In old Mexico there was a saying that is most likely still used today. “…. you want the silver or the lead?” In other words, do you want the bribe or the bullet and this is certainly the case when it comes to bullion confiscation.
I was talking to a trading friend of mine the other day. I mentioned the topic of bullion confiscation, his reply was “Well….that wouldn’t happen in this day and age. That’s something from the past”.
To be more precise, Australia’s Gold Confiscation was in 1959 and lasted until 1979. The country’s Treasurer stated in a press release that followed, “All gold (other than wrought gold and coins to a limited extent) had to be delivered to the Reserve Bank of Australia within one month of its coming into a person’s possession.”
In America, Franklin D Roosevelt seized all gold bullion and coins via Executive Order 6102. In the US 1933 citizens were forced to sell their gold and silver well below market rates. Citizens holding gold were seen as traitors. In America immediately after the “confiscation”, the government set a new official rate for gold that was much higher as part of the Gold Reserve Act 1934.
It doesn’t matter which way you look at it’s an incredible infringement on individual rights and sovereignty.
Before the lockdown measures of COVID-19 I thought as my trading friends said, such things could only happen in the past. The reality is, the lockdown measures though for apparent valid reasons, proved that the free world could be locked down by governments and this was enforced by the police or the military if necessary.
How could something like this happen now?
In this day and age, western governments would have quite a different approach but equally as effective.
As the price of gold becomes conspicuously high, a program of vilifying gold ownership would begin.
For example, media outlets may state; drug dealers use bullion to hide vast fortunes or embedded terrorist cells use bullion to finance acts of horror.
As EB Tucker points out, this would play into the cancel culture. People would be eager to virtue signal their affiliation with the group. “Yes, he keeps to himself…. no doubt his stacking gold and silver.” Would be the order of the day.
More recently than the distant past, Venezuela has had various programs of bullion confiscation for their citizens gold over the last 10 years. For example, restricting companies and citizen’s abilities to export gold out of the country.
Also, nationalizing the mining industry, companies and mining rights and all before COVID-19’s economic shockwaves are felt. This idea could spread to other struggling third world countries in particular countries outside US swap lines. See my article on US swap lines and how to protect yourself.
These are the temptations of gold and silver on a bull run.
Turkey’s financial system which also exists outside US swap lines, has a more softly approach using “gold bonds” to crowbar citizens gold from their possession. With hopefully a payoff in gold on maturity.
Some months ago, I spent time at a retail Bullion outlet. It was an interesting experience and I got to see a cross-section of customers that were interested in bullion and all things related.
That was just last year and the cash transaction limit was $10,000 but since that time the limit has changed to $5000. Over that amount the retail bullion supplier is required to notify the government under the money laundering and counter-terrorism financing act 2006.
Even at $10,000, it was difficult for customers to come in day after day to make small transactions under the limit that were private and yet still represented a financial position in Bullion.
It was clear to me from that time that bullion retail outlets have the eye of government regulation firmly focused on their industry.
But how would the confiscation happen now?
As EB Tucker also points out with zero interest rates and “…a world flooded with money, you going to turn to gold.”
But the next bullion confiscation won’t be a government forcing you to hand in your gold. It will look something like an excise tax, basically you will be unable to sell your gold.
Sure, you can keep it but you won’t be able to get rid of it, because if a transaction is recognized by the financial system you might be in real trouble.
This is why it’s important to diversify your gold portfolio. Even in the 1930’s you could still have Gold mining stocks and they did exceptionally well.
As an example, Homestake Mining gold producer made their shareholders wealthy during the Great Depression.
In Australia and the US, there were notable exceptions to the confiscation which allowed for the exchanging of gold and silver such as Numismatics, which is collecting coins.
Also, gold jewelry which is easily transported from country to country on one’s person.
Or, a bullion confiscation exemption of particular interest to myself, an artist specializing in casting gold and silver bullion artworks in sculpture. Both gold and silver, and works of art have traditionally been seen as a hedge against hard times. Currently, I am the only artist in the world that specializes in casting gold and silver bullion sculpture. You can check out my work at www.adrianward.com.au
Basically, the exemptions in the bullion confiscation in Australia and the US allowed people to retain important cultural items in gold and silver.
In conclusion, whatever the public’s view of this “barbarous relic from the past” might currently be, quietly governments and central banks have a vastly different opinion. With central banks around the world only recently pausing their wholesale acquisition of gold as the prices moves higher into unknown territory.
This is because central banks and governments are profoundly aware of the monetary significance of gold and silver. The fact is gold and silver represent a cornerstone in the relationship between governments and the financial world.
Gold has been and still is the proverbial Canary in the coal mine that signals the air quality of the financial and political atmosphere.
Gold is often referred to as god’s money, perhaps because its rarity translates into value, a value system created by the universe and not our ever-changing human beliefs.
Gold will always represent humanities aspirations for sovereign freedom of countries and for the individual.
Small Caps (Jul 11, 2020)
Retrieved from. EB Tucker: Why gold? Why now?
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This article does not take into account the investment objectives, financial situation or needs of a particular person or entity. Before acting on any investment strategy or advice you should first consult with your current ASIC accredited investment professional or seek out a compliant investment professional for such.