Confiscation of Gold Bullion & Coins
In 1933, the USA famously or infamously banned its citizens from continuing to own gold; this also happened in the UK in 1966.
Gold Confiscation, Surrender, or Exchange?
The American gold coin dealers who try to scare their customers into buying more expensive older pre'1933 gold coins usually talk about "confiscation" when referring to the Executive Order 6102 of 3rd April 1933.
We believe the use of the word confiscation is a deliberately misleading exaggeration . It is clear from the wording of the Act that the gold was not confiscated, but had to be sold or exchanged at the then current market value.
We also note that may articles appear to state that Roosevelt made holding gold illegal in the USA. This is untrue. The various Executive Orders and Acts allowed each person to hold up to 5 troy ounces of gold, and made exemptions for gold coins of numismatic interest or rarity. It was only illegal to hold gold bullion in excess of five troy ounces. Most families and households would have been able to re-allocate and share out gold holdings in excess of 5 ounces per person, for example a family of 5 would be able to hold up to 25 ounces between them, plus "rarities". Five ounces is worth over $6,500 at current (2010) price levels, and 25 ounces over $30,000. Only a very small number of individuals would have been forced to exchange their gold. Most private gold holdings would not have been publicly known, and many more individuals may have easily chosen to keep their gold holdings concealed, or possibly simply designated excess holdings as being of numismatic interest or with rarity value.
Raw Deal - Citizens Impoverished by State
Even though in 1933, gold was not confiscated, nevertheless any people who did exchange their gold effectively lost out when it was revalued upwards shortly afterwards. It seems fairly certain that the US Government would have known this at the time, and planned it. Gold owners who did exchange their gold lost our of a near instant 69% appreciation in value from $20.67 to $35 per ounce.
Revaluation to $35 Per Ounce
The Gold Reserve Act of January 30th 1934 changed the nominal price of gold from $20.67 per troy ounce to $356 per troy ounce.
Many American coin salesmen appear to claim that gold was revalued immediately after "confiscation". The official price, at least, was not changed until almost 10 months afterwards.
Rare Gold Coins as an Investment
Rare gold coins or gold bullion coins. Which is the better investment? We try to give some impartial advice to collectors and investors. Don't pay inflated prices or high premiums for investment gold coins unless you know what you are doing.
US Executive Order 6102
Rather than quote the Act in full here, we have allocated it its own page.
Devaluation or Legalised Robbery?
It remains our view that most if not all devaluations are a form of stealth tax or legal robbery of the citizens by their governments.
In democracies, it must be a very tempting way for current governments to remain popular by deferring financial responsibility and pain in order to remain in power, or get re-elected. Even for dictatorships, it must help to be popular, or at least not quite as unpopular, and defer any judgement day for the next holder of office.
Pre 1933 Gold Coins
Another piece of misinformation and propaganda we see frequently is the advice and scare story, particularly in the USA about confiscation. We have also noticed a few voices, those of more honest American dealers, stating their opinion that the 1933 confiscation is now irrelevant, and we believe they are almost certainly correct. These guys also believe that the scaremongers are simply doing this so they can sell you more expensive (higher premium) gold coins, on which they can make more money.
Bad Guys or Simply Salesmen?
e.e. cummings famously wrote "a salesman is an it that stinks Excuse". We would find it hard to improve on his observation.
There are many salespeople employed by many companies to talk you into buying the product they are trying to sell. Most sales personnel are paid at least partly on commission, so no matter how sincere they may try to be, there is always a conflict of interest, yours versus theirs. We offer no prizes for guessing which takes precedence. Also even where sales staff are not paid commission, there will be targets, and if these are not achieved, the salesperson will be under pressure to justify retaining his paid employment. This includes coin salesmen.
It is easier for any business to attract and recruit sales staff if they pay a generous commission. It must also be easier for the sales team if the company does not apply many rules of conduct. This means that many salespeople will tell you what you want to hear if it helps them sell you something. It may not be the truth, and probably isn't.
If you buy coins, or any other product, from such a salesperson, or such a company, it is almost certain that you will not be making a good investment.
We have noticed a number of American coin companies giving out frightening advice about modern gold coins compared with pre 1933 gold coins. Our firm belief is they are trying to get you to buy higher profit margin (for them) coin. We remain extremely sceptical about their advice and also their ethics. In summer 2010, one of the biggest American rare coin investment dealers Goldline International was criticised for some of its marketing, sponsorship of US TV programmes such as Glenn Beck on Fox News. Although we have not seen any of the broadcasts, it appears that Beck advises investing in gold, but the show is sponsored by Goldline, who then try to up-sell investors into "rare" gold coins, and particularly pre'33 gold coins, as opposed to gold bullion coins. In the UK, it has become popular to bash the BBC, which although probably imperfect, is an absolute paragon compared with most US media and news organisations. "Fool's Gold" is one headline on "The Daily Dish" about a Glenn Beck (political) rally.
Could a Repeat of the 1933 Gold Confiscation Happen Again?
Research & Effort
One of the best investments anybody could make is in knowledge and education. Buy or borrow a good book, or read a good website (you are already doing this). The money you spend, and the time you invest in learning will be well spent. If it helps you avoid making a bad purchase, it will also save you money, but the knowledge and possibly wisdom you acquire will be one of the best investments you ever made.
Why do you need to find out for yourself, and why can't you just ask somebody? If I had a coin which was worth $1 now, but I thought was going to be worth $1,000 in a year's time, I would not sell it to you, or anybody else, at least not for $1. Also if you find a coin you can buy for $1 which normally sells for $1,000 you should exercise some caution. If something sounds too good to be true, it usually is. It may be stolen, fake, or simply not exist. We have for example saved potential buyers million of dollars in eBay scams, and every day even more people get scammed on eBay and elsewhere from local flea markets to global websites.
A little effort should help you avoid the worst of these.
Collectors Coins & Numismatic Interest
The best reason for collecting coins is because you like them, or are interested in some aspect of them or another. Whatever you pay for them, your greatest dividend is likely to be the pleasure you obtain from buying and owning them, researching them, and possibly photographing them, displaying or showing them, sharing your knowledge about them, and perhaps even exchanging them or selling them to move on to another topic or theme.
If you do this, then any financial gain you make could be considered as a bonus.
If you have no great interest in coins you acquire, then you will not get much pleasure out of owning them, and you almost certainly will buy coins which will turn out to be a poor investment.
Learn to Gain
We could summarise the last paragraph as "learn to gain".
Pick Your Own
If you own a Victoria plum tree, you probably know that the best tasting plums in the world are the ones you pick from your own tree. They are best picked fully ripened by the sun, still warm and fresh from the tree. If you eat them while still up in the tree, they taste even better. If you let them cool off, and take them into the house, they will not taste quite as good. If you buy them from a supermarket, they may be days old, picked unripe, gassed to ripen them, and they will never taste as good as truly fresh warm ones.
While the same does not apply to coins in quite the same way, you will need to pick your own numismatic investments for the reasons we have already indicated.
If you invest in "hot" coins, where there is great interest, and prices are rising noticeably, you have probably missed the metaphorical boat, and you will be buying in at already inflated prices. If you spotted the trend early, you may be lucky, and be able to get out near the top of the market, in which case a coin which proved a good investment for you may end up being a poor investment for the person you sold it to.
There is more chance of gain if you buy into a coin or sector where demand is currently slack, and hold until interest increases. If you also research your coins, you could publish your research, enthuse and educate others, and turn your work and interest into a profit from the increased demand your work stimulates.
Near Bullion Coins
One area we think should always be worth a look is at near bullion coins. By this we mean coins which are priced at or close to gold bullion prices. These provide an each-way bet. If the gold bullion price rises, you will make profits. if demand for your particular coins rise, then again you will make profits. you may even be lucky enough to get a double profit if both happen.
It is for this reason, among others, that we suggest investors look at older bullion coins, the type which used to circulate, like sovereigns, rather than modern "bullion" coins such as Krugerrands or gold (ounce) eagles. These can often be bought at similar prices, but offer the possibility of becoming in greater demand for their collectability, and attracting a higher premium for this.
We have already observed this happening with British gold sovereigns, although some of the increased demand may be from investors who have taken our advice. It also applies to many of the "real" bullion coins which were originally issued for circulation rather than to sell to investors. We have nothing against Krugerrands, eagles, Britannias, maples, nuggets or pandas, but they are a little lifeless and boring compared with their older counterparts.
Strangely, one of the reasons we believe such coins have languished is because many investors are mentally too lazy, or perhaps stupid, to work out the intrinsic gold content, as these older coins were not usually made in nice round numbers or fractions of ounces. Don't be a lazy loser!
CMI-Gold-Silver article on the Myths of the 1933 Gold Confiscation
Another company expands on the misleading propaganda perpetuated by some coin and bullion dealers.
How About Real Gold Coins at Similar Prices?
One of the oldest pages one this website, and still valid.
In July 2010, we noticed much adverse comment, publicity, and speculation about an American company called Goldline International, and others. We were only surprised at how long it has taken for this to get out. We have for a long time believed that many coin companies offering investment advice were simply pushing people into buying whichever coins made the biggest profit for the seller, and these were likely to be overpriced and a poor investment. These companies probably spend much more on advertising than we do, use Google and other adverts, employ many staff, pay generous sales commissions.
As you can see, we have given Goldline their own page on our website.
Pre 1933 Gold Coins
Another piece of misinformation and propaganda we see frequently is the advice and scare story, particularly in the USA about confiscation. It deserves its own page on our website, which it will get soon. We have also noticed a few voices, those of more honest American dealers, stating their opinion that the 1933 confiscation is now irrelevant, and we believe they are almost certainly correct. These guys also believe that the scaremongers are simply doing this so they can sell you more expensive (higher premium) gold coins, on which they can make more money.
French 20 Francs Rooster Gold Coins
These are one of the commonest European bullion coins. They are also one of Goldline International's high profit "switch sell" lines.
In common with many other European dealers, we normally have these available for sale as low premium bullion coins, typically at similar premiums to our British gold sovereigns.
If collectors wish to buy high grade specimens, or special dates, we are also happy to help, but naturally we expect a higher price for numismatic specimens than for bullion coins. For these special coins, our premium is typically about 50% above gold. This compares with between about 4% and 15% for bullion coins depending on quantity. Goldline International is reported to charge over 50% premium for quantity "investment" purchases.
We will be publishing more information about these older coins soon, and will offer them as and when they are available, both singly and in bulk.
Other World Coins