Exploring the Legal Tender Status of Gold: Which States Accept Gold and Why?

States are becoming more interested in gold as legal tender in recent years. Although the U.S. Dollar has enjoyed incredible success in the global banking industry, becoming the most widely used reserve currency for international trade, its value is precarious at best. Recently, 23 states have made moves toward reinstitution the legal tender status of gold. Some states have already accomplished this, and there are several reasons this makes sense.

What Is Legal Tender Exactly?

Legal tender refers to whatever the law recognizes as a way to pay public and private debts, including paying taxes and fulfilling contracts. If you owe someone money, they are legally required to accept legal tender.

Which States Accept Gold as Legal Tender?

Let’s start with a look at the states that are already accepting gold as legal tender. They include all of the following:

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• Arizona
• Indiana
• Kansas
• Louisiana
• Oklahoma
• South Carolina
• Tennessee
• Texas
• Utah
• West Virginia
• Wyoming

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However, there are more states moving to make the same change. In 2024, a Missouri State Senate committee passed a bill to make gold and silver legal tender. As of 2023, several other states have bills for recognizing gold as legal tender. These include:

• Arkansas
• Alaska
• Idaho
• Iowa
• Kentucky
• Maine
• Minnesota
• Mississippi
• Montana
• New Jersey
• Oregon
• Vermont
• Wisconsin

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The excitement is growing among gold owners as gold retakes its place in the economy of the country. 

Why States Move to Promote Gold to Legal Tender Status

Yet, the question of why states want gold as legal tender doesn’t have a simple answer. The reasons are rooted in both the problems with fiat currency and the advantages of gold.

Fiat Money Troubles

Fiat money, such as paper dollars, succeeds when everyone has full confidence in its value. However, as that confidence wanes, people look for something more tangible to rely on.Here are some of the reasons paper money is less appealing in today’s financial climate.

It’s Too Easy to Print More Dollars

Does the government (and its citizens) need more money to pay bills? Why not just print more? That’s exactly what they do, and the number of dollars being printed is increasing year by year. In fact, in 2020, about 1.5 billion one dollar bills were printed. By 2023, that number had increased to about 2.4 billion one dollar bills. 

Obviously, the greater the supply of dollars, the less they will be worth. Gold, on the other hand, is a finite resource. It can maintain greater value over a longer period of time because you can’t just make more.

Inflation Has Less Impact on Gold

Inflation seems to be a constant worldwide struggle, especially since the global pandemic and all its effects on the supply chain and consumer demand. More factors added to inflation, including the war in Ukraine. Service businesses charge more now, since the pandemic placed a spotlight on the need for and value of service industry workers.

How does this inflation affect gold vs. fiat money? In times of high inflation, people lose confidence in the value of paper money. Gold can be affected by inflation, but in a much more indirect way. However, because no one denies the intrinsic value of gold, it retains its value better. After all, if someone gave you a choice between a gold coin and a random piece of paper, wouldn’t you choose the gold? A paper dollar may not quite be the same as random paper, but the paper has just as much intrinsic value.

States’ Pension Funds Are Losing Money

Here’s one of the biggest reasons states are moving to make gold legal tender. They’re worried that state pension funds - both for the lawmakers and others who get a government pension - will have little left for their retirement.

Why is this true? State pensions are typically funded with bonds, which are based on the dollar. When the dollar decreases in value, so does the money in their pension accounts. Legislators reason that pensions backed by gold will be more stable and reliable. 

Bank Failures Reduce Confidence in the Dollar

Any time a bank failure happens, people get nervous about cash. In march 2023, Silicon Valley Bank collapsed, depositors rushed to pull out their funds, and the entire country felt the shock waves. Are banks stable? Is it safe to put your life savings in a bank that might collapse? 

Legislators looking to make the shift to gold as legal tender may also be affected by this drama. If banks can fail, even in today’s world, wouldn’t it be better to have a means of exchange that has real value based on its physical worth rather than a form of money based on trust alone? As they ponder this question, many are getting on board with the movement towards gold as legal tender.

Countries in the BRICS Are Opting Out of the Dollar

BRICS - a global organization with members like Brazil, India, China, Russia, and South Africa among others - is moving to shift away from the U.S. Dollar as money for international exchanges. They urge countries in their group to avoid deaing in American dollars and use their own local currencies instead. This change could have a profound impact on the value of the dollar abroad. And if dollars are used less in foreign countries, that could mean more dollars will come back to the U.S., further devaluing our fiat currency.

Steps Being Taken to Give Gold Legal Tender Status in More States

Today, as many states push towards accepting gold as legal  tender, leaders are in the process of making this change. It’s not only a legal matter, but it’s also a grassroots movement. There will be several challenges to implement the change.

The U.S. Constitution helps legislators make the case for gold as legal tender. In Section 10 of the Constitution, the requirement for accepting gold and silver coins as legal tender. 

Lawmakers will need to address how gold can be used to pay state taxes. In addition, states are eliminating sales tax from gold exchanges, reasoning that if it’s money and not a commodity, it is not actually a sale but merely an exchange. They are also contemplating how to remove the capital gains tax from selling gold. Some states are considering creating state depositories to build stores of gold for the stability of the state.

Gold Makes Sense in Today’s Chaotic World

When the entire world seems turned upside down, it’s hard to put all your faith in fiat money. Gold is finite, its value never disappears, and it is a reliable asset that you should be able to use for any legal payment or exchange. If you’d like to learn more about investing in gold, speak with our precious metals experts at True Gold Republic today. We specialize in gold IRAs and can help you get started with building your precious metals portfolio.