Posted on March 07, 2023
When you buy gold bullion coins for the first time, you’re presented with a math puzzle. Take, for example, the 1/2 oz American eagle gold coin. These numbers are accurate right now, but the first two will change – for the purposes of our illustration, though, they really don’t matter.
Retail price: $1,148.32
Intrinsic (melt) value: $912.33
Face value: $25.00
Okay, so let me ask you: what is this coin worth? Is it worth what you pay for it? Is it worth its weight in gold as scrap metal? Or is it worth exactly $25?
What makes this so confusing is the mystery of “face value.”
There are particular nuances relevant to finance and insurance, but those aren’t relevant to our conversation. When we say face value, here’s what we mean (courtesy of Oxford Languages):
the value printed or depicted on a coin, banknote, postage stamp, ticket, etc., especially when less than the actual or intrinsic value.
So “face value” means what the thing says it’s worth.
What’s the face value of a five-dollar bill? Easy – it’s $5.
What’s the “actual or intrinsic value” of a five-dollar bill? That’s a bit harder. You can’t melt a five-dollar bill down and use it to make jewelry or electronics. The Federal Reserve tells us it costs $0.13 to manufacture and print a single $5 bill, so if they were sold at a typical retail markup you might expect to spend twenty to twenty-five cents.
But for paper money, intrinsic value is irrelevant. Even asking the question, “what’s the intrinsic value of a dollar?” is like saying, “That contract isn’t worth the paper it’s printed on.”
As we can see from this example, the face value of paper money is just as absurd as the face value of gold and silver coins. (Even a $100 bill costs just $0.17 to print.) It’s just that the face values are absurd in opposite directions.
You might be wondering why, exactly, gold and silver coins even have a face value at all? Well, we discussed American eagle face values already. (Spoiler: “because Congress says so.”) A very low face value also ensures that nobody but a child or an idiot would try to pay for movie tickets with a gold American buffalo. In other words:
These low face values help ensure non-circulating bullion is used for its intended purpose as an investment or a collectible and never treated like an ordinary coin used to buy goods and services.
The ridiculously low face value means you’re unlikely to confuse them with money intended for circulation.
Okay, so face value does play a role, even though it’s a strange one. But does it really matter?
Yes, it does. For two reasons.
Tradition: Sovereign coins have a face value because that’s one of the requirements of legal tender.
“Legal tender” is an economic and legal term – basically, it means if someone offers this as a manner of payment, you’re legally obligated to accept it. (Granted, these legal niceties don’t cut much ice at 2am when you’re arguing with the gas pump that only accepts credit cards while the station attendant, locked inside a plexiglass booth, is taking a nap…)
So face value is the imprimatur of a government – the mark of what we call “money.” It’s also the government’s way of vouching for the quality of the coin in question. Having a face value makes an American silver eagle official, legit, real money.
You’ll notice that sovereign coins nearly always have higher premiums over spot price than bullion bars or rounds. That’s because they’re in greater demand. Even the most government-skeptical libertarians often choose silver American eagles over silver bullion rounds.
Downside protection. This takes some explaining, but the essential point is that even an absurdly low face value is a kind of explicit guarantee of value.
Imagine a sci-fi scenario where NASA, Elon Musk and Richard Branson team up and figure out how to coax the asteroid 16 Psyche into low-earth orbit and extract its quintillions of dollars in precious metals. Like the asteroid that wiped out the dinosaurs, such an event would make “precious” metals a whole lot less precious. Let’s say gold dropped 99.9% in price – to $1.82 per oz. What would happen?
Well, I’d probably be out of a job! However, if I took a 1/2 oz American eagle to the jeweler and sold it for scrap, its intrinsic value would be just $0.91 – I’d be sad. The jeweler would probably be offering rings and necklaces in the hot new “precious” metal copper ($4.06/oz).
However, the face value of my gold coin would still be $25 – handily exceeding its intrinsic value. So it would actually be feasible to spend at the gas station for a candy bar and a soda.
Listen: the odds of this happening are roughly equivalent to Paul Vanguard winning the 2023 Nobel Prize for Economics. But it does tell you there’s some meaning, however speculative, in the face values stamped on gold and silver coins.
Q: What is face value?
A: The stated value printed or stamped onto an object.
Q: Is “par value” the same as face value?
A: If you’re talking about bonds, yes – “par value” is the same as “face value,” though there’s no such thing as par value in precious metals coins.
Q: What does “at face value” mean?
A: That means the price of a thing matches its face value. If I sell you $20 bills for twenty dollars each, I’m selling them at face value.
Q: Are nickels worth more than face value?
A: Some are, yes. At this moment, a 1946-2014 Jefferson nickel has a face value of 5¢ and a melt value 26% higher, a little over 6¢.
This calculator helps you find out the melt value of circulating base metal coins.
If you’re lucky enough to get your hands on a 1942-1945 “war nickel” containing 0.056 troy oz silver, its melt value is currently $1.13. Retail price starts at about $2 so you’re better off selling it than melting it.
And another thing! Melting down pennies and nickels violates the Prohibition on the Exportation, Melting, or Treatment of 5-Cent and One-Cent Coins, 31 U.S.C. § 5111(d) (2007). Not that I’m dispensing legal advice or anything like that.
Q: Are two dollar bills worth more than face value?
A: Nope. Last time I checked, every bank branch is happy to swap your singles for $2 bills.
Q: Which U.S. coins are worth more than face value?
A: A lot of them! That’s not to say you’re going to find a fortune in your pocket change. Also, precious metals prices fluctuate all the time, so I’ll stick to examples of coins worth well more than their face value. I’ll also limit this list to circulating coins, in other words, you already know that modern gold and silver American eagles are worth way more than their face value.
Having said all that, here’s a list:
“Junk silver” (pre-1964 circulating coins)
Base metal coins whose melt value significantly exceeds face value
Note you’re extremely unlikely to find, say, war nickels or Mercury dimes in circulation. People like me who get them handed over in change at the convenience store take them out of circulation immediately.
However, though it’s unusual, it’s not impossible to find a pre-1964 silver quarter or dime in your change jar. It might be worth a few minutes of your time to check…
Q: What pennies are worth more than face value?
A: Every penny minted before 1983.
Q: What quarters are worth more than face value?
A: All quarters minted before 1965.
Q: Where to buy dollar coins at face value?
A: You can go to just about any bank and get as many dollar coins as you want. They’re swimming in them. I’ve had quite a few vending machines give me Sacagawea or presidential dollar coins as change when I pay with a $10 bill.
Honestly, these should NOT be too hard to find! They don’t circulate much, it’s true (because when we’re feeling around in our pockets for change our fingers can’t tell the difference between a quarter and a dollar coin – “yellow” isn’t a texture, who knew??) so you might have to go to a bank.
For a while, the U.S. Mint sold dollar coins at face value by the tens of thousands. Alas, too many people ordered boxes and boxes of them to get points on their credit cards, and took unwrapped rolls of dollar coins to their bank to deposit. This program was arbitraged into destruction.