the "good old days." My father, who grew up in the 30's, who worked every day of his life, tells me stories about getting an orange for xmas (That's right, ONE ORANGE) and trading last year's presents with his sisters. A harmonica was a treasured thing. Most people didn't own property, most people, even in the city didn't have indoor plumbing. Geez! A twenty dollar gold piece was a fortune. That's why there are so many in AU and better condition.

BTW, home ownership by American Families didn't crack 50% until after WWII. So, other than in rural America where I might assume the rate was a bit higher - although there were many sharecroppers - not many people were able to save enough to make the downpayment on a home. And realize as well, that owning an automobile was quite a luxury up until WWII and the suburbanization of America - i.e., "Levitwown" (sp?)

 

You're forgetting one BIG thing:

People back then were MUCH more fiscally responsible than people today.

Just because people today don't bother saving doesn't mean squat.

Back then they did.

Sure people may have made a lot less money but they were also much more frugal.

How do you think all those cowboys were able to afford $20 pistols and $40 rifles?

It's because they saved up slowly and were able to accumulate enough money to buy one.

Same with the pioneers who took the Oregon Trail west. A fully loaded % provisioned wagon with four oxen cost $500. The people who followed the trail were considered "middle class" in their time. They weren't dirt poor but they weren't filthy rich. They saved for decades and used their life savings to make the trip.

But they DID save.

 

Your opinion.