Guest Post: Gold Confiscation - Straws in the Wind

Tyler Durden's picture

Submitted by David Galland of Casey's Report

Gold Confiscation: Straws in the Wind

In the emails that our readers at Casey Research send our way, questions and concerns about the possibility of gold confiscation rank high.

My somewhat standard response is that, yes, it’s possible, but that we should see straws in the wind well before it happened… allowing us to take measures to protect ourselves.

While I don’t want to make too big a deal about it, there have been clear signs of late that the U.S. government is taking an unhealthy interest in your gold.

My recent article “I Smell a VAT” touched on one such straw. The relevant point being that, thanks to a regulation slipped into the healthcare legislation, coin dealers – and all businesses, for that matter – will have to begin reporting any purchases of $600 or more from anyone, including clients selling back their gold.

While I think the overriding intent is to pave the road for the implementation of a value-added tax (VAT), there’s no question that the legislation simultaneously paints a target on the back of the free trade of precious metals.

Then, a couple weeks ago a friend sent me a copy of Mother Jones, an a unapologetically “progressive” mouthpiece with a cover story titled “Glenn Beck’s Golden Fleece.”

And friend and correspondent Lowell sent along an article with an embedded video link to an lengthy ABC News “investigation” by Clintonista George Stephanopoulos that picks up on the Mother Jones story.

Now that you’ve watched the video – and if you don’t, some of what follows won’t make any sense – I’d like to share some observations based on personal experience.

About Coins

Years ago, I headed up the publishing division of a company (that will go unnamed) with a separate division selling coins. I was there when the coin business started, and while not involved, was impressed at its rapid growth in the heady days of the 1970s gold bull market.

Then something happened. While the founder was a strong advocate for hard money and sincere in his intent to do the right thing by his customers, as the coin business grew, he increasingly recruited “professional” managers to run the firm – hired guns whose sole focus was boosting the bottom line and, by so doing, their bonuses. And the business hired more and more “professional” salespeople – the sort of folks who know how to squeeze a client good and hard.

As the company’s sales soared, fueled by hard-hitting marketing, the founder’s good intentions began to weaken under the onrushing flood of cash that began to wash in. In time, the entire conversation at the coin division switched from “What’s good for the customer?” to “What coins can we sell with the biggest mark-up?”

On those occasions when I was invited to comment on what was going on, I did what I could to argue against the corporate culture that had developed, but my impassioned and increasingly angry fights with the managers of the coin division couldn’t win out over the millions in profits being made. As much as I enjoyed my job, the situation became so degraded, I had no choice but to resign.

Now, let me be clear. The company broke no laws and, in fact, did nothing that I suppose most businesses on to a good thing might not do; marketing was generating lots of prospects, and the sales force was selling.

The problem was that the product line had moved from selling highly liquid government-issued gold and silver bullion coins to selling illiquid “modern rarities,” an oxymoron if there ever was one. Whether “proof” Mexican silver dollars, “treasure” coins, or privately minted commemorative coins, the one thing you could be sure of was that the mark-ups were huge.

Which meant that, in the absence of an active collectors market – which, when it comes to “modern rarities,” just doesn’t exist, and never will – the coins were very unlikely to ever provide a reasonable return on investment, let alone be a good asset to preserve capital. Quite the opposite, they were almost certain losers.

Buyer Beware

In the ABC video, you’ll hear a sound bite from a client of Goldline who spent $5,000 on “collectible” coins, saying that he wanted to buy bullion, but that the sales guy “kinda, sorta talked me into buying these other coins.” Soon thereafter the buyer decided to sell those coins and, when he did, he took a 42% loss. Which, he points out, was a big hit to his net worth.

You can probably spot all the things wrong in that paragraph, but I’ll do it anyway. 

First, the disgruntled former client says he was looking to buy bullion coins, but the sales guy switched him to a “collectible.” Whose fault is it that he allowed himself to be swayed? Quoting Nancy Reagan, when dealing with a salesperson, often times the best thing to do is “just say no.”

Second, if taking a loss of about 42% on an investment of $5,000 really hurts his net worth – he shouldn’t have been buying illiquid coins in the first place.

Third, buying any “collectible,” or pretty much any asset, at full retail and then turning right around and selling it, is invariably a sure-fire ticket to a quick loss.

Finally, who is to say that the coin dealer that bought the coins off the client didn’t lowball him? That, too, is part of generating a profit in the coin business.

While I feel sorry for the former Goldline client, he really can’t blame anyone but himself for that loss. He didn’t do his homework or stick to his guns when the salesman tried to move him up to a higher-margin product line.

As for the company, I don’t know them, but I do know that they spend a lot on marketing and celebrity endorsements. It doesn’t take a genius to figure out that money has to be recouped from somewhere – specifically, the clients. Which is why I strongly suspect that, yes, the company’s salesmen are especially aggressive. And that they try very hard to load their clients up with high-margin coins.

Let me recap some lessons from this article, and based on my own brush with the business.

First, if you’re going to become a coin collector, don’t think you can stumble into it and enjoy any measure of success. Do your homework – then do some more – before actually laying out your hard-earned cash. Fortunately, there are a lot of useful resources out there for you to rely on… pricing guides, auction results, and numismatic groups, to name just a few.

More important, however, is that if you are not going to be a collector, then stay away from anything but U.S. or Canada-minted bullion coins, or bullion bars issued by the widely acknowledged mints such as Johnson Matthey.

Will the bullion products be exempt from confiscation, should it come to pass? No. But trying to avoid confiscation by dealing yourself into a large loss right out of the box by overpaying for an illiquid pseudo-collectible is just silly… no matter what the sales person tells you.

What’s in the ABC Video That Should Concern You

While imminent confiscation isn’t really addressed in the ABC exposé of Goldline, there were some things that caught my eye as worthy of further reflection.

The first was the contention by the appropriately named NY congressman, Anthony Weiner, that it was ludicrous to suggest that the government could ever just confiscate a person’s gold. Excuse me? Deep breath. If the Weiner were to repeat that contention to my face, the conversation might roll out something like this…

“What!?! Did you actually just say what I think you said?”

“Why, yes, David, I did.”

“Are you kidding?”

“Why, no, David, I am not.”

“So, a government that can invade countries on false pretenses… arrest people and throw them into prison camps and hold them indefinitely without trial… whisk suspects off to foreign countries to be tortured… hit targets in sovereign nations on the other side of the globe with missiles fired from drones… declare imminent domain to take private property in order to give it to a hotel developer… confiscate homes because someone on the property, maybe not even the owner, is caught with a marijuana cigarette… freeze the bank accounts of anyone suspected of a crime, then not let them use their own money to defend themselves… offer known criminals, murderers even, ‘Get out of jail free’ cards if they testify against someone else… but they wouldn’t confiscate gold? Oh, and by the way, Roosevelt already did it once, you moron!”

“Who are you calling a moron? Security, we have a problem.”

Another deep breath. Pat hair back into place and resist urge to apply my forehead to the keyboard.

But enough of Mr. Weiner.

The second thing that should concern you – and the EVP of Goldline tossed Stephanopoulos a soft pitch down the middle on this one – was when he mentioned that his salesmen have instructions to “advise” their clients on the best sort of coins to buy. Paraphrasing Stephanopoulos, “But your people aren’t licensed as investment advisors, are they?”

No, but I suspect that, if this witch hunt continues, they may soon have to be.

Especially because a congressional committee has been set up to investigate this serious matter. Surprise, surprise, the co-sponsor of the committee is none other than Congressman Weiner. Apparently he was chosen for this particular bit of dirty work. While all of this may be nothing more than grand standing and bare-knuckle politicking, any time Congress gets involved, pretty much anything can happen; keep your eyes open for a fresh assault on the gold coin industry.

And, finally, the thing that probably concerns me most is that, whatever else he is, Glenn Beck is a highly visible and apparently effective critic of the current administration. Having failed to knock him off the air by unleashing a well-financed boycott that chased away many of his advertisers, it appears the Democrats are now pursuing their vendetta against Beck by attacking the business practices of the show’s largest sponsor. No matter what your opinion is of the man, this sort of determined government-backed assault should make your antenna go up.

Is Goldline an angel? Based on my experience with the industry, probably not. But in this case, I’m not sure that that matters as much as that they sponsor Beck’s show.

A Final Word – on Confiscation

Do I think confiscation is imminent? No.

But I do think that the straws in the wind point to yet more regulation. This could ultimately place gold dealers under the watchful eye of the SEC or some other Frankenaucracy that emerges out of the new financial reform legislation.

I am not a fan of regulation – even if it sounds like a good idea. For instance, to protect the ignorant from predatory salesmen. My rationale is that this is not a perfect world and never will be. Humans can and will find a way around every rule (witness the fact that Madoff, the former head of the NASDAQ, was able to scam billions off clients). Therefore, the sooner the citizenry learns that they have to rely on their own common sense – and actually educate themselves – before reaching for their wallets, the better. Having an implied government blessing over every transaction does nothing but create a false sense of security.

But that’s just my particular, and some think peculiar, world view. Back in the world we live in, any new regulations will, if nothing else, assure that any private transactions between you and your favorite coin dealer will become a thing of the past. The new reporting requirement on purchases of over $600 pretty much makes that a reality.

With this new layer of reporting in place, should the sovereignty come to the conclusion that it, versus you, should be in possession of your gold – they’ll know whose door to knock on.

Of course, we can’t know if and when such a thing might occur… but to pretend it can’t is to be naïve or, in the case of Weiner, disingenuous.

In my article, “I Smell a VAT,” I touched on some ideas for how you might protect yourself from a possible gold confiscation (none of which involved buying overpriced coins.

There is one other option I didn’t mention – expatriate. Many of the happiest people I have met in my life have their passport from one country, residency in another, and money/gold in a third.

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traderjoe's picture

From my cold, dead hands Bitchez!

Oracle of Kypseli's picture

This legislation is being repealed as we speak. Check the news on the IRS 1099 reporting.

Dantzler's picture

Not so fast, mate.

"Neither amendment achieved the 60 votes necessary to proceed to a final vote for possible inclusion in the “Small Business Jobs and Credit Act of 2010,” which is still under consideration in the Senate."

jeff montanye's picture

another reason to own gold and silver stocks.

UGrev's picture

I swear to god; I said the same thing (in my head) that you posted. Only I had a clear picture of Heston in a Turkey bubble above mine :)

I don't think people will obey this time around. Anyone have any good info on how much resistance there was during the Gold Confiscation Act's employment? 

Hansel's picture

I agree there will be too much resistance this time.  For them to initially confiscate gold, then make it legal for people to own again, then confiscate it once again is too much.

1100-TACTICAL-12's picture

Gold nor Guns will be confiscated,talk about revolution.

jeff montanye's picture

there was no violent resistance.  probably much passive resistance/movement of assets beyond borders.  or refusal to turn the stuff in.  little was really "seized".  prosecutions were mostly the result of bank transactions.  they were few and all were guilty at trial, eventually (even if new legislation had to be passed).  hear tell it was all melted into ingots, still in knox or ny, but lower purity than will trade.  it may be most of what's left (or not).

e_goldstein's picture

It wasn't really a confiscation, people were compelled to turn their gold in for FEDREZ notes.  It's estimated they got about half of the gold that was in circulation.

DosZap's picture

They got less that 20 Tons total.

Where do you think the near UNLIMITED supply of Eagles and Libs came from in this country now?.

From Europeans, after the ban was lifted.They hoarded the crap out of them.

There are more availbale than anyone one person has FRN's.......anybody.

As for Gline, they love to push austrian corona  shit, and soverigns,(as valuable Non confiscatible collectibles, LOL.

Like other pm sellers, use scare tactics to sell the highest premium crap JUST like them.

The dude on T.V. in the interview, is a loon.

If he was that broke he should have bought silver.

I am sure he goes to a car dealer, and pays sticker or above, for his cars,without a flinch.

Call the Whine Line.



Azannoth's picture

Be careful you might just get what you wish for

Translational Lift's picture

The Gubment can arrange that...........Luckily....We outnumber them.............

unwashedmass's picture


there will be a black market. count on it. no one is going to be trading a gold coin for tissue dollars.....or blithely paying a VAT....



thefatasswilly's picture

Yes, that's the plan. From your cold, dead hands.

Please, all of you, hoard as much gold as possible. It will do you much good against commando squads sponsored by the pentagon (and yours truly).

Bendromeda Strain's picture

I fart in your general direction, shmuck. Molon Labe, keyboard commando.

NOTW777's picture

clear path to physical violence (not recommending - just saying)

LoneStarHog's picture

Relatively speaking there are damn few physical gold owners.  Those who do have gold also are the people well-armed with plenty of ammo.  Let's take a low figure and say one million, all in different locations. Now Waco, Ruby Ridge, et al. were easy pickings for government thugs. Waco also showed what can happen to thugs who get too damn confident.

So one must ask, what would be the benefit to the government to go after these relatively few people, most having gold, but in small stashes.  The real gold in quantity already being held by TPTB, even if Fort Knox is empty.

It would be in the best interest of the government to just let these gold owners become the new Middle Class in the aftermath.

bronzie's picture

there are a number of big stashes - they are called ETFs

LoneStarHog's picture

We are discussing physical gold IN YOU POSSESSION.  It is doubtful that ETFs have anywhere near the physical gold claimed.  I have always said that ETFs serve two purposes:  1) To take demand away from the physical market and into paper

2) To have physical, in whatever quantities, in one place for easy confiscation.

Attempting to confiscate small stashes in MILLIONS of well-armed locations would be pure stupidity.  Just let those become the new Middle Class.

RockyRacoon's picture

You are right that there are few gold owners -- anywhere.  I've seen fence-sitters waiting for a "reasonable entry point" for the last 10 years.  Losers.

I hesitate to post the entire article, but David Ganz has a nice treatment of the last gold confiscation, and the possibilities of another one.   Ganz is an attorney and is well known by any coin collector and has been in the business all his life.  I am a coin dealer as well so I have to stay on top of this topic.  Below are a few excerpts from his article which appeared in Numismatic News on Sept 9th, as well as a link to the original.

A Florida reader has asked about whether possible gold  seizure actions by the U.S. government, which some say is in the offing, make out a case for investing in gold coins of foreign countries, and asks as an ancillary question whether or not those who strongly believe in gold ought to consider holding some (or all) of their gold outside the United States. one who is contemplating this has shown me the text of the proposed Presidential Finding and Declaration that would be most likely to be necessary in order to force the surrender of bullion, hallmarked items and coins. But I can guess what it will have to say (“national emergency”) and several other key lines of verbiage based on past action.

Just how successful the program of turning in gold was has not been fully explored. I took my collection of Mint reports that go back to 1867 and put a spreadsheet together. See the chart below.

Here’s what these statistics mean: the government’s “voluntary” gold coin retirement program actually took in and melted 125 million gold coins of 351 million gold coins ever produced by the United States from 1795-1933. That constitutes melting 39 percent of all the double eagles struck, 47 percent of all the $10 coins manufactured, and about a third of the $5 gold coins that were produced by the U.S. Mints. Most of this took place 1933-1939 under the “voluntary” recall.

Quite besides the $1 to $20 gold pieces melted, foreign gold coin was also turned in. According to the 1934 Mint report, between 1870 and 1934, the U.S. was a net exporter of gold coin to the extent of about $1,651 million ($1.6 billion, valued at $35 an ounce (or about 45.7 million troy ounces of gold.

However, saved from the melting pot were collector coins. During the 1933 gold recall, citizens were permitted to retain “rare and unusual coin,” as much because the constitution prohibits a taking without just compensation, as because even in 1934, coin collectors and the general public understood that coins had a value that exceed face value or metal content.

The coins that were ultimately declared “collectible” were all U.S. gold coins made prior to 1933; later, all foreign gold coins minted before 1960 were in the equation. Specifically, the law and regulations allowed up to five of each date and mintmark to be held.

That is, for a $20 gold piece, $100 face value in gold coin for each date and mintmark. There are over 190 double eagles and that would allow a collector to acquire 950 gold double eagles at a minimum), which amounts to about 919 ounces of gold worth at current gold price (about $1.1 million). The $10 gold coin set has over 336 eagles in it or about 1,680 coins.

In context, the value at melt is about 806 troy ounces or another $967,000. What the heck: the $5 gold piece collection has over 225 dates and mintmarks from 1839 to 1908, alone (1,125 coins) (another 288 ounces, or about $345,000).

Completely forgetting numismatic value, the gold content of that collection alone would be around $2.5 million (and we haven’t gotten to quarter eagles yet). That should be enough to shield most people from seizure of their gold assets.

There follows a chart showing the makeup of a nice, safe gold holding.  In many cases the collector premiums are very small -- and besides, collecting coins is fun!


boiow's picture

good article.   i'm sure i speak for a lot of people here in valueing your ZH contributions.

RockyRacoon's picture

Thank you.  I guess I get frustrated over the number of instant experts on every subject, stirring a pot of some sort all the time and displaying ignorance.  I try to reserve my comments to 2 areas.  1. Topics upon which I have real world or career experience.  2. Totally irritating snark.  Otherwise, I keep my trap shut.

ColonelCooper's picture

LOL.  I always enjoy your posts, Rocky.  I didn't think that last one was snarky at all... ;)

Cognitive Dissonance's picture

Even RR's snark is usually filled with some wisdom and insight.

Then again, you'd expect someone who's 96 years old to have a few nuggets of Gold to pass around. :>)

Hulk's picture

Thats one old Coon. I hope I am alive when I am 96!

RockyRacoon's picture

Rummaging in garbage cans has its advantages.

And messing with the family dog:

amusedobserver's picture

Most people don't realize:

1.  The "national emergency" that FDR deemed to exist 1934, in justification for his gold confiscation, was World War I in 1917.  (Go ahead, google his executive order and read it, it's not that long.)


2.  The price of gold from the founding of the Republic thru the time of the confiscation was set at $20.67 the ounce.  Nine months after the confiscation, FDR devalued the dollar 40% to $35 the ounce.  That is, if you wanted to buy an imported item from a country still on the gold standard it would cost 69% more dollars.  So he not only took in everyone's gold, he then creamed their wealth for good measure.


3.  Anyone who thinks FDR is a great man and one of our best presidents is an ignorant jackass.  He was nothing more than a premeditated thief.

jeff montanye's picture

i don't know about premeditated; he seems to have been making up most of it as he went along.  still, four elections.  excellent point about ww1; it gets neglected in this.  another reason to avoid wars: they generate such bad legislation (fdr's other world class crime: the japanese internment in ww2).

thefatasswilly's picture

Government will be much more aggressive this time around; this depression is far more severe.

thefatasswilly's picture

You have assault rifles. Government has small, specially trained squads with nightvision, grenades, and most importantly, superior numbers/teamwork. Pentagon is probably collecting information on you as I type this, because you have revealed yourself to be a gold hoarder. Thank Confucius for the internet.

Thus, in response to your comment, LOL. LOLOLOLOOLSJAFOADL

Bendromeda Strain's picture

You really are a douche. Come get me first, sarge. The only rifle you've held was white with a Nintendo logo.

thefatasswilly's picture

Rather be a douche than be a dimwit who is incapable of reading comprehension.

I'm not the pentagon, you fucking idiot. Don't post, ever again.

The Rogue Economist's picture


"It would be in the best interest of the government to just let these gold owners become the new Middle Class in the aftermath." I think that this mostly sums it up. What most people don't realize is that the government doesn' have to come into your house to confiscate your physically held gold. All they have to do is to set an incredibly high tax rate on the profits of any sale with an assumed 100% profit without documentation. This wouldn't affect the highly wealthy that much, as they would be able to use their larger stores of gold as collateral in loans, which would then be used to scoop up assets at pennies on the dollar in a crisis. I always find it interesting how some coin vendors tout collectables as a way to avoid confiscation, all the while missing or avoiding two key points: 1). Any president who even mentioned the words "wedding ring" in a confiscation order, no matter how bad the crisis, would be committing political suicide. 2). A look into countries with a black market in gold, but no nearby natural source (gold mine) reveals that if you want to trade your gold for a bag of rice, they're going to give you the going rate for 10k jewelry, even if you have pure 24k bullion. In a hyperinflation situation, not only is it dangerous to flash a full gold coin in front of others, they probably won't have enough goods to give you full value. This means that you'll have to shave coins, which renders their pedigree and gold purity stamping useless. If the government is smart when TSHTF, they'll make special dispensations through government approved vendors while sympathizing with the people having to snip up their wedding rings to eat. That way they'll get midt of the gold, and it will be turned in gratefully. Bullion and coins are good, but use 10k gold to survive, then use the bullion to secure loans once the banks restabalize. Collectables are for collectors, not survivalists. (my apologies for any typos. I'm replying on a cell phone keyboard.)

Azannoth's picture

The people of America where in a 100x better position 80 years ago to defend their gold and they didnt, I kind sorta think that today the government would get away with this sorta thing even more easily, most people like 60% think that only 'fat cats' own gold and would very likely support a confiscation

LoneStarHog's picture

They were given gold-backed dollars back then. Get a clue!

alien-IQ's picture

actually, I don't think so.

1934: The obligation is changed. The bill is no longer redeemable in gold, but rather in "lawful currency". This is due to the U.S. being taken off of the gold standard. "Lawful currency" in this case means silver.

The Gold confiscation act was April 5, 1933.

So in a sense they took your gold and gave you paper. Oh yeah...nice trade.

MarketTruth's picture

More USA gold confiscations talk... and China is asking their citizens to buy gold, which is VERY WIDELY available as was there a few months back and you could easily buy gold bars in malls, jewelry stores, at many banks, etc.

So ask yourself why China is asking their citizens to buy gold and it is wodely available yet within the USA you must seek it out and virtually all banks do not sell gold. What is the USA afraid of?


thefatasswilly's picture

Prob responding to a rhetorical question, but: loss of status as world reserve currency, and thus subsequent collapse (from such a loss and many other factors).

U.S. is trying to stall economically until it can enter WWIII, at which time it will use its only source of remaining power.

Many countries will side against the United States (whose capitol is located in the middle east nowadays), for two reasons: its currency reserve status and subsequent ludicrious economic behavior.

This war will be spectacular. "Win" or "lose," zhong guo will profit most.

Slartebartfast's picture

Everything I have read states that only a very tiny percentage of ordinary folks surrendered their gold.  There was also a black market for some time.  There was also selling it outside the country.  Anything but obeying like a good slave.  Then or now.

traderjoe's picture

I read that they gave people a lot of notice, and most people with substantial holdings moved their gold to Europe...

alien-IQ's picture

No the "average person" was not given much advance notice at all.

The executive order was issued on April 5, 1933 and all Gold had to be delivered by May 1, 1933. A little less than a month. Not much time at all.

Bendromeda Strain's picture

And everyone was entitled to keep 5 ozt personal stash. So, aren't you also holding for your "extended" family?

Azannoth's picture

America has 1 weekness all of you people who think themselves patriots(to America not its governmnet) well there are just as many if not more people who think of themselves as Patiots serving the Government or on government dole, its like during the Civil War the south and north both thought of themselves as the 'good guys' the biggest carnage in the history of your country happened because you fought a 'Patriotic War' people can be made to do the stiupidest and evil things in the name of Patriotism and Religion and no doubt the next war will be a 'Patriotic war' or 'Religious war' (aren't they all btw?)

cossack55's picture

Patriotism is the last refuge of a scoundrel.


                              Dr. Samuel Johnson

bronzie's picture

those people 80 years ago were far more compliant than people are today

those people of yorn also trusted their government and believed that the govt had their best interests at heart

anyone today who believes the govt has their best interests at heart is delusional


I read a lot about the precious metals but I have never seen any numbers for how much gold was actually turned in in 1934 - I inherited some of the gold that DIDN'T get turned in which makes me wonder if compliance was really all that high even 80 years ago


RockyRacoon's picture

Numbers on that here:

Here is a small part of the article:

...the government’s “voluntary” gold coin retirement program actually took in and melted 125 million gold coins of 351 million gold coins ever produced by the United States from 1795-1933. That constitutes melting 39 percent of all the double eagles struck, 47 percent of all the $10 coins manufactured, and about a third of the $5 gold coins that were produced by the U.S. Mints. Most of this took place 1933-1939 under the “voluntary” recall.

Quite besides the $1 to $20 gold pieces melted, foreign gold coin was also turned in. According to the 1934 Mint report, between 1870 and 1934, the U.S. was a net exporter of gold coin to the extent of about $1,651 million ($1.6 billion, valued at $35 an ounce (or about 45.7 million troy ounces of gold.

However, saved from the melting pot were collector coins. During the 1933 gold recall, citizens were permitted to retain “rare and unusual coin,” as much because the constitution prohibits a taking without just compensation, as because even in 1934, coin collectors and the general public understood that coins had a value that exceed face value or metal content.