The concept of a one ounce legal tender coin without a declared face value was pioneered with South Africa’s Krugerrand launched as a bullion coin in 1970 and sold at a premium of three per cent over its gold content. It was followed by Canada’s Maple Leaf, Australia’s Nugget, Britain’s Britannia, the United States’ Eagle, Belgium’s Ecu and Austria’s Philharmoniker amongst others.

The Britannia, Eagle, Ecu, Maple
Leaf and Nugget are the leading
bullion coins (Credit: World Gold
Council)

The appeal of the coins, marketed with heavy advertising, was widened by the introduction of half ounce, quarter ounce and one-tenth ounce versions. The bullion coin became a significant investment item in gold, taking up fourteen per cent of all gold coming on to the market between 1970 and 1990.

However according to GFMS, in the mid-1990s demand declined sharply as the gold price failed to perform; by 1996 fabrication was less than 63 tonnes (2 m oz), the lowest for twenty years. Premiums virtually disappeared as many bullion coins were sold back into the secondary market. Often coins were bought back only for melt, thus becoming a source of gold supply.

However, over the following three years the situation reversed and fabrication more than doubled, reaching 133 tonnes (4.3 m oz) in 1999. The surge in demand came mainly from the United States where concerns over potential problems in the international financial system when the new millennium dawned prompted increased gold investment as ‘insurance’. In 2000, as 'Y2K' fears proved to be unfounded the market experienced a collapse in coin demand combined with widespread selling back in the secondary market. The selling back was concentrated but not limited to the first quarter. By the end of the year the market had returned to positive, albeit very subdued, net investment. The following year, coin fabrication recovered modestly to 56 tonnes (1.80 m oz), partly due to a modest pick-up in investment demand following September 11th.