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(August 24, 2002) Conspiracy buffs, paranoics, nervous nellies, political fringe-dwellers, and commission salesmen hawking numismatic coins tell us that some day Federal agents, probably armed, jackbooted, and flying black helicopters, are going to come to your house and confiscate all your gold bullion and coins, unless, of course, those coins were made before FDR was President. Can they be right?
Confiscation! - An ugly term being thrown around these days, implying that “someday, they” inevitably are going to invoke the powers of the federal government and confiscate every citizens’ gold holdings, just like they did in 1933. How does such an idea gain any traction? Well, because there is an infinite capacity among some in the U.S. to believe any theory involving conspiracies of government officials to strip American citizens of their rights and their wealth. To follow this line of thought completely, you must believe that gold is the only money, and someday the government fiat dollar will finally prove to be worthless, which will lead greedy and unprincipled Washington bureaucrats to exercise their powers to seize your gold just to keep their fiscal game afloat.

Remember! They did it in 1933, and they have the power to do it again!

But, goes the sales pitch, you can still own gold, and at the same time save yourself from this fate. How? By buying coins struck before 1933, which are somehow magically protected since they are antiques, collectible items which are, supposedly, forever, exempt from any such seizure. It's total nonsense on stilts, of course, but the salesmen of numismatic coins will tell you that it’s the law that these pre-1933 gold coins can never be confiscated. How does he know that? Because the script writer at his company told him so!

Such malarky ignores the simple fact that when gold was called in during the devaluation of the dollar in 1933, over 95% of that gold consisted of gold coins which were produced before 1933. Massive amounts of old U.S. minted $20, $10, $5, and even $2 ˝ gold coins were “confiscated” during this period, as the whole point of the gold turn-in was to devalue the dollar by removing its gold backing at $20.67 per ounce and replacing it with a paper dollar worth $35 per ounce.

These older gold coins that numismatic salespeople speak so highly of today were in fact exactly the form of gold that the U.S. Treasury was most interested in, simply because they were the form of gold most commonly held by U.S. citizens. And these coins were traded in for paper dollars by the millions, both under the threat of confiscation and for the patriotic motive of helping our country out of the worst economic depression it had ever experienced.

So where did this myth of the inviolability of ‘pre-1933’ gold coins come from? From an after-the-fact and deliberate misreading of a set of defunct Treasury regulations from the Nixon years, directives issued long after the call-in of gold had for practical purposes ended and gold ownership was but a few years from being re-legalized – 1969 to be exact.

On April 22, 1969, the Treasury (over the signature of Paul Volcker, then Under Secretary for Monetary Affairs, and later head of the Federal Reserve Board) issued rules and regulations (Title 31, Money and Finance: Treasury, Chapter I - Monetary Offices, Department of the Treasury, Part 54, Gold Regulations, "Gold Medals for Public Display and Antique Gold Medals.") that eliminated all licensing requirements for the importation of gold coins produced prior to 1934. This 1969 ruling defined "rare coins" (gold) in the following statement:

"(b) Gold coins made prior to 1934 is considered to be or recognized special value to collectors of rare and unusual coin."

Under the section headed "Rare coin," it amended the regulations to read that "(a) Gold coin of recognized special value to collectors of rare and unusual coin may be acquired, held, and transported within the United States without the necessity of holding a license therefor." This was in 1969, remember, after the ‘recall’ of gold coins was but a distant memory.

Of course, six years later, on January 1, 1975, all of these rules and regulations became moot as private gold ownership once again became legal for U.S citizens, as it has been ever since.

Those who tout the ‘confiscation-proof’ aspect of these very same coins are misleading thousands of investors in order to line their own pockets. These so-called “numismatic” coins which coins salespeople hawk to their victims are shamefully marked up compared with the small percentage commissions charged for the most popular forms of gold bullion. As for the “non-confiscatable” issue – nothing could be farther from the truth, as these older coins were exactly what was recalled in 1933.

Although private gold ownership was banned in 1933, it wasn’t until the late 1960s that the Treasury modified its regulations about gold coin ownership in rules such as those cited above. These rules were meant to protect the holdings of those engaged in the scholarly pursuit of numismatic study, and were by no means meant as a loophole in the law that would allow U.S. citizens to hold gold in bulk as a store of value.

For instance, at the same time that the Treasury was defining "rare and unusual" gold coins, it was re-affirming its opposition to private holdings by U.S. citizens as a monetary asset in directives such as the following:

"The basic principles governing the administration of the Gold Acts and Orders are that gold, as a store of value, can be held only by the government and that private citizens and entities in the United States can acquire gold only for legitimate and customary industrial, professional, and artistic uses.” - U.S. Treasury Office of Domestic Gold and Silver Operations, Gold Regulations and Statements, "Gold Medals," June 5, 1969.

In short, gold buyers today are being presented with bogus marketing claims that pre-1933 gold coins are somehow "non-confiscatable," based on shaky interpretations of decades-old U.S. Treasury directives that:

- were codified during the waning years of the 1933-1975 era, and

- were meant to apply to coins of "recognized special value," and

- have not been in force for over 25 years.

It's not like we're talking about Constitutional amendments here. On the contrary, numismatic marketers are making mountains of cash by quoting obsolete Treasury directives that were written during the 1960s to cover narrow exemptions to a law that went by the boards during the Ford administration. Their relevance today is zero. And if Congress or the Treasury did contemplate any future gold regulations, they would surely start with a blank slate, exempting nothing.

And if for some unknowable reason, the government decides to confiscate gold, it’s not likely that they will ignore the millions of ounces of common pre-1933 gold coins being loudly sold today to the unwary as collectible items supposedly “exempt” from confiscation.

As our friend Bill Haynes of Certified Mint writes,

“Some precious metals firms foster the circulation of many myths, misunderstandings, and outright lies about the purchase and sale of precious metals. Generally, these misconceptions and falsehoods promote the notion that the government may again call in gold as it did in 1933…By cultivating such fears in investors, unscrupulous firms can sell high-priced (and often over-priced) coins with greater profits of margin. Investors who believe these stories invariably pay too much or buy the wrong coins.”

In our opinion, the "pre-1933 gold" sales pitch is fear-mongering at its worst, and misleading to the point of fraud. Over-hyped and over-priced “collector” gold coins are totally inappropriate purchases, unless collecting coins is your hobby.

The majority of people interested in gold today are looking to protect their assets, not risk those assets in the vagaries of the numismatic market. The most direct asset protection is low cost gold bullion, which is easy to buy and sell and is totally transparent in its pricing (just look in any newspaper for the latest gold spot price).

There’s nothing wrong with buying older gold coins – we sell affordable old Double Eagles and British Sovereigns right here on this website. When they're available at prices competitive with gold bullion, then buy them and enjoy.

But don’t confuse pre-1933 gold coins with either silver bullets or magic beans – in the end, plain and simple, they're only gold!


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