Can Government Confiscate Gold?
Can Government Confiscate Gold?
The answer is yes, the United States government has the legal authority to confiscate gold. And while this may seem an unlikely action today, recent events which include the housing crisis of 2008 and the pandemic of 2020 have spurred economic distress in the US have reminded those who own gold that such a possibility still exists.
How can the Government confiscate gold and what can you do about it?
The answer starts with your own portfolio and how you can diversify it to protect yourself from major economic changes.
How Government Gold confiscation began
The confiscation of gold in the US began in 1929 with the collapse of the stock market which led to the Great Depression. This cataclysmic event which began the US quickly spread around the world and shut down most economies. The result was the unemployment rate plunged to over 30% while the government assets also took a major hit.
To provide value to the currency of the US, it was decided that gold was needed to provide actual value as a hedge against the falling markets. An executive order by then-President Franklin Roosevelt issued on May 1st, 1933 required anyone owning more than $100 worth of gold to send them to the Federal Reserve Bank or any member of the Federal Reserve System.
The only exceptions were some jewelry and coins if they didn’t add up to more than $100 in value. It was not long before other countries which were feeling the pressure began to confiscate gold as well. And while those who turned in their gold were compensated. It was at a much lower value level than the gold was worth. The going price was $20.63 per ounce at that time.
Less than a year later, the government placed a price of $35 per ounce for citizens wanting to purchase their gold back. This was nearly $15 higher and was news that was not well received. For the next four decades, it was still illegal to own more than $100 worth of gold until that order was rescinded in 1975.
Is Gold Confiscation Illegal Under the US Constitution?
The answer appears to be no. This is because the constitution lays out several rights that the government cannot pass laws to make illegal. However, since the right to own gold is not specifically mentioned or other commodities for that matter. This means that the government does have the right to confiscate gold again if they deem it necessary.
Will gold confiscation happen again?
Admittedly, the likelihood of such a confiscation is less likely today because the US is no longer on the gold standard when it comes to backing currency. Plus, there are bound to be lawsuits and challenges to such an order if it were to arise again. However, with the precedent in place of gold confiscation back in the 1930s, it is likely that the courts will stand by the previous action for any future confiscation of gold under similar circumstances.
In addition, the confiscation was made by executive order and not legislation passed in Congress. This means that any president could make such an order again.
What can I do about Government Gold confiscation?
So, now that you know gold confiscation by the government is still possible, what can you do to protect your gold assets?
There are some answers to consider which starts with the most obvious, keeping your gold in another country. The US cannot take assets that are not within its borders. This means that if you have gold stored in a country outside the US’s realm of influence, then they cannot take it from you.
Offshore Gold Storage
Popular countries to store gold assets include Singapore, the Cayman Islands, and Switzerland which has a strong reputation for protecting assets, especially gold for their clients. Plus, Switzerland has a long history of neutrality which makes it less likely to side with other countries in confiscating gold from its citizens or those who choose to store their gold in their banks.
However, the downside is that storing your gold in that manner makes it more difficult to sell or really do anything with it. Just like hiding money under your mattress or burying it out in the backyard, it’s just going to sit there and not work for you. Therefore, this option is best when a crisis is approaching, and you have time to shift your assets.
Investing in Gold jewelry
Another option is investing in gold jewelry. Since jewelry was an exception in the last confiscation, you could literally wear the gold on your fingers, ears, and even around your neck in the form of jewelry. While jewelry is not as liquid as gold bullion, it is less likely that the government can confiscate it.
The only downside is that you will have to sell your jewelry to get the value out of it. This is not too big an issue since gold can easily be melted and repurposed. But also consider the small possibility that your jewelry can be stolen, so be sure to take out insurance and keep your jewelry safe protected.
The final option is digital gold. Bitcoin is a cryptocurrency that currently offers the ability to protect your assets while being immune to confiscation. Because of the inherent blockchain security methods used for the storage of Bitcoins, your assets are fully protected. There are companies which offer an IRA based on Bitcoins that include precious metals such as gold.
The downside is that cryptocurrency is highly volatile, which means that you should diversify your portfolio as protection. Plus, you can make the switch to Bitcoin and take advantage of digital gold if you sense the time is right. As with any investment made for protecting your assets, it is far better to act now instead of waiting for the crisis to manifest itself and have everyone else do the same.
Although the chances of the federal government re instituting a policy to confiscate gold is unlikely, it is always possible which is why you should keep your options open. By engaging in one or more of the aforementioned methods, you can protect your gold from confiscation.