face value of a 1 oz gold Britannia

Why is the face value of a gold Britannia different from its actual value?

Ever wondered why the gold coin you bought is worth ten times more than its face value? For instance, the face value of a 1 oz gold Britannia is £100. But the coin is actually worth over £1 400.

It’s all to do with the fact that these coins are legal tender in Britain. Which means that, just like any other coin in your purse or pocket, you could use your gold Britannia to pay for goods or services. But you’d have to be crazy to spend such a valuable coin on just £100 worth of items!

Why is the coin so valuable? Because it contains one troy ounce of pure gold. And the current spot price of gold is around £1 400 per ounce.

So, wouldn’t it make sense to make the face value of a 1 oz gold Britannia closer to the coin’s real worth? There are two very good reasons why this isn’t practical:

  1. Fluctuation of the gold price
    The spot price of gold may go up or down, depending on a number of factors. Supply and demand, the global economy, the political situation, and even the season. You would never be able to exactly match the face value of a 1 oz gold Britannia to its actual value.

    When the first 1 oz gold Britannia was minted back in 1987, the gold price was just £360 per ounce! See how the gold price has fluctuated over the past 100 years.
  2. Keeping gold bullion coins out of general circulation
    Even though they are legal tender, these coins are not intended to be exchanged for goods and services. They are an investment product … an alternative way of storing wealth, other than money in a bank savings account, or stocks and shares.

By classifying gold Britannias as real coins, the government makes it possible for you to buy these coins VAT-free. They are also exempt from Capital Gains Tax (CGT) for British tax payers. This makes them more attractive to local buyers than other gold bullion coins, such as American Eagles, Canadian Maples and South African Krugerrands.

Face value of normal coins in circulation

In contrast to gold bullion coins, all British coins in general circulation have a metal content that is worth less than the face value of the coin.

Older readers will remember referring to small change as ‘silver’ and ‘coppers’. This is a legacy from bygone days when coins were actually made from metals – gold, silver, bronze and copper – which equaled their face value.

There is no actual silver in today’s ‘silver’ coins. They are made of cupro-nickel – a silver-coloured alloy containing 75% copper and 25% nickel worth considerably less than silver. Even the golden coloured outer ring on the £1 and £2 coins is created using a nickel-brass alloy.

Since January 2012, British 10p and 5p coins have been made of nickel-plated steel, in order to ensure the metal content is worth less than the face value.

Tampering with UK coins is illegal. But, after a surge in the copper price a few years back, officials were concerned that people might be tempted to melt down their 1p and 2p copper coins. Global demand for the metal was such that the copper value of these coins was twice their face value.

As a result, all copper coins cast after 1992 are made of copper-plated steel, which is worth very little in terms of metal content.

Other coins with face value less than their actual value

Apart from gold and silver bullion coins, there are other British coins that are worth far more than their face value as collectors’ items. These are mostly rare coins, like the 2009 Kew Gardens 50p coin. Only just over 200 000 were minted, making them attractive to coin collectors. If you have one of these in your possession, you could sell it for around £150 today – 300 times more than its face value.

Coins with mistakes or flaws are also often extremely valuable. In August 2021 a bartender sold a £1 coin for £205 on Ebay. When the coin was handed to him, the bartender spotted that it was solid gold in colour, instead of having the normal silver centre. The coin sparked a bidding war between five interested collectors before being sold for 200 times its face value.

Gold bullion coin are safest to buy

While stories like these fire the imagination and spark hopes of making big profits, unless you know what you are doing, you are well advised to steer clear of buying collectors’ coins. It’s very easy to fall prey to unscrupulous dealers who describe coins as ‘rare’ or ‘valuable’. But these coins are only valuable if someone wants to buy them. When you come to sell your high priced coin, you may find that it’s worth considerably less than you paid for it.

If you really want to invest in coins, a safer option is to stick to gold bullion coins like Britannias. They have a tangible value based solely on their gold content. The value of the coin is not linked to its rarity; nor do you need to find a collector who is interested in that particular coin. You will always be able to sell your Britannias at the current market value of gold.

New to buying coins? Learn more here.

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