Due to shortage of coinage, the colony of South Australia was experiencing a financial crisis, with merchants being forced to accept payments in gold dust or nuggets. After intense lobbying on their part, the colonial government decided to act in a way which would ease the cash circulation problem. At that time, colony governors were expressly "prohibited assenting in Her Majesty’s name to any bill affecting the currency of the colony” which meant that establishing a local mint and striking local coins was out of the question. However, a further condition was “unless urgent necessity exists requiring that such be brought into immediate operation”, which allowed the Lieutenant Governor to propose and speedily get approved the Bullion Act, which passed the Legislative Council on 28 January 1852.
The first Act - providing for gold ingots (stamped with their weight by the Adelaide Assay Office) to be used as legal tender was accepted by the Imperial government in London. However, the ingots proved to be impractical so the Act was amended on 23 November 1852 to allow the issue of gold coins (although technically they were actually tokens) valued at £5, £2, £1 and 10 shillings (half pound). Even though all existing coins are dated 1852, most of them (with the exception of only four) were minted in 1853. This second version of the Act was seen to breach the Royal Prerogative for the minting of coins, and the Imperial government duly order the colony to repeal it. Due to slow communications though, it turned out that the colony (having solved the crisis) had already repealed the Act by its own accord when the dispatch from London arrived.
Although the Act had called for several denominations to be issued, in fact only the one pound coins were minted at the time. Dies were prepared for five pound pieces, but not used so no five pound coins were produced. These dies were however preserved, and used by the Melbourne Mint to produce restrikes in 1921. One pound coins are excessively valued today due to their low mintage and to the fact that most of them were melted soon after they entered circulation, when it was found that their bullion value exceeds their face value.