Should I Be Worried About Gold Confiscation?

This article was submitted by JD Bauman, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

One of the common questions we hear from gold buyers is, “Is it possible that the government might come after my gold and confiscate it?”

In a time when the governments are waging a war on cash, it’s not hard for people to imagine that a war on gold is next.

There is some precedence for this, after all. On April 5, 1933, Franklin D. Roosevelt’s Executive Order 6102 “[forbade] the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States.” Americans who owned gold were told to deliver their gold to the bank and in exchange receive paper dollars of equivalent value, $20.67 per ounce at the time.

To be very clear though, contrary to common belief, the government did not conduct a widespread seizure of gold, nor did it go door-to-door nor systematically raid safety deposit boxes. While a $10,000 fine and ten year prison sentence threatened the masses into obedience, only a handful of sting operations were conducted against a few offenders to serve as an example.

While the fear of a modern-day door-to-door confiscation is understandable, the fact of the matter is that it holds little weight, and is highly improbable within the current political and financial landscape in the US. The conditions that prompted the confiscation of 1933 are no longer relevant in today’s financial system, nor would a confiscation be successful.

In 1933, the United States found itself in the thick of the Great Depression. With widespread business and bank failures, people began to rush to get their money out of the banks before it could disappear. The government felt it had no recourse but to use inflation and fiscal stimulus to revive the economy, encouraging investors to put their money back into the economy.

Inflation was not easily achieved under a gold standard. At the time, there was a 40% gold reserve standard. The government confiscated gold to increase gold reserves and make it possible to increase the money supply. The confiscation of 1933 was not a tactic to raise revenue, but a monetary move to increase inflation.

We live in a different time today. Unlike in 1933, there is no gold standard and the Federal Reserve has complete authority to expand the money supply with no reserve requirements. In other words, the government doesn’t need your gold. The fed has unrestricted ability to implement monetary policy at its own discretion.  There is a vast array of tools in the fed’s monetary belt, whether that’s another quantitative easing strategy, or a newer strategy akin to the “bail-in” as utilized in Cyprus in 2013, or a “haircut” on bank or retirement accounts. The alternatives to gold confiscation offer much lower hanging fruit for a hungry government.

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A widespread seizure of gold would be no less difficult today than in the 1930s. Gold sales remain unregulated in the United States, so when a person purchases physical gold or silver, there is no reporting conducted, nor is there reporting when a person sells physical gold or silver, except for specific bullion products and thresholds. No one is completely certain what percentage of Americans own physical gold or silver, nor does anyone know who those individuals are. Gold confiscation would be incredibly cost-inefficient, impossible to implement, and a political suicide tactic for any politician foolish enough to consider it.

Gold remains the premiere safe-haven asset, unmatched it its level of security, privacy, and liquidity. Gold owners should take comfort knowing that gold is safe to own and avoid the scams of “confiscation-proof collectibles” and similar bullion products that use the fear of gold confiscation as prime marketing to sell high-profit coins.

If you don’t own physical precious metals, it’s time to switch into physical gold and silver; they are the only money that governments can’t control and unlike the dollar, they aren’t going anywhere.

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