The thought of someone taking something you’ve worked hard to accumulate is almost unimaginable. Unfortunately, this is exactly what happened to physical U.S. gold owners in 1933 (gold holders were actually paid in exchange for gold). We’ve spent the last few posts answering “newbie” questions knowing sooner or later every new buyer, of both gold and silver, asks, “Will gold (silver) be confiscated, again?” Fact is, a great confiscation of wealth takes place everyday, growing worse, with few outraged at all and the culprit is inflation. But today we’ll do our best by comparing our current worldwide gold market with a time when most private metal ownership was illegal.
Right off the bat I want to put new buyers (owners) at ease by saying I see less risk of gold confiscation compared to inflation and asset bubbles. My opinion, it’s far riskier to NOT own physical metal than to. But the concern is real and needs to be addressed, so we will. In 1933, the penalty of not returning your gold was up to $10k and (or) ten years in prison. I was unable to find one case where a person paid a fine or spent one day in prison for failing to return private metal to our government. My research found some folks returned gold but plenty did not and none, that I know of, went to prison.
Gold, in 1933, played a much more significant part of our economy than it does today. We have mentioned many times that less than 2% of the today’s wealth is in gold. In 1933 gold was very relevant since a “gold reserve” or inventory dictated the number of dollars in circulation, this is not the case today. Many economic experts believe the “call-in” of gold was more about keeping real wealth here in the US in a time when gold was flowing into Europe. If true, this was about controlling real money and less about what U.S. citizen owned it. The result was the same by taking private ownership away from citizens, ending the gold standard system.
Our global gold market is much bigger today with many more countries, citizens, able to physically own gold and silver, unlike 1933. It is possible for a citizen of the United States to own physical metal keeping it in Canada, by example. To me, the threat of confiscation is much less than the possibility of a new tax or fee when metal is bought or sold. This brings up the next very real option of an underground gold and silver market. Think directly trading gold or silver for something else without trading metal to dollars first (a currency within itself).
By nature, those who own gold and silver are independent types. The thought of big government controlling more aspects of day-to-day life is nauseating, at best. A gold confiscation will push most of these types to trade “underground” exactly like many countries of the world do today. In home searches, for precious metal, seem like a long shot especially in a wrecked economy trying to make do with less law enforcement and prison space. Remember, if the economy is bad enough to confiscate metal than city, state, and federal agencies stretched and underpaid. Law enforcement will have more to worry with than your 50 ounces of gold.
To me, a bigger risk exists today for new gold buyers, as related to gold confiscation, with the belief some gold is non-confiscatable. This “non-confiscatable” gold (collectibles, rare coins) may bring peace of mind to new owners but really only brings big profits to those selling. This assumption comes from a sentence out of the 1933 gold confiscation hand book saying, “gold coins having a recognized special value to collectors of rare and unusual coin…” are exempt from confiscation. There is no guarantee this will be the case if confiscation becomes law again. Paying far more than real gold value, in my opinion, is rarely a good idea for those wanting to protect wealth by way of gold and silver.
We often hear interesting feedback at www.theprospectorsite.com and like to share views with other readers. It’s great when comments show folks are thinking about their future unwilling to take the advice of mainstream “experts”. We have said, for some time, the most beneficial financial adviser you can hire is yourself, since no one looks after your money like you. Below is a comment from our SHOULD YOU OWN PHYSICAL OR PAPER GOLD post.
“My issue with “paper gold” or “paper silver” is that what happens when the SHTF? let’s say you have paper gold. the dollar collapses. now you have a fancy piece of paper saying you are owed gold, what happens when the person who actually owns the physical gold your paper says is yours won’t come off of it? you now have a fancy piece of paper and no gold.” KYLIE.
PROSPECTOR: Great point Kylie and thanks for the comment. My point was more about when is enough physical “enough” and diversifying physical and paper make sense? Maybe I’m too optimistic but I’m not expecting a complete societal breakdown, no doubt “middle class” numbers will decline and this concerns me. Thanks for reading and making a good point.