Categorized | Investing in Gold

Gold Confiscation Myths

An unfortunate number of coin dealers, especially those dealing in numismatic and semi-numismatic coins, promote everything from myths to blatant lies concerning their products. One of the most common is to tell investors that the government might confiscate gold as it did in 1933 - unless the investor buys their old numismatic coins, which are somehow exempt from gold confiscation. This argument sounds reasonable (after all, risk of loss is a factor in any investment), however when examined it amounts to nothing more than a deceptive marketing ploy. They use this line to fear-monger investors into purchasing their overpriced collectibles instead of making wise investment decisions. In this article, we’ll touch on the gold confiscation story, whether you should be worried about it, and why no coin is exempt.

The basis of their claim that the gold coins are not confiscateable comes from the 1933 Executive Order 6102 from President Roosevelt. This Executive Order required all Americans to turn in gold in exchange for Federal Reserve Notes at a rate of $20 an ounce. Written into the Order are a few exemptions, one of which exempts “gold coins having recognized special value to collectors of rare and unusual coins” from confiscation. The Order goes no further in defining what qualifies as a rare and unusual coin, nor does it target gold medallions and other collectible but non-numismatic gold items. In spite of this, dealers peddling medallions and older gold coins push this line because they can sell their overpriced products more easily with the spectre of gold confiscation looming over the investor.

There is simply no excuse for making such claims. Even if the coins these dealers are selling would have been exempt from President Roosevelt’s Executive Order, and most of them certainly wouldn’t have been, this doesn’t mean their coins would be exempt from a future confiscation. That Order has no legal affect on future Orders doing basically the same thing. Moreover, Executive Order 6102 was repealed in 1974 by Gerald Ford at the same time as Congress returned to Americans the right to own gold. A few years later, in 1977, the ability of the President to regulate gold outside of wartime was removed by Congress, which includes gold confiscation orders.

Unfortunately, the U.S. Goverment ignores laws on a regular basis, so even if at some time in the future the coins these dealers are pushing were made exempt, there is no reason to believe that the law couldn’t be changed to allow for gold confiscation at some time in the future. There is simply no claim to be made by anyone that their gold will never be subject to confiscation. Unfortunately, most investors don’t know the difference and fall prey to the claims. They end up investing in gold in a way that destroys their ability to make returns, eventually selling the coins for much less than spot as they have to be examined by an expert or full-melt assayed to have their gold content verified.

Wise gold investors stay away from these kinds of ploys. Any time you are being offered gold at a substantial premium over the spot price you should immediately be wary of the validity of the investment.

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