Leading online precious metal retailer, Provident Metals, confronts the falsehoods surrounding gold confiscation and the U.S. government
If you’ve ever heard that the government might one day confiscate gold again, you’ve heard wrong. The myth of gold confiscation is a fear-based story that unscrupulous entities in the gold world use to talk people into buying old gold coins at a high markup, instead of modern day bullion.
To understand the hype of gold confiscation and why it’s false, first we need to look back at history. By doing so, we’ll see not just where the story got started, but also why a future gold confiscation order by the government is extremely unlikely.
Gold and the Great Depression
In 1933, the United States was four years into the worst economic depression that the country has ever experienced. The stock market had crashed and not recovered, unemployment was at 25%, crop prices and international trade had plummeted, and nearly half of the country’s banks had failed.
These circumstances had also led to massive gold hoarding by citizens fearful of losing their money. It was during this time, on April 5th, 1933, that President Franklin Roosevelt signed an executive order forbidding the private possession of gold – in bullion, coin, or certificate form.
All citizens were required to turn in all but $100 of their gold in exchange for cash, or face a penalty of up to $10,000 and ten years in prison. The President signed this order because the thought was that gold hoarding was further stalling the economy and making the depression worse.
In fact, the gold was desperately in need by a maxed-out Federal Reserve which, at that time, could only increase the money supply to the point where it was backed by 40% gold, due to the nation’s gold standard. Once nearly $800 million of gold assets were compiled, the government increased the price of gold from $20.67 an ounce to $35 an ounce, thus increasing the Federal Reserve’s balance sheets by 69% in one fell swoop.
The confiscation of gold and the end of gold clauses enacted by Congress allowed the Federal Reserve to increase the money supply and simultaneously took the United States off of the gold standard.
Origins of the Gold Seizure Myth
One exception to the gold seizure of 1933 was “gold coins having recognized value to collectors of rare and unusual coins” in order to prevent the destruction of collectibles. Unscrupulous coin dealers have used this clause to convince novice coin investors that old coins (which they sell above their market value) are safer than modern bullion, which just isn’t the case. Modern bullion is much more liquid and widely recognized as an investment than collectible bullion.
How America’s Relationship With Gold Changed
In 1971, President Richard Nixon officially and completely severed the gold standard by announcing that there would no longer be a fixed value conversion rate between gold and US dollars. Gold possession remained illegal in the United States until 1974 when President Gerald Ford signed legislation that allowed citizens and entities to own gold once again.
Gold re-entered American society in a completely different light. While it’s still, and always will be, a way for people to protect their wealth, it is no more likely to be confiscated by the government than your house or the contents of your bank account. That’s because the US dollar is no longer backed by gold. The government doesn’t need your gold to inflate the money supply; they can do that with the floating value of the dollar.
That being said, know that you can buy any type of gold coin or gold bullion, both modern and rare, right here at Provident Metals. With free shipping, our online precious metal store is one of the most cost efficient ways to own gold – the ultimate store of value and financial security.