Will the Government Confiscate Your Gold?

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Whenever I write about gold, I can be certain of two things.

By William Patalon III, Executive Editor, Money Morning

 

First and foremost, I know that readership will be exceptionally high. The interest in gold, silver and other precious metals is as intense as I’ve ever seen.

And, second, I can be sure that, in the days that follow, I’ll receive a slew of e-mails, phone calls and letters from folks asking some variation of the same three questions:

  • What are the chances that the federal government will confiscate my gold?
  • Can I put gold in my IRA?
  • And how much gold should I hold?

The bottom line is that a lot of folks are investing in gold for the first time.

To give those newcomers a unique (and informed) perspective on these questions, I picked up the phone and called industry colleague Rich Checkan at Asset Strategies International (ASI), a precious-metals and foreign-exchange dealer that operates out of Rockville, Maryland … just down the highway from our own offices here in Baltimore.

ASI is a veteran player, having just celebrated its 30th anniversary, so I was certain that Rich and his staffers would have something of value to say on these topics.

On that point, I was right.

Here’s an excerpt of my interview with ASI.

(Q): Rich, one of the questions I get asked most frequently has to do with confiscation – the Roosevelt Administration Executive Order of 1933 that required folks to turn over most of their gold coins, gold bullion and gold certificates in return for paper currency. There’s a big concern that this will happen again – especially given the big deficits, massive debt load and challenges that Washington now has to deal with. What’s your view on that?

Rich Checkan (A): It’s very interesting Bill … we just hosted our 30th Anniversary Seminar – which we titled “Finding Certainty in Uncertain Times.”Despite the high attendance, nobody asked if gold, silver and other precious metals were going to appreciate in the months and years to come – that was a foregone conclusion because of the challenges you’ve just cited.

But the question of confiscation was very high on their list and, as you say, seems to be a very real concern of investors in general.

Now, I believe confiscation unlikely for a number of reasons.

First, the major economic concern in 1933 was deflation, not inflation, and the U.S. dollar was still tied to gold. We were not able to simply print more money to fund increased governmental spending, so the U.S. government took in the gold, handed you dollars and achieved the goal of increasing the monetary base.

A second reason I believe this is that the cost would also be enormous at this point. In 1933, the government had some control over the value of gold – in fact, if you study your history you’ll see that the government actually raised the price of gold soon after taking it all in. Washington doesn’t have that luxury … that latitude … today. If the federal government took every ounce of gold from every American, it would still be a traded commonality that might rise or fall.

Further, the amount of gold Americans hold would not be enough to be of any benefit either. If we took every ounce of gold from every American right now and put it in the U.S. Treasury, we wouldn’t even put a dent in the current debt, which has resulted from decades of fiscal irresponsibility at the hands of both parties.

What you can tell your subscribers, Bill, is that a much more likely concern is exchange controls – a policy where the citizens of a country cannot purchase assets outside the country and assets in any other currency than their base, domestic currency. Why? Forcing citizens to invest in assets denominated in the domestic currency creates artificial demand, which can drive the currency up in the short term.

(Q): What can an investor do about that?

Rich Checkan (A): As we tell our clients: Do today what you may not be able to do tomorrow. In short, if you intend to establish a financial foothold offshore, the time to so do is before the opportunity vanishes.

(Q): Rich, another query I get quite frequently from my Private Briefing subscribers is: “Can I put gold in my IRA?” What’s your response to that?

Rich Checkan (A): The answer – which is perhaps the biggest surprise to many of our clients, as well – is a resounding “Yes.”

However, the truth is most IRA custodians just aren’t able, or willing, to offer physical storage of precious metals. Instead, they often steer you towards options that maximize their own profit.

But here’s the good news: There are many methods of investing your IRA into precious metals. Two that are particularly worth mentioning are the Perth Mint Certificate Program (PMCP) and Domestic Storage.

Let’s take a look at them both.

The Perth Mint Certificate Program (PMCP) offers one of the safest, most cost-effective means to invest your IRA into precious metals and diversify it offshore at the same time. It’s the oldest, continually operating mint in the world, and it has the benefit of being owned by the AAA-rated government of Western Australia.

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