Today, as was true 42 years ago, the American people once again have the freedom to own as much gold as they choose. Devotees of the free market have viewed this development with pleasure, for they have had little cause to rejoice during these many years of the steady erosion of individual liberty. The socialistic governmental intervention has steadily expanded since the denial of our right to own gold.
The restoration of legal gold ownership by individuals is certainly a reversal of this ominous trend of government omnipotence through the federal government. It has been heralded as a sign of change in the course of statism. Upon closer scrutiny, however, such optimism may be questioned, for there is a marked distinction between conditions then and now.
What has been restored, and what was lost 42 years ago, is not the same. Before April 5, 1933, gold was money. Individuals used gold daily as their medium of exchange for goods or services at the rate of $20.67 an ounce of gold. Indeed, the payment was rarely made in gold bullion coins, but the gold certificates or gold coins in use represented bullion. Gold was legal tender, along with the coins and currency of the Treasury and Federal Reserve Banks. Upon demand, anyone could surrender his paper currency and receive gold bullion.
The legalization of gold ownership has not restored it as our medium of exchange - money exemption. The statist legal tender laws (in conjunction with Gresham’s Law) continue to force the flat paper money of the government upon us. The use of gold money is still forbidden. Any attempt to use or demand gold payment for goods and services remains illegal. The absolute governmental monopoly of fiat money continues to be protected by law against competition from gold.
Calling In The Gold
The evolution of this government's monopoly of money began with a Proclamation of President Franklin D. Roosevelt on April 5, 1933. Under enabling legislation passed a month earlier, the destruction of gold as money commenced: “All persons are hereby required to deliver on or before May 1, 1933...all gold coin, bullion, and gold certificates now owners by them of coming into their ownership on or before April 28, 1933...Until otherwise ordered and person becoming the owner of any gold coin, gold bullion, or gold certificates after April 28, 1933, shall, within three days are receipt thereof, deliver the same...upon receipt of gold coin, gold bullion, or gold certificates delivered to it...The Federal Reserve Bank or member bank will pay therefore an equivalent amount of any other form of currency coined or issued under the laws of the United States.”
This order called for the surrender of private gold holdings at face value. Individuals, many believing it was merely a temporary action arising out of the “national emergency” of the great depression, obediently exchanged the troy ounces of physical gold for paper currency at spot price.
The surrender of rare numismatic coins or silver coins or amounts of gold for paper currency is understandable since gold could no longer be used as a medium of exchange so there was little point hoarding it. Individuals needed money to transact their exchanges at the bottom line. Since the exchange value of money at the time was greater than the commodity value of the gold content in the coins, people generally did not resist exchanging their gold for the remaining medium of exchange - taking their gold from their deposit box and exchanging it for paper currency.
But the government wanted to make sure that its money monopoly position had special value. It wanted the gold confiscation, and in furtherance of that end, President Roosevelt issued another Proclamation on August 28, 1933: “After 30 days from the date of this order no person shall hold in his possession or retain any interest, legal or equitable, in any gold coin, gold bullion, or gold certificates situated in the United States and owned by any person subject to the jurisdiction of the United States, except under license therefor issued under this Executive order…”
While nominal holdings of the gold standard were exempted from these edicts, any subsequent use of or holding of gold was under the direct control of the government. Gold ownership was now illegal except under Treasury license and scrutiny.
It only remained to establish penalties for any violation of these edicts. This came in short order as a part of the Gold Reserve Act, January 30, 1934: “Any gold withheld, acquired, transported, melted or treated, imported, exported, or earmarked or held in custody, in violation of this Act...shall be forfeited to the United States...and, besides the will of the state to once again permit gold ownership is precise because the state no longer views gold as a threat to its money monopoly.
Gold can now be owned as a non-monetary commodity. Any effort, however, by private citizens to re-introduce gold money as a medium of exchange will be promptly challenged by the government as illegal competition against its monopoly of paper money. Gold ownership was not legalized in order to restore sound money, but instead, because the government no longer considers gold important.
Overconfidence, however, even by a monopolist, can lead to a miscalculation. So, any relaxation of power by the state, and restoration of freedom to the citizenry, should be acclaimed with joy and fully exploited.
The restoration of the legal right to own gold is the action of an overconfident money monopolist. While the use of gold as a medium of exchange is still prohibited, the fact that we own gold provides a means to protect our wealth from the ravages of inflation.
A Measure Of Stability
If the state continues on its inflationary path, cash holdings in paper money will be reduced, or even eliminated in some cases. Holding gold will be more advantageous. The expansion of the quantity of the government’s paper money, which erodes its purchasing power, cannot touch gold. On the contrary, the price of gold may be expected to rise in direct reflection of the declining purchase of the paper dollar.
This development will become more and more visible. The advantage of holding gold rather than paper money will become obvious to all. Conversion from gold to paper money, in order to complete an exchange, and then converting back to gold from paper will become commonplace.
While the process introduces an additional complication in our exchanges, buyers and sellers in the market will readily discover that this additional “complication” is a small burden to pay in order to offset the inflationary impact of government money.
This trading practice is widespread in those countries throughout the world that permits private ownership of gold while still suffering from chronic inflation. With lengthy histories of paper inflation as their lesson, people in foreign lands hold gold, not paper, in their secret hiding places. God’s immunity from government-generated inflation has made it a prized possession in these inflationary times.
Our exchange economy does not have to follow such dismal examples. Though not intended as such, the first step toward a return to sound money has been taken. As individuals begin to register their preference for gold over paper in the market, the next major step by the government must be permitted: permitting gold as a medium of exchange.
Leave It To The Market
Past intrusion by the government into monetary affairs has only led to monetary destruction. While the law can guard money against fraud, it cannot create money. Money evolves from the market and the need for a means to facilitate our exchanges.
If individuals are to have their full freedom to make exchanges, they must also be free to determine the media in which their exchanges shall be made. Throughout history, gold has been the commodity chosen by free men to accomplish this end.
The legalization of gold ownership will allow the market to demonstrate that gold is the preferred media for making trades. Once again it will be seen that sound money can only originate within the market.
The final restoration of sound money will require a major shift in political thinking. The futility of continued inflation must first be recognized. As the failure of “political money” becomes increasingly obvious to voters, the government hopes it will abandon its monopoly power over the money system. In response to the public clamor for sound money, gold will finally prevail.
The soundness of gold in contrast to the deterioration of paper money will be clear to all who care to see it. All that is required by the government hereafter is the removal of legal barriers to free use of gold in trade. The competitive forces of the market will shortly re-establish it as the “market’s money.”
So, from the restored right to own gold, we may hope eventually to reassert our right to use it as money. The welfare of all of us is dependent on such a result. The survival of a free market is dependent on the preservation of sound money. If sound money is to be restored and people’s freedom preserved, the government must surrender its monopoly over money and allow gold to once again serve buyers and sellers in the market as the medium of exchange. Gold is legal, but it is not yet money.
Gold Legal Again
At the end of 1974, President Gerald Ford signed another executive order that repealed Roosevelt’s order, pursuant to an act of Congress that re-legalized gold ownership for Americans. A few years later, Congress took away the authority of future presidents to ban gold ownership by executive order, except in time of war, a serious economic dislocation is no longer enough to justify such a move. Gold ownership is now quite popular among Americans, so it would be a very difficult political undertaking for Congress to forbid gold ownership again.
Under current law and the U.S. Mint, Americans are free to buy and hold as much gold as they want in any form, including bars, bullion coins, collectible coins, and jewelry. No federal law or regulation oversees individuals trading in the metal. Furthermore, there are no reporting requirements on the purchase of gold, whatever the quantity, with one exception. A seller must notify the government when he uses more than $10,000 in cash to buy gold bars (or anything else).
Buying Gold Bars
When deciding to buy gold bars, the most important task is finding a reputable dealer. A dealer should be knowledgeable and able to help the buyer avoid mistakes. An educated dealer is the first thing to look for. If a dealer only pushes the most expensive products, he or she isn't educated. If you have a big order, it’s wise to seek larger dealers with a high volume of gold bars, as this will allow for flexibility when buying. A buyback policy is also a good thing to look for. If a dealer is unwilling to buy the gold bars he or she sells you, you shouldn’t buy gold bars from him or her.
The brand of gold bars you buy matters. Reputable gold bar dealers stamp bars with their hallmarks and all the information about the gold in the bars. This information should include the purity, weight, and registration number of the gold bar. If a bar is missing information, it might not be pure gold. The best way to make sure gold bars are of the highest quality is to buy ones with well-known, trusted hallmarks. With highly regarded refiners’ hallmarks, the gold bars can be sold anywhere.
The biggest reason someone should buy gold bars instead of gold coins is that bars are cheaper. Gold coins are decorative, and buyers pay extra for that. Buyers should purchase gold bars in sizes that fit their needs best. Gold bars can weigh between one gram and 400 ounces. A one-ounce gold bar would be perfect to have for unexpected financial needs. If the buyer is wealthy, buying both small and large gold bars would be advised. When people sell big bars, they’re liquidating a major part of their assets. Those who have many small bars can liquidate a smaller portion of their assets. The large gold bars are the ones that central banks and exchanges use.
Gold is legal to own. However, there was a time when it was illegal for U.S. citizens to own gold. From 1933 to 1974, it was illegal to own gold bullion or gold bars without a license. On December 1st, 1974, private gold ownership restrictions ended. Starting on January 1st, 1975, U.S. citizens could freely hold any precious metals with no licenses. They no longer had to report their holdings to the government and could buy any amount.
Gold bullion, typically in the form of gold coins or gold bars, is usually considered legal tender, allowing it to be brought across borders without incurring fees. Every maker of gold bars places its stamp of certification on its product.
Gold is not used as a currency today, but its role as money makes it superior to any currency. In fact, gold has been money longer than any currency in history. One of the crucial promises of money is that it serves as a long-term store of value. Gold fulfills this promise better than any fiat currency.
If you buy physical gold, you can hold it in your hand, something you can't do with almost any other investment. Real gold can't be destroyed by fire, water, or even time. Gold is tangible, finite, and liquid. Gold is easily convertible to cash and can go with you anywhere. Physical gold is one of the most ideal forms of long-term wealth preservation. It is also ideal for your heirs since it will outlast any currency they may use in the future.
The primary reason investors choose a gold bar is that it's less expensive than a gold coin. Premiums are lower because coins have a more intricate design and thus greater labor and machining costs. Coins may be prettier, but you'll pay extra for that appeal. The other advantage of gold bars is they're easier to store. A gold bar takes up less than the same number of ounces of coins. In fact, bars were originally designed specifically for ease of storage.
Buying gold bars doesn't compromise any of the core advantages of gold: they're portable, private, liquid, and will last forever. Buy one-ounce gold bars to meet future needs as they come up. If you have a high net worth, buy both small and large bars.
One of the first decisions you'll have to make when buying gold bars is what size to purchase. Gold bars come in different sizes and weights. They're as small as one gram (sometimes called wafers because they're so thin), and as big as 400 ounces. It's these large sizes that central banks, exchanges, and ETFs buy. Generally speaking, the bigger the bar, the smaller the premium. That's because it's less costly to produce a kilo gold bar than a one-ounce gold bar. But that doesn't mean you should buy the heaviest bar you can afford. Just the opposite.