Gold News

US Gold Confiscation: The Risks

"A true patriot is one who commits you to his cause..."

of HSBC pointed out at a recent precious metals conference that some top US asset managers are truly fearful of the possibility of government confiscation of gold, writes Julian Phillips at

HSBC's director of precious metals trading and sales, Levin explained that when told the bank's New York vault had sufficient space available for their gold, several asset managers said they did not want their gold stored in the US. They'd prefer Europe, because they fear that at some stage the US administration might follow the path set by Franklin D. Roosevelt in 1933 and confiscate all US gold holdings as part of the country's strategy in dealing with the nation's economic problems.

Who are these asset managers? For a start, they are highly qualified capable men who understand the ins and outs of investment management. Such knowledge usually encompasses monetary matters of the sort that would include gold. As such we would suggest their opinions have value.

Why did Roosevelt confiscate US citizens' gold in 1933? The US was fighting to come out of the Depression and US banks were struggling in a not to dissimilar way that they are today. The Federal Reserve was fully aware that US money supply was closely related to the gold they held. Money supply had to expand. What's more...

  • Hitler had gained power in Germany. The potential for war now existed;
  • The value of gold as a reserve asset that provided liquidity, when all else failed was fully understood;
  • The ability to raise money supply by devaluing the Dollar in terms of gold, was an opportunity that had to be taken.

But where was Roosevelt going to get the Gold Bars needed to both enlarge the money supply sufficiently and to provide internationally acceptable money in the event of war?

One of the recognized tactics of war always includes forging your enemy's money and undermining the home economy. Gold is difficult to forge. So every advantage was there to confiscate gold and if needs be, to devalue the Dollar, and so instantly enlarge the money supply.

This is an example of when "national interests" are seen to supersede those of its citizens. How true the saying, "A true patriot is one who commits you to his cause." And so it is with governments. Should we see ourselves as bound up with our government, or can we make our own decisions when we disagree with government? Each one must answer that question for himself. Many feel the answer has to be qualified by the situation that presents such demands. Many will support their government nearly all the way, but draw the line at their own personal wealth (on which tax has been paid) being confiscated, albeit for cash. It seems this is what these asset managers feel. Certainly the trust in and reliance on government has decayed since those days. Many feel that gold is beyond the pale of such demands.

In Roosevelt's day, it may have seemed reasonable to most to willingly accede to government demands for the confiscation of gold. Today, with the ability to hold Gold Bullion anywhere in the world, such compliance may not be necessary. Or will it? After all, the market price at the time of Roosevelt's confiscation was $20, so it seemed a fair price. That was so for two years, until President Roosevelt authorized the devaluation of the Dollar by 75% and raised the price of gold to $35 an ounce. Then many citizens had a sense of humor failure.

Where could the US Government get more gold today? The most accessible gold was locally held Gold Investment in 1933, held by US citizens. To help matters enormously, every US citizen had to declare his assets on a yearly basis to the taxman. So accurate records were held of how much was held, by whom and where it was held. The only way out was to hold rare Gold Coins, which fell outside the classification of simple gold.

It was a great start. The Depression spread far outside the States and the banking problems, like today, covered the developed world. Germany was rising fast and clearly headed for war. Europe and Great Britain were vulnerable in a war. Prudence demanded that a war chest be accumulated and held in the States.

It would be naïve to think that Europe and the UK were caught off-guard by the United States devaluation of the Dollar, as history leads us to believe. No other countries devalued with the US Dollar. They all held their exchange rates to the Dollar at the rate of exchange that stood before the devaluation. This created a massive arbitrage opportunity. Buy Gold in London at the equivalent of $20 and ounce and sell it to the US at $35 an immediate 75% profit. It wasn't long before the US was holding the bulk of the world's monetary Gold Bars and coin, over 26,000 tonnes of it.

What principles were established by this accumulation of gold?

  1. First, governments not only believe that it is a privilege for individuals to own gold, but that, that privilege can be removed at any time they want;
  2. Second, governments will cooperate to the extent needed on accumulating gold, when they believe it necessary;
  3. Confiscation is a course of action that will be followed should one or more governments deem it necessary in their national interests.

Buy Gold – in secure, non-bank vaults – in Zurich today. Start with this free gram at BullionVault now...

JULIAN PHILLIPS – one half of the highly respected team at – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report.

See full archive of Julian Phillips.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals