I read an article recently from a well respected gold analyst Doug Casey where he made the following statement about the potential confiscation of gold;
“The Saint-Gaudens is a collectible – and that can be very important, if and when the government starts confiscating bullion. That’s because such historic artifacts are not considered the same way modern bullion coins are – at least, last time around, they were not confiscated. Plus, because of their semi-numismatic value, they do attract a premium over the price of the gold they contain. Historically that’s been between 50% and 100%.”
I have written extensively on the issue of confiscation of gold and silver, here, here, here and here. I even wrote a report outlining the confiscation tactic (among others) that gold dealers use as a means to rip off unsuspecting gold buyers by convincing them that their high commissioned gold coins won’t be confiscated if/when our government ever decided to confiscate gold again. Granted, Casey does mention that some gold dealers will mark up their semi-numismatic coins 50% – 100% or more, but I’m just surprised he even mentions these coins at all. Maybe Lew Rockwell wanted to give the other side of the story since just last week he put up a story from Gary North called Gold Confiscation: A Highly Unlikely Threat.
I submitted my own gold confiscation article called “Gold Confiscation Won’t Happen Today,” to a financial website I write for called Seeking Alpha, but while they publish 95% of my articles, they chose not to publish that one. Why? Congress did want to know what I knew about the confiscation of gold and so did the NY Times, even though both of these dropped the story once a certain large gold dealer hired a lobbying firm. That’s how things work in America. Money talks. Congress disappears. The media is complicit. You must learn to separate fact from fiction on your own.
While there are those people out there who admire a pretty coin, 99% of all gold investors should not be buying them. The reasons are outlined below.
1. Do investors make good investment decisions on the basis that something might occur in the future?
I would think that most gold investors simply want protection from inflation and government idiocy in managing the economy, along with some sort of insurance from the coming banking crisis. While people may invest in a drug company because they “might” discover a cure for cancer or something, the risk vs. reward aspect can pay off big. But in looking at whether our government might confiscate gold again as they did in 1934 with an executive order (rescinded the next year), just think of the logistics of such an absurd assumption.
The government would have to hire (at a time when they have no funds to do so), people to act like census takers, and go to everyone’s houses and ask the question, “do you have any gold to turn over to the government?” Now some people will comply with the government, but many, many of the people I know who own gold are also strong believers in the 2nd amendment. A census taker type government inquisitor isn’t going to be able to come into your house and search your belongings in their quest for gold. It would take years to accomplish such a task as they would have to inventory and compensate all gold holders, not just ask a few questions like census takers. And I’m afraid many gold hoarders would resist such a demand.
No, the reality of this type of confiscation speculation shows ignorance of the times we live in. The 2nd amendment would have to be abolished first before any further government intrusion into the lives of its citizens. That’s just not a reality. This is not 1934. The means of social media involvement in grass root efforts to thwart government abuse would be prevalent and utilized today by those who don’t want to bow down to a potential governments grab for loot.
2. Does it make sense to pay 10% for gold you can get for 5% today (One Ounce American Eagle Gold Coins)?
What is the opportunity cost that is lost in speculation that confiscation “might” occur? The answer is over $50,000 in 20 years. 5% compounded over 20 years is $53,065. While it is true that many financial advisors today still don’t understand the need for gold as a hedge against the U.S. dollar risk associated with one’s portfolio, you will find the ones who do recommend gold to their clients hard pressed to recommend St. Gaudens as a means to acquire wealth.
Just look at the price performance of the lower grade Mint State St. Gaudens the last 10 years. The only real reason they have gone up in price is because of their gold content and the fact so many gold dealers push them on their clients so they can make those high commissions and be able to afford to advertise on Sean Hannity and Glenn Beck’s shows in search of more
3. Who will exchange goods and services for your semi-numismatic coin that is rare or semi-rare?
If our society did devolve to a barter economy, do you think anyone cares about the collectible value of a coin when taking it for payment of food, medicine, clothing and the like? All that will matter is the gold or silver content of the coin. While the ultra wealthy may still admire the shiny beauty of a rare coin, that’s all they will do with it. They can hoard those coins and still buy the necessities by other means. But 99% of the people don’t have that luxury. That’s why I find it absurd to recommend these people buy such semi-numismatic coins at a much higher premium (cost) to bullion gold.
4. Wouldn’t it be much easier “in times of financial crisis” for the government, via the President and the stroke of a pen on an Executive Order, to go after 401k plans and turn them into some sort of a fixed return investment similar to Social Security?
Sorry trusting people. We told you for years to invest in the types of plans that we control. We even gave you tax deductions as an incentive. But we also now have a nice chunk of your retirement that we control the taxing of and through our good friends at the IRS, can change the rules now that you have accumulated all that wealth. No census taker types needed! Will the government do something that is easy, or difficult to implement?
5. Unlike gold, silver was never confiscated (despite some people’s beliefs) in 1934, so why not buy silver if you are worried about confiscation?
The cost to acquire those 90% bags of silver today is about 1% over the spot price of silver with Buy Gold and Silver Safely. Again, I ask, why pay more for your metals?
The Bottom Line
The bottom line is, confiscation is used as a ploy by most gold dealers to enrich themselves at your expense. While Glenn Beck and Sean Hannity, among others, can still represent these types of gold dealers, and people trust these hawksters, don’t be fooled into buying the wrong type of gold. These gold dealer sales people tell a convincing story and use past Executive Orders and other legislation to try and prove their case for confiscation. But it is all speculation and all Executive Orders and legislation passed years ago are no longer relevant today. I proved this case in my book, Buy Gold and Silver Safely.
You can do a search on Google today for “gold confiscation” and see for yourself which companies use this tactic to rip you off.
You can call a representative at Buy Gold and Silver Safely today at 888-604-6534 to see what they recommend for your precious metal allocation. You simply want the most gold or silver for your money.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.