Could Government Confiscate Your Gold? Seizing Metal Assets
If you have been keen on gold investment and have been looking into it, you might have also encountered cases of the government confiscating gold.
There have been situations in the past where private citizens' gold has been confiscated for various reasons. However, such occurrences are not very common anymore.
It has been quite a long time since the government confiscated gold; however, it has been a long time since a financial crisis occurred. Are you still wondering whether it could happen again? Are you worried that your gold might be confiscated as a gold investor?
Gold confiscation throughout the years
At the time of that national crisis known as The Great Depression, in the 1930s, the government confiscated gold from gold owners. The Great Depression lasted for 10 years, and it was a severe worldwide economic downturn in which the stock market crashed, and hundreds of thousands of investors were exhausted. During this time, investment dropped significantly, and so did consumer spending.
Wall Street erupted in panic during this national emergency, and private citizens felt hopeless and helpless. However, many investors know that the precious metal gold is one investment asset that can act as a saviour in such situations. Gold is known to perform well in the cases of market crashes, and many wise investors invest in gold for this matter. The government is also aware of this. And so, in 1933, when the economic downturn occurred, President Franklin D. Roosevelt's management told the American citizens that they were required to turn in the gold they owned by passing an Executive Order.
This Executive Order declared a national emergency and stated that the people of America were required to give their bullion and gold to the government and get $20.67 for every troy ounce as an exchange. Failure to do so would result in the Americans being liable for $10,000. This was for hoarding gold coins, gold bullion and ownership of gold certificates as many people used to invest in gold, and it was also used as a commodity of trade. Later, in 1934, the Gold Reserve Act required gold and gold certificated with the Federal Reserve to be given to the United States Department of Treasury. Additionally, they raised the official price of the dollar in gold to $35 per ounce. This was done almost 9 months after stating gold was illegal to have as a possession. This decision was taken to aid the Federal Reserve in increasing the money supply as the Federal Reserve Act required the Fed to be on hold of 40% of gold backing on the grounds that it issued. The Vast majority had to give their gold in exchange for paper dollars.
In 1954, the government modified the original Executive Order to exempt rare coins from being confiscated.
From 1934 to 1971, the gold price remained constant; however, President Richard Nixon, in August 1971, declared that the United States would not convert dollars at a predetermined value. Hence, starting in 1971, after President Richard Nixon's order there was no gold standard for foreign exchange.
In 1974, the citizens finally had their right back to own gold. President Gerald Ford had revoked the Executive Order of President Roosevelt Franklin. Now the American people could enjoy private ownership of gold.
This Executive Order was passed as a solution to the extreme hoarding of gold during the recession. This caused the economy to worsen even more. The government believed that this hoarding impacted economic growth negatively. This order excluded certain gold ownership, such as gold being used for industrial uses or art.
And finally, in 1977, Congress removed the authority of the President to set gold transactions during a monetary crisis.
This Executive Order was in implementation for about 30-40 years. Hence, private ownership of gold in the United States was not permitted during this time in history. And lasted till 31st December 1974. Later, in 1977 the President's power to regulate gold transactions was removed by Congress.
Some very common myths about gold confiscation
Many people tend to make up myths regarding the confiscation of gold to scare people and make them victims of brutal investment scams.
Telemarketers tend to instill fear in the minds of gold investors by providing them with wrong information. This is done to influence their purchase so that they buy gold items such as gold coins, holdings of gold certificates and gold bullion at unnecessarily high prices and provide the telemarketers with big chunks of profits. However, we want to inform you of some common myths so that you do not become a victim.
Collectible Coins and Rare Coins Are Not Confiscated
This has been a myth since the Executive Order was passed; however, it has no truth. The order spared the gold coins that have some special value to collectors who gather rare, never seen before and unusual coins with some recognized value. However, it isn't explicitly stated what kind of special value or collectibles are referred to. However, dealers still convince investors that old gold coins will not be confiscated. And these unreliable dealers, after scamming innocent investors, sell these coins at very high prices.
This way, many people might increase their physical gold holdings by gathering collectible coins without knowing that they might not be safe from confiscation.
And they end up buying gold coins at a higher price than the gold content contained in them.
Overseas and Old Gold Coins
Telemarketers tend to sell overseas coins such as European and other countries by claiming that foreign coins will not be confiscated. They state that coins such as Dutch 10 Guilders, Belgium Twenty Francs etc., will not be confiscated as they are foreign and valuable coins; however, foreign coins are also subject to being confiscated.
Additionally, telemarketers try to convince investors that old coins are collectibles compared to new gold bullion coins and will not be confiscated.
If the government decides to confiscate gold, then the government can confiscate all kinds of gold coins, with the exception of genuine numismatic coins.
See also: Top Gold Coins to Buy
Coins That Are Non-Reportable
Many gold sellers try to sell gold coins stating that the coins they sell do not need to be reported. In the first case, the government never requires investors to report the gold. Rather they have to report the transactions in cash that take place when they purchase gold. Gold dealers are also supposed to do the same. They are supposed to report the transaction in money of the amounts of gold they have sold. The government does not require the gold to be reported. Rather, the cash. Hence, if the transaction for gold is greater than $10,000, you must report the purchase. This transaction could be a deposit to any financial institution or bank.
Non-reportable sales only occur if the transaction is not greater than $10,000. And this only applies to cash, paper money etc.
Can gold still be confiscated?
Yes, indeed. The government can confiscate gold. However, no explicit laws suggest that the government can ask you to turn in your gold. Nevertheless, the government can seize your gold in difficult times of extreme crisis by ordering another Executive Order or making a law regarding it if you own gold coins or other gold assets.
The United States dollar has started losing its value. And if this decline in purchasing power continues, the money value will impact the dollar's value as the world's reserve currency. If a currency crisis arises, then the government might start confiscating gold.
The occurrence of gold confiscation is extremely unlikely now. However, not entirely impossible. But even the slight possibility of it happening again has piqued the interest of many investors on how to steer clear of it.
Why are the chances of gold being confiscated very less?
In 1933, the government's biggest battle was against deflation. As the dollar was bounded by the gold standard, taking gold was the sole way to heighten the reserve money. However, these times, the federal government can easily increase the production of dollar bills when required, and the dollar is not bound to anything. Moreover, confiscating gold wouldn't be useful to the government.
As gold is now available for trade worldwide, the United States is not the one who decides the price of gold. Hence, confiscation could impact the risks with the gold price of the gold price decreases.
As gold and silver are being turned into legal tender or money, this decision would not have been taken if gold was to be confiscated. Precious metals are usually a commodity in possession of the rich. And the rich are the ones who provide the government with the most monetary support. Hence, the government would not ideally confiscate the possessions of gold of the wealthy people.
For the governments, there are better options to choose now than confiscating gold. And for the investors, there are other options, such as storing the gold overseas.
Laws for gold confiscation in the US
While no laws are currently being implemented to confiscate gold, in the future, if desperate times loom over the head, the government might become compelled to reintroduce gold confiscation laws, and quantities of gold might be required to give to the government to save the economy. Hence, laws will be made and can be changed according to the current condition.
Invest Wiseley, Always Diversify Your Portfolio
The times have changed as compared to the years of The Great Depression. Despite that, the world we live in is uncertain and surprising. Hence, we need to be ready for everything. Despite the possibility of future confiscation being very low, it still exists.
The idea of gold being called in by the government is not very pleasant to think about. Yet, many investors tend to ponder over it and think about what one can do to avoid the chances of the government confiscating their gold. There are some ways you can reduce the chances of gold confiscation if a law is implemented. One way you can do this is by buying gold jewellery or investing in gold in foreign countries.
However, as the economy has changed a lot from before and become more connected worldwide, it is unlikely that the government would prefer to confiscate gold. But an economic collapse can compel the government to practice what was done many years ago!
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