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Converting Gold Coins Into Bullion Bars After 1933

United States $20 gold coin alongside a ledger showing the daily melting of gold coins into ingots after 1933.

By Roger W. Burdette, special to CoinWeek …..
 

Much has been made of President Roosevelt’s Executive Order 6102 forbidding the hoarding of gold coin, gold bullion, and gold certificates. The order of April 5, 1933, and the subsequent removal of gold coins and gold notes from commercial circulation, while likely traumatic for a few, had little impact on most American families. Ordinary wage earners and white collar employees rarely saw gold coin in circulation. Savings, when not kept in a bank account, were mostly in paper currency and whatever silver coins could be saved from time to time. The Executive Order was directed primarily at those who had hoarded gold in the month prior to the order or who had kept gold as a speculative investment pending any devaluation of the dollar. Rumors of devaluation and changes in the price of gold had circulated for more than a year and the Hoover Administration had taken steps to identify those holding large amounts of gold coin.

During the 1932 presidential campaign in October, Hoover told a large audience in Des Moines, Iowa, that just after Great Britain abandoned the gold standard (September 1931), the Secretary of the Treasury informed him that unless something could be done to thwart speculators, the United States could be forced off the gold standard within two weeks.

We have defended the country from being forced off the gold standard, with its crushing effect upon all who are in debt … We determined that we should not enter the morass of using the printing press for currency of bonds. All human experience has demonstrated that that path, once taken, cannot be stopped, and that the moral integrity of the government would be sacrificed because ultimately both currency and bonds would become valueless.

After telling his audience how successful his administration had been, Hoover, who wrote most of his own speeches, then inserted a strange yet typical comment:

…thousands of our people in their bitter distress and losses are saying that “things could not be worse. No person who has any remote understanding of the forces which confronted this country during these last eighteen months ever utters that remark. Let no man tell you that it could not be worse. It could be so much worse that these days now, so distressing as they are, would look like veritable prosperity[1].

According to Federal Reserve reports quoted in major newspapers of the time, approximately $650 million USD in gold and gold certificates was turned in between March 6 and April 7, 1933. This left about $750 million outstanding; however, much of this was exported without record, converted to commercial uses such as jewelry, hoarded without record, or lost[2]. The executive order of April 5 was intended to encourage the return of as much of this outstanding balance as possible.

The United States Mint supplied somewhat different estimates for domestic gold coins in the United States[3]. The Mint’s numbers, using the old $20.6777 value, only served to further confuse Treasury and administration officials.

This is a table showing the United States Treasury's holdings of gold in 1933 though January 31, 1934.

The executive order and subsequent legislation included several significant exceptions which guaranteed continual private ownership of gold coins. Gold coins totaling $100 or less per person, slightly less than five ounces, were exempt from the anti-hoarding order. This enabled a typical family for four to retain up to $400 without penalty. The population of the United States was estimated at 125,578,763 on July 1, 1933. If each person had kept five $20 gold coins, then the total would have been a staggering $12,557,876,300 – or an amount three times the total gold coin production of the Mint Bureau since 1795[4]. The $100 exemption was dropped in December 1933, but continued to confuse citizens and Treasury agents for many years.

Additionally, the exemption of numismatic gold allowed nearly anyone who cared to form a “collection” that was not subject to nationalization. During the 1933-49 interval there is no record of any numismatic collection being involuntarily seized. The sparse numismatic-related anecdotes uniformly refer to hoards or speculators, not coin collections.

Withdrawal of convertibility on April 20 officially removed the U.S. from the gold standard. This severed the connection between the commodity (gold) and all forms of currency. It had the further advantage of increasing the available money supply by informally revaluing government-held gold at the open market price of approximately $29 per ounce, although this was not officially done until September 8, 1933[5]. An additional advantage was that it pulled the rug out from under international currency speculators who were stuck holding dollars they could no longer exchange for gold.

With passage of the Gold Reserve Act of January 30, 1934, the Treasury Department found itself in possession of immense quantities of gold coins of no use in commerce and which were now legally bullion. On August 4, Mint Director Nellie Tayloe Ross issued an order to Mint superintendents: “You are authorized to proceed with the melting of the general stocks of domestic gold coin as soon as working conditions warrant[6].” The task would take nearly six years to complete due to chronic staff shortages, high demand for regular coinage, and a huge influx of foreign gold purchased at the new price of $35 per ounce.

How did the conversion of millions of coins into 0.900 fine gold bars take place?

This is a colorized photograph of Brigadier General Billy Mitchel.
Brigadier General Billy Mitchel. Image: National Archives / color added by CoinWeek.

The primary consideration was security. Not merely the usual protection of gold from loss or theft but also the influence of international politics on America’s national security. President Roosevelt, a former Assistant Secretary of the Navy, learned from events surrounding the actions of General Billy Mitchell in 1921, and although calling Mitchell “pernicious” at the time, he later embraced the importance of air power and floating air bases: carriers advocated by Mitchell. The President had a practical and realistic approach to the evolving dictatorships in Germany and Japan. To counter this, he encouraged expansion of our military readiness in weapons development and especially the construction of aircraft carriers, aircraft, and support ships.

To safeguard America’s gold, Treasury Secretary Henry Morgenthau’s staff developed a three-step plan. The first step was to move gold in all forms away from the lightly defended West Coast. The War Department under Secretaries George Dern and Harry H. Woodring, reasoned that if Japan were to attack, their most likely route was island hopping through the Aleutian Islands, then east and south through Alaska and British Columbia into the states of Washington, Oregon, and California. Morgenthau had gold moved from San Francisco to the more spacious Denver Mint.

The second step was to reduce the volume of vault space required to store gold. This was accomplished by having the Philadelphia and Denver mints melt coins into bars without extensive assays or reweighing.

And finally, the third step was to build a central storage facility for gold on land at Fort Knox, Kentucky, and a similar facility for silver bullion at West Point Military Academy.

Gold Melting Begins

Although we coin collectors concentrate on a coin’s date and mintmark, the Gold Reserve Act made all gold coins identical – just bullion in a different form. Mint director Ross, Assistant Directors Mary M. O’Reilly and, after December 1939, Frank Leland Howard, organized and directed the Mint superintendents in melting. Dates and mints were ignored, and none of the coins were counted. The quantities and weights of bagged coin were accepted as correct.

The usual complement of workers involved in coin melting was five. This included a representative of the superintendent and cashier who opened vault cages, designated bags for removal, and counted each bag as it was removed from the vault and put on a truck (a flatbed “cart” or “trolley”). A similar representative for the melter and refiner counted bags put on the truck. A third person, representing the Mint director, observed all actions and kept an independent count of bags. Lastly, two laborers loaded bags onto trucks and removed them for melting. The workmen wore leather gloves and aprons. Everything that touched coins or bars was later burned to recover any gold that had worn off.

An interesting twist to the operation was that although gold was officially valued at $35 per ounce, Mint employees tracked coins by bag count and their old face value. Thus, each bag of gold coins containing $5,000.00 at the old value, was worth $8,467.74 at the new rate. But trying to apply this adjustment to every bag was a waste of time: as bars, it would all be revalued in bulk.

Once a vault cage was empty, or the truck full, the little procession went to the Melting and Refining Department. Along the way, no one was allowed to touch the truck or even to come near it. Violation could mean a reprimand and possibly having to recount everything.

At Melting and Refining, large tilting electric induction furnaces were equipped with crucibles awaiting coins to melt.

In referring to coin melting, Leland Howard wrote:

We melt gold in approximately 10 thousand ounce pots, which will produce approximately 24 bars weighing 400 ounces per bar, and we carry the entire lot as one bookkeeping entry by assigning it a melt number. As the metal in the pot is a homogeneous mass, we eliminate a lot of assaying as well as bookkeeping entries[7].

Using Howard’s note as a guide, the maximum bags melted in one furnace was 36, equal to 9,000 $20 gold double eagles, or 9,675 troy ounces of coin alloy.

This is an illustration that shows worker melting gold coins into ingots.

In the mid- to late 1930s, the Philadelphia Mint is believed to have had at least 12 tilting induction furnaces with a capacity of 10,000 Troy ounces each. A furnace could produce two or three complete melts and pouring into bar molds per day (or if overtime were authorized). These furnaces had to serve normal silver and five-cent coin alloy melting, and that limited gold melts to an as-available basis[8]. If there were $1,000,000 in gold coin to melt, this used 200 bags (at $5,000 each) and required six melts of 36 bags each to complete. The table below shows actual value of double eagles melted from Vault F. Day-to-day variations occur based on coins in each cage, and the availability of furnaces. Mint superintendents had to adjust coinage schedules to maximize normal coinage and gold melting with as little interference as possible.

This is an illustration depicting the Treasury Department's Gold Melting Record for January 1937.

The table at left was extracted from the gold coin melting record for Vault F at the Philadelphia Mint beginning January 8, 1937. Figure 3 explains what the entries mean, beginning at the top of the page.

This and similar working tables show that over irregular intervals from 1934 through about 1941, most Treasury Department gold coins, and those held by Federal Reserve Banks, were melted into “coin gold” bars. Each bar weighed about 400 Troy ounces and was stamped with its weight and a control number.

The process was kept as simple as possible. The only counting was of bags of coins. There was no examination or weighing of coins. There was no strict measurement of gold in each bar, although the bars were weighed separately and stamped with their weight and a control number. Canvas bags and workers’ aprons and gloves were later burned in a closed gas furnace. The ashes were cleaned and refined to collect any remaining gold.

After each day’s melting, the coin gold bars were counted, stacked on a truck, and taken to an empty vault for temporary storage. Later, once the Gold Bullion Repository at Ft. Knox was complete, bars were loaded onto pallets and delivered by train. As from the beginning of the process, representatives for multiple departments checked the work. Any discrepancies had to be resolved before anything else could be done.

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Notes

[1] “Hoover Offers 12-Point Farm Plan Using War Debts to Make Markets; He Tells of Saving Gold Standard,” New York Times, October 5, 1932. p.1. Full text of speech transcribed by the Associated Press.

[2] Grimes, William T.. “Order Puts US Back on Gold”, Wall Street Journal. April 7, 1933. 1.

[3] NARA-CP RG104, Entry 235, Vol. 473. Letters dated March 21, April 19, May 17, July 3, 1933 to Woodin from O’Reilly; and February 20, 1934 to Morgenthau from O’Reilly.

[4] Total gold coin production was $4,526,218,477.50 according to figures from the Bureau of the Mint in 1970.

[5] This was not a formal fixing of gold; rather, the Treasury published its buying price from time to time, and sold to users at approximately the same price. Official revaluation of government gold stocks did not occur until February 1, 1934.

[6] NARA-CP RG104, Entry 235, Vol. 489, p.40. Telegram dated August 4, 1934 to Superintendents, all three mints from Ross.

[7] NARA RG104, Entry 328H, Box 6 “Mint Study of Gold and Silver Refining Activity.” 3.

[8] Bronze cent planchets were bought from contractors.

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Roger W. Burdette
Roger W. Burdette
Responsible for much original numismatic research in recent years, Roger Burdette was named the ANA Numismatist of the Year in 2023. Besides CoinWeek, he has written for Coin World and The Numismatist, among others. He is the author of Renaissance of American Coinage 1916-1921 (2005); Renaissance of American Coinage 1905-1908 (2006); Renaissance of American Coinage 1909-1915 (2007); A Guide Book of Peace Dollars (Whitman, 2009); and Fads, Fakes & Foibles (2021). He also co-wrote the NLG award-winning Truth Seeker: The Life of Eric P. Newman (2015) with Len Augsburger and Joel Orosz. Burdette served as a member of the Citizen’s Coinage Advisory Committee (CCAC) from 2008 to 2012.

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