Metals Notes

The Question of Gold Confiscation

Originally Posted May 7, 2014 –

One of the most frequent questions asked of us here at Jack Hunt’s involves the possibility of gold bullion confiscation by the US government, similar to what happened in 1933.

To review, then president Franklin Roosevelt signed into law in April of 1933 an executive order banning private gold ownership in the United States. In theory, gold owners were supposed to voluntarily take their gold bullion to a bank and exchange it for dollars at the current rate of approximately $21.00 per ounce. This presidential order, which was repealed in 1971, has become notorious amongst gold investors and telemarketers. The fear is a similar confiscation could happen again as our government might ban gold ownership as part of a ‘solution’ to a ‘national economic crisis’.

I’d like to make two points suggesting the improbability of a similar law being enacted anytime soon. First, the 1933 law was not strictly enforced. Whatever gold was turned in was due to the sense of national pride and patriotism prevalent in that era, not so much a fear of prosecution. Although no one was ever charged with failing to turn in their gold, an estimated 50% of the public’s holdings at the time were redeemed for cash. Clearly, many citizens did not comply with the presidential order. How do we know this? There are substantial quantities of pre-1933 US gold coins still in existence and there are countless pieces of pre-Depression era jewelry that survived as well. The law simply could not be effectively implemented. If such a law could not be enforced in 1933 with our population consisting of 80 million fervently nationalistic Americans, could such a law be imposed now dealing with the 320 million ethnically and politically diverse individuals residing within our borders? I believe not.

My second point suggesting gold will likely not be confiscated is that gold is no longer the foundation of the world’s monetary system as it was in 1933. Few individuals actually own gold, at least compared to those who own real estate and more mainstream financial assets. In addition, most privately held gold is in a form relatively inaccessible to our government making confiscation a logistical nightmare. When I suggest that privately held gold is relatively inaccessible I’m referring to the lack of a paper trail still legally available to most private citizens buying or selling gold. An individual rarely has to share their social security number or specific home address when dealing in precious metals.

It should also be noted that the gains to the Federal Government by confiscating the public’s gold would be substantially less than the inflation adjusted assets accrued by FDR in 1933. For these aforementioned reasons I feel that the likelihood of our government going door to door to confiscate gold or ordering the public to turn in their gold is rather remote. If government gold confiscation still remains a concern, storing ones physical gold out of the country would be an option to look into. Look for a discussion on that topic in a future issue.