Many gold investors worry about the risk of their investments being confiscated by government authorities, though this possibility remains low.
Franklin D. Roosevelt made history when, under Executive Order 6102, he confiscated private citizens’ gold bullion and coins with high premiums under Executive Order 6102. This included high-priced numismatic coins.
History of gold confiscation
President Franklin Delano Roosevelt took steps during the Great Depression to prohibit private ownership of gold. He believed people were hoarding it to slow the velocity of money circulating, so he ordered banks to call in their gold holdings immediately. Anyone failing to comply was subject to search and seizure of assets without compensation.
Reasons this could never happen again include our departure from the gold standard and governments no longer having recourse to confiscating gold as a solution for crises; rather, they would likely employ quantitative easing or negative interest rates instead.
However, the government would likely prefer confiscating other instruments of wealth like savings accounts and stocks instead. Houses or bank accounts can easily be confiscated; it would be much harder for authorities to get their hands on physical commodities like gold.
Pre-1933 gold confiscation
Many gold investors may have heard rumors that President Franklin Delano Roosevelt confiscated Americans’ gold during the Great Depression, however this is far from accurate. While he made owning gold illegal for citizens, no actual confiscations took place – rather, those who turned in their gold were compensated accordingly.
Understanding confiscation is vitally important. According to Merriam Webster, confiscation means seizing without appropriate compensation as forfeited to the public treasury aEUR” this differs from expropriation which involves forcefully seizing property.
Roosevelt wanted to stop this flow of capital that was leaving the country through export of bullion bullion was confiscated in 1933; only coins considered collectible were exempt because their intrinsic value exceeded that of their gold content.
Post-1933 gold confiscation
FDR issued an executive order during The Great Depression mandating that Americans surrender their gold. This order was intended to prevent bank runs and capital flight during times of economic distress.
Although Roosevelt’s call-in led to some confiscations of private citizens’ gold, no clear evidence shows this was done on a widespread scale. Instead, more emphasis was put on prosecuting sellers of illegal gold rather than going after individual owners directly.
Today’s governments can confiscate assets like stocks and bonds with devaluing currency; however, gold cannot be taken by government since the US Dollar no longer relies on any form of gold backing; Richard Nixon shut the international dollar-gold exchange window in 1971, thus rendering expensive old coins useless as protection against confiscation.
Future gold confiscation
Not likely. No affluent American would allow their precious metals to be taken by government without fighting this action with all available resources. Many such individuals already own precious metals and have done so for some time; as a result they know their way around the bullion market quickly when needed.
Retail precious metals dealers frequently raise the possibility of gold confiscation to scare potential buyers, but this premise is incorrect: most confiscations in history were in response to currency debasement or economic downturn; today with no official gold backing for currencies available for confiscation is unlikely; nevertheless investors should consider confiscation as a potential threat should their debt levels continue to increase and central banks continue printing money without restriction.