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Did you know that it is possible for the .U.S. government to take away your gold? History proves gold confiscation is a real thing and it can happen again. Even outside of the United States. That said, the economic state of our planet goes up and down in cycles. The 2008 global economic collapse wasn’t the first time that humanity experienced a deep recession. In fact, if you ever take a high school history class that you might’ve heard of the Great Depression.
It’s important to understand that these dire circumstances often lead to war, but not just the kind that incites violence. Wars are also waged economically and sometimes those wars involve the government dominating its own people. That doesn’t just happen in dictatorships. It’s happened in America and across Europe. More importantly, there’s nothing saying that it can’t happen again in the future.
So what is an investor to do?
There are a few strategies investors can implement to protect their gold, but ultimately there’s no such thing as a surefire investment. Any investment comes with risk. That’s why risk and reward are always connected. Usually the more risk an investor takes on, the higher the reward they need to chase in order to feel comfortable with that risk.
Still, planning ahead and thinking critically about protecting your investments in gold and other commodities can help an investor stay ahead of any potential unforeseen circumstances that may compromise their life savings.
As you’re about to learn, the idea that investing in gold bars can keep money out of the hands of governments during times of crisis is false. But there are still things investors can do to maintain their wealth as best as possible.
Where the Concept of Gold Confiscation Came From
It all started in the 1930s. While, technically 1929 to be exact. Something called a global recession grabbed a hold of the economy. Sound familiar? Because of that, governments swarmed citizens in search of ways to take care of federal debts, including the American government. The deflation of currency values around the globe triggered The Great Depression in the 1930s.
In 1934, .U.S. President Franklin Roosevelt created the Gold Reserve Act. He and his associates signed Executive Order 6102 in 1933. That Executive Order made it illegal to own any gold outside of jewelry and a few coins. While it was a big move for North America, many other countries around the world followed suit. The bottom line is that the federal government needed to bail out reserve banks and keep the traditional financial system afloat. Sounds like 2008 before 2008 doesn’t it?
As with any sweeping policy change, The Gold Reserve Act was promoted as a good thing for the country and its citizens. But the programs instituted as a result of the policy forced citizens to sell their gold back to the government for just $20.63 per ounce.
Less than a full calendar year later, the government put a price tag on gold of $35 per ounce. This means that citizens were now paying 40% more to get their hands on gold even though they could’ve had a just nine months earlier for the $20.263. It took over three decades for the government to officially allow Americans to own more than $100 worth of gold. 1975 was the year.
The Gold Reserve Act proves that governments have the ultimate power when it comes to dealing with the law and making things favorable for the almighty Big Brother.
Why Governments Always Have the Power to Confiscate Gold
A democratic government is always supposed to be for the people, of the people and by the people. So why is it that a government will always have the power to confiscate gold? It’s because of the three principles that all governments are responsible for, democratic or not. All governments:
- Governments can always make new rules.
- Governments can always change existing rules.
- Governments always have the power to enforce rules.
Of course, constitutional rights and charters of freedom are meant to protect the individual and afford most people in Western society basic human rights, but none of those constitutional rights appear to involve the right to own gold or other commodities.
Governments can always make new rules. It hasn’t happened in the precious metals industry in North America in a long time, but it’s happening right now in the world of digital gold. Bitcoin investing is becoming a more and more regulated sector of the industry because of scams and a lack of understanding and the part of governments with regard to how digital assets work and how they can best be used to serve society.
Nevertheless, governments cannot only make new rules, they can also change existing ones. They are also responsible for enforcing the rules. Again democratic or not, governments have a lot of power.
As you’re about to see, this applies all over the world.
Gold for the Fatherland: Italian Gold Confiscation, 1935
Under the dictatorship of Benito Mussolini, Italy played a large role in supporting Adolf Hitler and the Nazis during World War II. To try and help Hitler’s cause, Mussolini created a program called Gold for the Fatherland. The program’s aim was simple, to get the country’s gold out of the hands of its citizens and use the proceeds to strengthen the cause for war. This all happened in 1935.
What did the citizens who turned over their gold get back from their trusted government? A steel bracelet with the words “Gold for the Fatherland” inscribed on them. The program was very successful in helping Nazi allies push forward with Hitler’s desire for an Aryan race. The Mussolini family felt so strongly about it that even the dictator’s wife donated her jewelry to the program.
The Brits Ban Gold in 1956
Just like the United States of America, Great Britain changed its stance on gold in 1931 and the value of it fell quickly. Just 10 years later, a British citizen was allowed to own no more than four gold coins at one time. The government also introduced tariffs on foreign gold to make it so that importing the precious metal from other countries wasn’t worth it.
There was one legal loophole that citizens could use to try to get their hands on more gold. Showing the bank of England they were licensed and qualified collectors. This requirement lasted until the late 1970s when it was deemed that citizens could own larger amounts of gold again.
Gold Confiscation Down Under
Australia followed in the footsteps of the United States and America nationalizing gold in 1959. The country’s policy was instituted through something called The Banking Act. It required every Australian citizen to hand in all of their gold within the next 30 days. They can only keep a small number of coins to themselves.
Not only did they have to sell their gold. They had no choice but to sell it back to the country’s national reserve Bank. It wasn’t until the 1970s that citizens were allowed to buy gold back. The Gold confiscation program lasted more than 25 years overall.
More on Dictators Confiscating Gold
Although reading about democratic governments taking control of is certainly disheartening, there is something about it that’s always more ruthless when a dictatorship does it. Nevertheless, hard-core libertarians out there looking to protect their wealth from big, bad institutions don’t like it either way. That’s how it should be.
Still, Benito Mussolini wasn’t the only dictator confiscating gold. It only makes sense that he was supporting Adolf Hitler and his quest to take over the world while Hitler was stealing nearly 6 million British pounds worth of gold from Czechoslovakia. He literally stolen via wire transfer. After the fact, his associates drastically underreported the amount of gold that the German government had in his possession so as to avoid any sanctions from international governing bodies. The scheme worked.
Hitler and company were the only dictators greedy for gold. There were many after them. That includes former Cuban president Fidel Castro and the former president of a rock Saddam Hussein. Russia’s Soviet Union also did the same thing. Citizens of the Soviet Union got thrown in jail for owning gold, and today the Russian government has considerable control over gold which it exercises through its central banks. The country also does business in diamond mining with the largest diamond companies in the world. Investors can guess with the terms and conditions of doing business with the Russians is. Enriching the Russian government.
So How Can Governments Protect Their Gold?
The current generation of gold investors, meaning millennial’s and anybody born in the late 1970s probably thinks the odds of gold being confiscated again are slim. If you’re an investor who feels that way, you’re right to do so even in considering previous history. The world is more evolved now than it was 50 years ago. With the advent of social media and the fact the public discourse surrounding issues related to equal rights are so readily embedded in our social consciousness, the odds of a government taking control of all the gold available to its citizens, especially in North America is very slim. Still, investors can do certain things to protect their gold. All it takes is a little bit of creative thinking and strategic planning.
Here are three options:
- Store gold in foreign countries
- Purchase jewelry
- Consider digital gold
Storing Gold in Foreign Countries
Many North American investors like to store their gold in places like Singapore, The Cayman Islands, Austria, Switzerland or Hong Kong. Given the political unrest that’s currently affecting citizens in Hong Kong, putting gold there probably isn’t a good idea right now. However, the other options have fairly liberal government policies that allow foreigners to invest. One of the reasons people invest in gold is so they can count on it in times of crisis. So the downside of investing in gold outside of North America is that it might take a while to get it back should an investor want to liquidate it or use it for anything. Still, investing outside of your home country makes it less likely that your own government can confiscate your gold.
Investing in Gold Jewelry
There’s a reason cash for gold businesses make money when people are facing financial hardship. It’s because they’re trading in gold jewelry that gets melted down into gold bars and receiving loans or cash in exchange for that gold. If you’re investing in gold proactively odds are you’re not currently in a moment of crisis.
Believe it or not, investing in gold jewelry might be one of the best ways to take care of your assets. This is a very common strategy in countries where gold is more likely to be taken away. That’s why when going on vacation to a country like Cuba, investors might see locals wearing gold. The more links a gold chain has, the wealthier the individual is. In many developing countries, people literally wear their gold around the neck to keep it out of the hands of the government.
Even Hollywood celebrity Elizabeth Taylor was famous for wearing lots of jewelry and gold before she passed away. She travelled a lot and used jewelry as a strategy for maintaining her wealth and keeping it in her hands.
How to Invest in Bitcoin
Bitcoin is digital gold. The fastest way for an investor to get their hands on some is to use a credit card and a cryptocurrency exchange like Coinbase. Coinbase and its many direct competitors allow users to purchase Bitcoin and other cryptocurrencies instantly.
That being said, the best way to invest in Bitcoin for the long term is to invest in a Bitcoin IRA. Yes, they exist. There are five top companies that provide investors with Bitcoin IRAs. Many of those providers have backgrounds in dealing with precious metals too. Investing in Bitcoin not only means investing in something that isn’t owned or controlled by a single entity, it also means killing two birds with one stone and having the option to make precious metals part of your portfolio alongside your digital assets and other investments you may have.
As always, whether or not you’re worried about investing in gold or having to keep it away from governments or unscrupulous criminals, remember that a solid investment strategy planned out using due diligence and critical thinking skills is imperative to building wealth in the long run.
Now you know how to protect your gold and make sure that it stays in your possession for years to come.
Photo by Aaron Burden on Unsplash.
