It’s now official!

Utah is officially the first state to announce that both gold and silver will now be allowed as an alternative to the US dollar. It all became official when Gary Herbert signed House Bill 157 in March 2012. However, the bill goes on to state that only certain types of gold and silver coins will be allowed as legal tender. Forget walking into Best Buy and buying a nice, new camera with a Canadian Maple leaf as they will only recognize coins issued by the United States of America.

It also means that gold and silver coins are exempt from sales and use taxes and are also eligible for a tax credit when sold for paper money. This means gold and silver investors won’t need to pay capital gains taxes anymore if they make profits on a sale. Of course the usual federal taxes still apply. This means gold and silver is now treated as currency and not an asset. This is Utah’s bold stand on the issue and it looks like other states might follow suit.

There is another problem however.

The coins are still only worth their face value as far as the state is concerned. So that $50 (face value) 1oz gold coin, which is worth today roughly $1600 on the street for it’s gold content, is still only worth $50 in the eyes of the state. So if you really want to buy a Coke with a valuable gold coin you can by all means, but you might just lose some money in the process.

Governor Herbert has been reported as saying that the reason he passed to law was simply to do away with capital gains on a very popular investment. Of course the other reason it was passed was to take a stand against the Federal Reserve. Many states, and countries for that matter, believe that the Fed has permanently weakened the value of the dollar by printing so much of it and pumping it into the monetary system.

While this might be a step in the right direction, the state treasurer Richard Ellis stated:

“In my mind there’s still no practical way of making this happen”.

Unfortunately, the sad fact is that the state is not equipped to store gold and silver coins, never mind the hassle of authenticating them. There is hope though, that with this move, banks might start offering bank accounts backed by real gold and silver coins, helping consumers regain some trust in the currency as a whole.