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Doug Eberhardt is a 30 year investment professional offering his analysis on 46 ETFs 5 days a week providing buy and sell recommendations. He is the author of the soon to be released book "Illusions of Wealth" that offers a fresh look on how investors can profit. He has written the book "Buy... More
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  • Gold Confiscation Won't Happen Today 0 comments
    Oct 21, 2010 12:42 PM | about stocks: GLD, SLV

    Over and over you’ll hear the salesmen at gold dealers claim that you need to buy rare, numismatic or worse, European coins like Swiss francs, French Roosters or British Sovereigns, to avoid government confiscation. What they are really saying, is “buy our more expensive coins so we can make more money.”

    Confiscation Tactics

    The following is an excerpt from my book; “Buy Gold and Silver Safely,” that goes into gold dealer confiscation tactics and other means gold dealers use to get you to buy highly marked up coins.

    “Gold dealers will make certain statements that play on the ignorance of those who call in after hearing an ad on the radio or TV. Gold salespeople will say things like, “Are you aware that in 1933, the government took gold coins away?” Most people don’t realize this is true, which will be explained in a moment.

    The gold salesperson will then ask “What kind of gold do you want, the gold that can be confiscated, or the gold that can’t?” Or word the question this way: “Do you want government gold or private gold?” “Government gold” would be the bullion gold like American Eagle gold bullion coins and “private gold” would be the coins like the European coins or others with a high markup over the spot price of gold.

    Some companies will even mention confiscation in their literature. The literature might say; “No confiscation…. yet another advantage over gold bullion coins: rare coins are not subject to gold confiscation laws, due to their historical status as a collector piece.” Or they’ll say; “Investment metals offer different premiums and benefits, such as government reporting and protection from confiscation.”

    Many gold salesmen will try and convince you that if you buy gold bullion coins, the government will confiscate them like they did in 1933 with an executive order. They’ll say that pre-1933 coins didn’t get confiscated and if you buy these pre-1933 coins, the government won’t confiscate them from you today. This is pure speculation on behalf of the gold salesperson.

    Yes, gold was confiscated in 1933. However, those laws and executive orders are no longer valid. They have all been rescinded. Don’t let gold dealers convince you otherwise.

    The Truth About Gold Confiscation

    The following explains the facts of the gold confiscation. The only people who will probably read this in detail are gold salespeople, who won’t be too happy about their hand being exposed. My guess is quite a bit of their profit comes from this one tactic alone.

    Executive Order 6102 was signed by President Roosevelt on April 5, 1933, “forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates.”

    Executive Order 6260, August 28, 1933 amended 6102 by saying:
    “…no returns (of gold to the government) are required to be filed with respect to Gold coin having a recognized special value to collectors of rare and unusual coin;”

    Gold salespeople will say there was an amendment to this executive order on December 28, 1933 “Exempting Pre-1933 Gold Coins from Confiscation.” No such executive order amendment from that date exists, although there were other amendments to Executive Order 6260.

    Finally, Executive Order No. 11825, written December 31st, 1974, revoked Executive Orders 6102 and 6260.

    So what does this mean? It means no executive order exists today to confiscate anyone’s gold.

    Many gold dealers will say the following is of significance regarding which coins are considered “collectible” and thus would be exempt from confiscation:

    Title 31 of Code of Federal Regulations Sec. 54.20 Rare Coin:
    (b) Gold coin made prior to April 5, 1933, is considered to be of recognized special value to collectors of rare and unusual coin.

    While it is true that these coins may be collectors’ coins, it is irrelevant because again, all executive orders pertaining to confiscation of gold have been rescinded.

    These collectible gold coins should not be bought to be utilized for purchasing goods and services at some point in the future, period. This includes all European bullion coins because they will be difficult to use as a medium of exchange, as they are not highly recognizable in the United States.

    There’s even one gold dealer out there, Goldworth Financial, that outright lies about what the U.S. code says about confiscation and puts it right on their website:

    “Today the Federal Government still maintains the power to confiscate gold and Silver through: Title 12, Chapter 2, Subchapter IV, Section 95a, which provides in part: “During the time of war, the president may through any agency that he may designate, licenses, or otherwise—(NYSE:A) investigate,
    regulate, or prohibit, any transactions in foreign exchange transfers of credit or payments between, by, through, or to any banking institution, and the importing, exporting, hoarding, melting, or earning of gold or silver coin or bullion, currency or securities.”

    Well, guess what? Title 12, Chapter 2, Subchapter IV, 95a exists, but it says none of what this gold dealer would have you believe it does.

    In reality, the government could confiscate anything they wanted to in times of “economic emergency.” Whether it is gold, stocks or your home, the laws and regulations are in place for them to do so… in the country’s best interest, of course.

    Making an investment decision on a “what if” scenario makes no sense whatsoever, especially at a cost of 30% to 50% of the initial investment.

    Making an investment decision on known facts of what our Congress, Treasury, Federal Reserve are doing in destroying the economy and monetary system makes perfect sense.”

    What Is A More Likely Scenario for Government Confiscation of Gold?

    If you really think about this for a moment, the government decides it wants to confiscate some gold because of economic troubles. Will they send the police and troops out to everyone’s doors and check their houses, safe’s and bank safety deposit boxes? Or will they with a stroke of a pen, take the quasi-gold known as the ETF; GLD? Would they face a fight on the street with a citizenry who are armed, or take the easy route and take the millions just sitting there in gold ETF's?

    I can flat out say that a gold dealer who sells these rare and semi-rare coins is in the business of making a larger profit off of fear tactics like confiscation, than a gold dealer who sells just bullion coins. But you won't find too many gold dealers that sell just bullion.

    In fact, you won’t hear a gold dealer who sells just bullion gold and silver coins and bars ever advertise on Glenn Beck’s radio or television show, or any other show for that matter. Why? Because it’s just too expensive. There is not a high enough mark-up on bullion gold and silver to allow any profits to allocate towards advertising on these programs.

    Will the Government Come After My Silver?

    This is a subject rarely addressed. The government didn’t confiscate silver in 1933, only gold. But silver was money at that time too. In fact, the bankers had already succeeded in demonitizing silver because they didn’t like the fact that those who had bulk silver could take it down to the mint and have it coined into standard silver dollars to spend. The bankers weren't in control of this monetary exchange, and they didn't like it. Gold became the monetary unit most used with the further discoveries in Alaska, but silver still remained money.

    After gold was confiscated in 1933, here is what Roosevelt had to say about silver in a message to congress, Jan. 15, 1934;

    “The other principal precious metal— silver—has also been used from time immemorial as a metallic base for currencies as well as for actual currency itself. It is used as such by probably half the population of the world. It constitutes a very important part of our own monetary structure. It is such a crucial factor in much of the world’s international trade that it cannot be neglected.”

    Silver coins continued to circulate in the U.S. with the production of 1-ounce coins ending in 1935. Silver dimes, quarters and half-dollars continued to circulate until 1964, when silver was removed from all dimes and quarters, and half-dollars’ silver content was reduced to 40%. Flash forward a few years and in 1968, the government refused to pay any more silver to bearers of Silver Certificates.

    Many today may not view silver as money, but it has been viewed as money since the time Judas was given 30 pieces to deliver Jesus to the high priests. China was never on a gold standard, but a silver standard. Even making sivler more appealing is the fact that like gold, silver too has acted inversely to the U.S. dollar since 1997 as seen in the following chart (Note: silver has moved significantly higher the last year since the ending point of this chart).

    If the government decided to confiscate silver today, would they require every citizen to turn in their Thanksgiving dinner settings? Hardly. Your silver is safe. But just in case one believes they will come after gold, then silver makes a perfect investment alternative to counteract the U.S. dollar decline, and insure your portfolio’s U.S. dollar risk.

    Confiscation Scare Tactics Still Continue Today

    I just did a Google search for gold confiscation today and one of the companies under investigation by the Energy and Commerce committee, the FTC and the Santa Monica city attorney, Goldline International, because of the findings by Rep. Anthony Weiner, D, NY, is still using this scare tactic to get people to buy a certain type of marked up gold.

    I was asked by Weiner’s office to testify at those gold dealer hearings in September, but after my book was sent to the Energy and Commerce committee, they decided to pass. More than likely this is because I wasn’t kind to congress in the first four chapters of my book. I was hoping congress wouldn’t read those chapters and only the chapter dealing with gold dealer tactics in ripping off unsuspecting buyers.

    Either way, sooner or later, the American public will wake up to this gold confiscation nonsense. One needs to buy gold based on it being insurance for their U.S. dollar based portfolio (U.S. stocks, U.S. corporate bonds, U.S. government bonds), buying the highest amount of gold for the least amount of premium. They don’t need to pay 30% commissions or more for “what if” scenarios. But this is exactly what thousands of uninformed people are doing after hearing their favorite talk show host recommend these companies.

    Disclosure: Long Physical Gold and Silver Bullion
    Stocks: GLD, SLV
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