Will the Government Confiscate Gold?


     This is a one of the top questions asked by gold and silver investors.  This question is largely asked because of what gold and silver investor have heard concerning Franklin D. Roosevelt’s Executive Order in 1933.  So the first thing we have to do is examine the reasons behind this confiscation.  Executive Order No. 6102 issued by Franklin Delano Roosevelt outlawed the ownership of gold.  The government bought back gold at $20.67 an ounce from the public in accordance with eminent domain law.  There are a couple of important things to note about the confiscation.  First, almost all the gold that was confiscated was voluntarily given up.  All other gold that was confiscated was held at banks or by very large investors.  So even this confiscation was not comprehensive or effective.

      However for us to truly answer this question we have to ask , “Why would a government choose to confiscate gold?”  There are two main reasons.  The first reason a government would confiscate gold is in order to gain additional funds in order to deal with fiscally hardship.  And the second reason would be in order to inflate the money supply.

      Most gold and silver investors believe confiscation is likely because they only are considering the first option.   Most investors in gold and silver believe that is why Roosevelt confiscated gold.  However, this simply isn’t true.  In 1933, the United States was on the gold standard, which meant that every dollar in circulation was backed by physical gold.  This meant that FDR could not simply print money in order to finance his massive spending and this is why FDR ended up confiscating gold.  He could not inflate the dollar until he controlled the value of the gold.  It is important to note here that the US government held 68.2% of the world’s supply of gold at the time.  Once Roosevelt made gold ownership illegal, he immediately raised the price of gold to $35 an ounce.  This immediately devalued the dollar by 40% over night.  This is truly the reason why Franklin Delano Roosevelt confiscated gold.  Therefore FDR would not confiscate gold today because the Fed now has the ability to inflate the money supply without controlling the gold supply.

      The real question when it comes to confiscation is would the US government confiscate gold because they were in a fiscal straight.  I think the answer is no.  Gold holdings are very small in the US.  At most we are talking about several billion dollars.  If the government was truly in need of funds there would be several larger and more obvious targets.  The first and most obvious one is retirement accounts.  According to the Investment Company Institute there was $7.835 trillion in IRA, 401K, 457, and 403b accounts in 2009.  All gold and silver holdings in the United States are a miniscule fraction of this huge source of wealth.  There is also historical precedent for government confiscation of retirement accounts especially in socialistic and communistic countries.  Even if the government attempted to confiscate gold, the task would be enormous.  The logistics of attempting a house to house search for gold and silver would be massive and would hardly be worth the man power and money that would have to be used in order to confiscate it.  In the end, the chance of the government confiscating gold and silver seems extremely small.

Josh Renfro

President & Founder

Lone Star Bullion

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