American Gold Buffalo Coin (Video Transcript)

Welcome back once again to the “Know Your Investment” Series!  Here, we continue to dive into the specific characteristics of each bullion coin, bar, and round that TRADEway offers, and how you can use that information to determine what’s best for you!  Today, we’re going to be discussing one of the industry’s most notable gold coins!

The American Gold Buffalo, which is an official gold bullion coin of the United States of America, was first released into circulation by the U.S. Mint in 2006 after the successful passage of the Presidential $1 Coin Act in 2005.  While the Gold Buffalo wasn’t directly a part of the list of presidential coins that followed the passage of that Act, the Act mandated the production of a 1 oz. 24 karat gold bullion coin with a face value of $50 and a mintage limit of up to 300,000 coins.  This was when the U.S. Mint introduced the world to the 1 oz. American Gold Buffalo!

It was the first time that the U.S. Mint, which by the way was established under Congress’ Coinage Act of 1792, had ever struck a coin in 24-karat gold. So that means that it took 213 years before the U.S. ever minted a coin this pure!  Isn’t that kind of crazy considering America’s long history with gold?  The annual coin is now on its 11th year of mintage with the release of the 2018 American Gold Buffalo coin!

Comprised of one troy ounce of 99.99% pure gold with no metal alloys added, the American Gold Buffalo is well known in the numismatic world for its strict purity standards and historical design. The coin carries a legal tender face value of $50, and its purity, weight and content are guaranteed by both the U.S. government and the U.S. Mint.

Speaking of its historical design, the artwork of the American Buffalo gold bullion coin is a modified version of James Earle Fraser's design for the Indian Head nickel (Type 1), issued in early 1913. After a raised mound of dirt below the animal on the reverse was reduced, the Type 2 variation continued to be minted for the rest of 1913 and almost every year until 1938, with the exceptions of 1922, 1932, and 1933 when no nickels were struck. Generally, Fraser's Indian Head nickel design is regarded to be among the best designs of any U.S. coins in history. The same design also was used on the 2001 Smithsonian commemorative coin.

The obverse of the coin spotlights a right-facing portrait of a Native American chief. In order to create an authentic depiction, Fraser combined the features of three Native American tribe chiefs – Chief Iron Tail of the Lakota Sioux, Chief Two Moons of the Cheyenne, and Chief Big Tree of the Kiowa. The word “Liberty” is beautifully inscribed in the top right corner of the coin, and its mint year is marked on the chief’s shoulder, as you can see in this example with the coin’s mint year being 2011. Fraser incorporated his signature on the obverse of the coin in the form of a small “F” located directly beneath the year of the coin.

The main purpose of this coin’s creation was in order to compete with other foreign 24 karat gold bullion coins, such as the Canadian Gold Maple, the Austrian Philharmonic, and many others. Since investors sometimes prefer 99.99% pure gold over the 91.67% gold used in the American Gold Eagle for example, many were choosing non-U.S. coins, again such as the Canadian Gold Maple Leaf, to meet their bullion needs. 

With the American Gold Buffalo coin, the U.S. government hoped to increase the amount of U.S. gold sales and partake in the huge market for 24 karat coins, which makes up about 60% of the world gold market.  On July 22, the mint transferred two of the American Buffalo coins to the Smithsonian Institution's coin collection because of their historic value.

On September 26, 2008 the U.S. Mint announced that temporarily, it would halt sales of the American Buffalo coins because it could not keep up with soaring demand as investors sought the safety of gold amid the subprime mortgage crisis of the late 2000s, which had also affected the price of gold.  This is a good example of the liquidity that Gold Buffalos have, as their demand has been proven to increase dramatically in times of financial crisis. 

Now, let’s talk for a second about the Gold Buffalo as compared with the American Gold Eagle, which is still considered the most popular bullion coin in the world.

In the last several years, these standard Brilliant Uncirculated bullion coins have had the exact same retail price.  Now, this is interesting, because as I alluded to earlier, the Gold Buffalo comes with a higher purity than the Gold Eagle, with a 24 karat purity compared to the Eagle’s 22 karat purity.  

So why is that important?  Well, even though you’re paying the same price for both coins, you are in some ways paying for different things.  For the Gold Eagle, the reason it’s the same price even though it’s less pure is for the reason I mentioned a second ago, because it is considered the world’s most popular bullion coin!  The Eagle’s demand therefore is consistently higher than others, and that shows in the premium.  The Gold Buffalo, while very popular in its own right, is still not quite as highly desired as the Eagle, but because of its high purity and reputable source it comes out to be the same price!

Now remember this, I’m NOT saying that you’re getting more metal when you get the Buffalo, because both coins hold a full troy ounce of gold.  However, the purity of the ounce of gold in the Buffalo coin is more pure, which for some investors is an important factor! 

To sum up, we as investors are presented with two fantastic gold options produced by the U.S. Mint (namely, the American Eagle and the American Buffalo)!  The American Gold Buffalo shines in the area of a high standard of purity, which can be very meaningful to many investors!  This bullion coin is perhaps my personal favorite U.S. option, and due to its historical artwork, high purity standard, and trusted source, the American Gold Buffalo coin is a great place for any investor to start! 

Thank you so much for joining me in this video, and I look forward to having you with me for the remainder of the series!