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What is a Gold Certificate?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 24 August 2016
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    Conjecture Corporation
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A gold certificate is a certificate which is held by someone in lieu of holding actual gold. Gold investors want to be able to invest in large volume, and handling and securing gold in that amount could quickly grow extremely cumbersome, for obvious reasons. As a result, many investors prefer to use gold certificates, leaving the bullion secured in a banking facility and buying and selling certificates instead.

Individual banks which keep stores of gold and sell to investors issue their own gold certificates. Once an investor has a gold certificate, she or he can sell it or trade it with another investor. This is usually done in large amounts through exchanges set up specifically for people who trade in gold. Entry into the gold market can be a costly endeavor, as new investors may learn to their surprise. The gold which corresponds with each gold certificate is kept in highly secured environments; one advantage to using gold certificates is the knowledge that the gold is highly unlikely to go anywhere, because banks take their vault security very seriously.

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The value of gold is under constant fluctuation. Daily rates are usually quoted in financial publications and may be available from some banks. In addition, exchanges which deal in gold post the current rates so that people know which direction the market is moving in. Traders in gold can move their investments as needed to change their position as the market shifts and using a gold certificate to represent gold facilitates rapid trading.

People also refer to “gold certificates” in the form of historic certificates issued by the United States Government. Between 1863 and 1933, gold certificates redeemable for gold were issued. These certificates were used primarily by banks for interbank transfers, for much the same reason that investors use gold certificates today: to avoid the expense and hassle of handling large amounts of gold.

In 1933, people were ordered to return their certificates and they were no longer redeemable for gold. Despite this, some individuals held on to their gold certificates and these documents have since become collectible items. Gold certificate ownership was even briefly outlawed, although today fans of historic documents related to finance and banking can collect gold certificates without needing to worry about running afoul of the law. It should be noted that the United States Government does not redeem gold or silver certificates for previous metals and will not offer opinions on the value of currency and certificates traded for their historic value.

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