Source: My Coin Guides:  The Liberty Head or “Type 1” Gold Dollar was struck from 1849 to 1854 and represented the first series for the smallest gold denomination ever produced by the United States Mint. The authorization for the denomination followed the discovery of gold in California, which had prompted Congress to expand the use of gold within the coinage system. Under the original system created under the Coinage Act of 1792, the silver dollar had served as the primary unit, with the largest gold denomination having a value of ten dollars. Under the Act of March 3, 1849, the gold dollar was introduced as well as a larger gold denomination known as the double eagle, which had a value of twenty dollars.

While the gold dollar was not introduced until 1849, its roots can be traced back to 1836, when the denomination was first proposed. At that time the silver dollar had not been produced for three decades and as the resumption of production was being contemplated, some suggested that a gold dollar would be more logical and easier to use. Gold dollars had been struck privately by the Bechtler family in Georgia and proved to be hugely popular in that area of the country. Although some patterns were prepared at the Philadelphia Mint struck in a composition of 90% gold and 10% copper, nothing came of it.  In 1844 the same dies were used to strike patterns in a slightly different gold alloy (the 10% was now silver), but once again the project failed. It was the discovery of gold in California and new gold interests that would eventually lead to the authorization of the denomination.

Initial patterns for the gold dollar had already focused on the size, since it was apparent that they could not be very large. Among the most interesting 1849-dated patterns are those a little over the size of a dime, with a hole in the center which allowed the coins to carry a larger diameter while still containing only a dollar worth of gold. The chief engraver of the Mint James Barton Longacre had designed a small number of patters which included a square hole instead of the round one seen in other patterns. None of the designs were ever put into use.

The actual design for the new gold dollar was created by Longacre and featured  the head of Liberty on the obverse. She is facing left and wearing a headband inscribed “LIBERTY” with thirteen stars surrounding. The reverse of the coin contains a wreath encircling the denomination of “1 DOLLAR” and the date. The words “UNITED STATES OF AMERICA” appear around the wreath. The first year of the series saw two distinct varieties, identified by differences in the revrerse design. On the earliest coins, and all of those struck at the Dahlonega and New Orleans Mint the wreath is open, while later Philadelphia and Charlotte coins have the wreath closed. The closed wreath design would be used until the end of the type in 1854.

Following their introduction, the new gold dollars became a source of much criticism from the public. Their small size made them easy to lose and somewhat difficult to handle. In thr ensuing years, the idea of producing coins with a hole in the center was once again contemplated, but ultimately it was decided to make the coins wider but thinner. The change in specifications was introduced in 1854 along with a new design which would continue to be struck in two different types until 1889. The short-lived Liberty Head Gold Dollars now stand as the smallest coins produced by the United States Mint and are reminiscent of a turbulent yet interesting time in American history.