Will the Government Confiscate Your Gold?

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

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.

One advantage is the low commission: 2.25% to buy and 1.25% to sell. Another advantage is free storage for gold or platinum. Silver does currently carry a low storage fee of 0.95% per year. The minimum purchase to open an account at the Perth Mint is $10,000 (USD), which can be divided between gold, silver and platinum. Metals stored at Perth are insured for 100% of their current market value at all times and are guaranteed by the government of Western Australia.

The Perth Mint also has a depository program (PMDP) with a minimum balance of $50,000 to open an account. However, the depository program is structured more like a statement of account, similar to a banking arrangement. It was designed for hedge funds and the like and is geared more toward institutional investors.

The certificate program, on the other hand, was designed from the start to be a retail program – geared to individual investors both large and small.

(Q): What about domestic storage?

Rich Checkan (A): If you are more comfortable storing your metals closer to home, you can choose domestic storage through your IRA custodian at an approved depository. Keep in mind, however, that there are some restrictions. You will need to purchase specific coins or bars, which meet criteria put in place to ensure quality. In general, IRAs will only hold pure or near-pure precious metals. You can even choose to take delivery of your physical metal as a distribution at any time, to include when you reach the age where Required Minimum Distributions (RMDs) are required.

(Q): The last question we get here a lot is pretty straightforward: Investors ask us what percentage of their portfolios should be focused on gold. What's your view on that?

Rich Checkan (A): As you know, Bill, we here at ASI are not financial advisors. That said, the three decades we've spent in this industry does give us a unique view. For instance, the World Gold Council (WGC) will tell you that, statistically speaking, "portfolios containing gold are generally more robust and less volatile than those that do not." WGC research has demonstrated – and many advisors agree – that holding around 10% of your entire net worth in gold – as "insurance" – smooths out volatility and protects your holdings from the worst periods in the overall market.

In addition to your "core holdings" or wealth insurance, many advisors suggest an additional 10% to 15% of investible assets with a for-profit motive as a hedge against the current market conditions – thanks to low interest rates, the threat of rising inflation and [Fed Chairman] Ben Bernanke printing as much money as he can as fast as he can.

As to how much should be invested in each specific metal, the answer is really best left to the individual investor … their emotional makeup and their tolerance for risk. In other words, they need to create the mix that lets them best sleep at night.

For wealth insurance, that mix is typically either all gold or mostly gold with some 90% (purity) U.S. silver coins for divisibility.

For the appreciation-oriented precious-metals allocation, many investors are very comfortable with a mix ASI has long favored: 40% in gold, 40% in silver and 20% in platinum. In the past few years, palladium has become an increasingly interesting story and may serve a portfolio as well within that 20% platinum allocation.

Why the variety? One simple adage will answer that: Don't put all of your eggs in one basket. That's why ASI has long been saying not to put all of your money in one currency, one country or one asset class.

(Q): Any final thoughts?

Rich Checkan (A): More than ever – given the Fed's QE proclivity for printing, the anemic interest rates investors face, and the impending fiscal cliff – gold and other precious metals figure to play a role in successful portfolios like they never have before.

[Editor's Note: Our thanks to Rich Checkan at Asset Strategies International for taking the time to talk with us. I thought this was the best interview we've done all year. It just goes to show you how far Bill will go to get to the bottom of the story. If you'd like to learn more about Bill's Private Briefing click here. It's always a fabulous and profitable read]

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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  1. Doug DeHaan | December 10, 2012

    Thanks for the information on Gold investment – particularly with IRA dollars.

    My confusion is what are the tax liabilities, like collectable taxes? Also, what about investing same as an alternative with GLD?

  2. Mirko Markovic | December 10, 2012

    Excellent !

    • BHOLMES1 | December 11, 2012

      Thank, Mirko!

      William Patalon III
      Executive Editor
      Money Morning & Private Briefing

  3. Gordan Finch | December 10, 2012

    Gold cannot maintain its lustre for insurance investment, Governments will print their way out of debt and no amount of gold holding will be short term. Gold will sink and it will rise but not until the current debt bomb has been inflated away, and that is at least 12 to 20 year away. Then the price of gold will be higher but inflation will have took its toll and the real value will be much less.

    Play safe, buy land or property and keep at least 2 AAA currencies, its also a prudent measure to buy antiques, blue chinese ceramics or quality art or blue lapis, these are a staple of good investment practice.

    Banks are certainly not a safe depositry, choose carefully Building Societies, customer shareholder owned deposit accounts. Banks and Insurers are still the crooks in suits and nothing has changed.

  4. BJ Reed | December 10, 2012

    Just how much gold does the US have and has there been an inventory since the Reagan administration? This is important…this gold belongs to us!!!!

  5. cynthia taylor | December 10, 2012

    I just can't spend the amount of time it takes to listen to the long sales pitch. Tell me in 5 mins max. Preferably 3. Or not at all

  6. R. West | December 10, 2012

    Sure , they can take my gold…………….out of my cold dead hands

    • BHOLMES1 | December 11, 2012

      Great, great comment ….

      The "R. West" reminds me of "Red" West, the actor and former Elvis bodyguard who always maintained that approachable but always tough persona.

      Your comment is worthy of that tough image. Thanks for posting ….

      William Patalon III
      Executive Editor
      Money Morning & Private Briefing

  7. H. Craig Bradley | December 10, 2012

    GOLD AND POLITICS

    The President apparently believes that if you raise just the top two income rate brackets, then the "rich" will pay more taxes and the Federal government will get more money. True. However, it won't move the budget needle at all because all the extra revenue hardly measures against $1 Trillion dollar annual deficits. Anotherwords, its ALL Politics and Ideology.

    The same logic would hold in the event of gold confiscation. The amount of gold held by individuals today is trival at best. Does that mean the Federal government would not confiscate itif the price was high enough? Not necessarily. It may be that the Federal government does not want any kind of informal off-the-grid transactions going on other than with dollars or electronic transactions (trackable). The government might want to prevent gold from ever competing with paper, even in the underground economy.

    The Federal government definately wants to follow the money and keep track of ALL transactions. Gold is not trackable and individual holdings can not even be identified and verified, let alone tracked. However, the government recently attempted to do so by requiring 1099-B be issued whenever by dealers any time gold is purchased, thereby tracking where it is and who has it.

  8. deane gilmour | December 10, 2012

    With the 1933 law still on the books and Barry still working toward destruction of all economic health in the USA I would not put is past him to sign another of his already virtually 1000 executive orders to bring the law out of mothballs and enforce it, or at least make it illegal for a non-government entity to trade gold, silver, paladium, platinum, for goods or services in the USA proper or its territories. the USD still has a disclaimer that is is legal tender for all debts, public and private, and this could be enforced even to the point that all but the USD and the darling of Democrats, Plastic, would be non legal tender for debts. the USD is already loosing its grip as an 80 plus year basis for trade in the world. And, if it goes to Gold or other precious metals, Barry could require that all purchases on the world market are with the fiat USD. The chinese are alr4ady trading US treasury bills covering our debt for gold a silver bullion on the world market and will continue to do so as long as COMEX continues to fail to do their duty and call the control of such by sale of paper supposedly backed by non-existant precious metals. The commodities of the near future now are
    Water, Foodstuffs, Weapons, and Ammunition.

  9. Ed Lindsay | December 10, 2012

    The U.S. Government has got to pull in its reins and to stop interfering in private citizens' business! This is NOT a dictatorship and our government shouldn't be acting like one.

    Feel free to quote me.

  10. Michael Prosser | December 10, 2012

    With Monday Morning, we can surely be guaranteed to receive all of the most recent conspiracy theories. Really, really right wing!

    • BHOLMES1 | December 11, 2012

      Hi Michael…

      Well, look at it this way … isn't it better to receive all the most recent conspiracy theories … as opposed to "old" conspiracy theories that you've already heard?

      Seriously, thanks for taking the time to post. If everyone agreed here, what fun would that be?

      William Patalon III
      Executive Editor
      Money Morning & Private Briefing

  11. 000034889611 | December 10, 2012

    How about that MCP? A recommendation I will stick with. It just shows how news can affect a stock in a big way. I'll bet Stanley Morgan wishes they hadn't pulled out last week, although that didn't seem to have much impact on the stock price. But the ruling coming out of Australia sure had an impact. It seems like some of the big players may have decided to get back in or increase their holdings. Maybethe best way to play this stock, and you gave a great analysis on the stock, for me, is to hold half of the stock, and let the market play itself out, and take the other half and play it on the technicals. There should still be some good profits in that as long as it remains so volatile.

    • BHOLMES1 | December 11, 2012

      Good analysis, excellent thinking.

      Make sure to check out Private Briefing on Wednesday, as well.

      As we said all along, we continue to like the company and its long-term plans — our only caution was that the ride was likely to be volatile.

      As you point out, that volatility can be turned into an advantage.

      Good to hear from you.

      William Patalon III
      Executive Editor
      Money Morning & Private Briefing

    • (Admin) Bill Patalon | December 18, 2012

      Dear 000034889611:

      Just wanted to add a postscript to your comment about "Stanley Morgan" (what a great line!) and MCP. Don't know if you saw this or not, but Goldman just initiated coverage of Molycorp this week. Now, it did so only with a "Neutral" rating and a target price of $11, but the mere fact that it even bothered means the folks who cover this sector believe there's a chance this stock will move to higher ground; if that happens, the fact that they initiated coverage will enable them to claim that they "saw" it coming.

      You're starting to see a lot more bullish talk about this stock from the institutional side of the ball, which is noteworthy.

      And the traders are growing increasingly bullish, as the options activity is beginning to show.

      We took an in-depth look at MCP in the Friday (Dec. 14) Private Briefing, and ran through a particularly detailed analysis of the CEO ouster.

      Thanks again for taking the time to offer these comments. They are definitely additive to the overall discussion.

      Respectfully yours;

      William Patalon III
      Executive Editor
      Money Morning & Private Briefing

  12. sb | December 10, 2012

    People can choose a self directed Roth; and control their investments. You should look into this.

  13. fallingman | December 11, 2012

    Thanks for the focus on the metals.

    2 quick points:

    While I understand and appreciate Rich's thinking, if the objective is to discourage and punish gold "speculators" as the clownbuck's value collapses, then confiscation isn't the only or even most desirable way to go about it. They could and likely would simply institute a tax on metals "speculators" of say 90% on any capital gains. And if the Powerz decide they have no choice but to reestablish gold's place in the monetary firmament, you can bet they'll either confiscate or nail us with a tax.

    Seems that owning some gold offshore, outside the banking system, in a place where the rule of law is stronger would be a prudent thing to do.

    On holding gold in an IRA, sure, you can do it, but should you? I used to help people do this waaay back in 1979-82. I'm not opposed to it per se, but think. Here's the thing people need to consider. You want INCOME producing assets in an IRA, as your money compounds tax deferred. As the gold haters will always tell you, gold pays no interest. But you can hold gold stocks that pay a dividend and you can sell covered calls against stocks of the bigger miners and royalty companies. And Gabelli has a gold and natural resource "income trust" that trades like a stock. It spits out a nice return every month by selling options against miners for you….GGN

    So, if you want to hold both physical metal and stocks, hold the stocks in the IRA and the metal outside. If you want the physical and have no funds other than IRA money with which to buy it, then that's fine. Better to have some in an IRA than none at all, but physical gold is best held OUTSIDE.

    • BHOLMES1 | December 11, 2012

      Thanks, Fallingman … Totally agree with your first point. The only caveats about holding outside the U.S. is the difficulty one might have laying their hands on the hold in an emergency … which is when you'd need it most.

      I'm also looking into the whole issue of what depositories can do with the gold that they hold (ie, loaning it out). I think there's an intriguing story there.

      Again, you talk about being "outside the banking system," which might negate that concern.

      And your second might make for a nice follow-up column — all by itself. Let me take a look at that and run it by our gurus here. Neat idea.

      There's a roster of folks whose comments are always additive, provocative, and even educational. I see several of those names today … yours among them.

      Good to hear from you…

      William Patalon III
      Executive Editor
      Money Morning & Private Briefing

  14. fallingman | December 12, 2012

    Oh, for sure. Couldn't agree more. That's why I said, "some," but I should have clarified that this is after you have some held nearby.

    You have to have some physical in your possession before ever thinking about spreading it around. And yes, you'd better be dealing with people you can trust. I would insist on fully allocated storage with no lending allowed, but no arrangement is gonna be entirely risk free. And yes, no bankers. I would trust Everbank in the US, but hey, they hold their bullion domestically. Won't do in my book. Got to spread it around.

    Since it's probably down to me and you on this thread, let me just say that I was involved early in the efforts to allow people to hold hard assets of all kinds…coins, diamonds, stamps, etc. in retirement accounts. We worked with Clayton Trust outside St. Louis. They were pioneers.

    I was in the position of helping people set up the accounts, which took a bit of effort, getting the funds transferred in, which took a lot of cage rattling, and I then worked with specialists in the different hard asset areas to provide quality goods to the clients…from which we made a commission.

    Although I depended on those commissions, I considered it my responsibility…if I were to be in integrity…to recommend a balanced approach that included income producing investments. The mining stocks paid some hefty dividends back then and there were other options. Although I had formerly been a broker, I made nothing from those transactions.

    I just think it's a real mistake to hold hard assets in an IRA if you can hold them outside, especially with so many stocks and derivative products that can produce a nice steady flow of income, not to mention lowered risk. I love doing covered calls and debits spreads on the miners and royalty companies.

    I appreciate your kind comments. I keep coming back because you focus on important subjects and you show considerable courage in tackling subjects that seem to be taboo in the MSM.

  15. DoktorThomas™ | December 13, 2012

    Surprise! Your gold has already been taken. See:

    Executive Order 13603
    National Defense Resources Preparedness
    Signed: March 16, 2012
    Federal Register page and date: 77 FR 16651, March 22, 2012 See:
    EO 11858, May 7, 1975; EO 12472, April 3, 1984; EO 12656, November
    18, 1988

    Through Executive Order 13603 President Obama gave himself the
    power to control all vital aspects of your beloved nation.

    Take a look at some of the sinister and menacing forces that will
    be put into motion. They are weapons of mass destruction!

    Seizing of all forms of civil transportation.

    Do you realize what this means? Obama specially wrote "civil" NOT
    "public" transportation. In the name of a national emergency
    (which Obama has yet to define which, in turn, means he
    can define it any way he wants) he can grab ALL forms of
    transportation civilians use, including:

    * Automobiles, trucks and delivery vehicles
    * Boats and ships
    * Your cars, your children's cars and even grandma's car
    * City buses
    * Trains
    * Airplanes
    * Motorcycles
    * Bicycles
    * Scooters, skateboards and wagons
    * Horse and buggies
    * Snowmobiles
    * Tractors (Yes, some people drive to town on tractors)

    A secret plan went into action right under our noses a few months
    ago-the very plan the Blame Stream Media deliberately hid
    from the American people.

    Obama forgot to tell you that he can grab ALL FORMS OF CIVIL
    TRANSPORTATION, didn't he? How convenient to keep the good
    citizens of America in the dark.

    But wait… that's not all…

    Obama doesn't stop at just grabbing transportation but will grab
    the food out of your mouth. He will also grab:

    All commodities and products capable of being ingested by either
    human beings or animals. In other words all food products,
    growing, picked and in store, including:

    * Farm crops
    * Inventory in grocery stores
    * Grandmas garden vegetables
    * Your canned goods
    * Dog food and livestock feed
    * Survival food cache
    * Fish from fish farms
    * Fruit from orchards

    The lame stream media not only turned a blind eye to Obama's evil
    deeds but has refused to comment on the Obama grab when
    presented with the facts! The main stream press is NOT your friend.

    It gets worse!

    Health resources, which include, but are not limited to: drugs,
    biological products, medical devices, materials, facilities,
    health supplies, services and equipment. This includes:

    Hospitals
    * Vitamin stores
    * Wheel chair suppliers
    * Oxygen providers
    * Drug stores
    * First Aid supplies
    * Red Cross
    * Medical insurance companies

    And the savage takeover of America doesn't end there.
    Obama gives the power to government to take over!

    All forms of energy:

    *Solar energy farms
    * Wind turbine projects
    * Niagara Falls electric plant
    * Your home generator
    * Hydro-electric dams
    * City power plants

    All usable water from all sources:

    * Mississippi River
    * The Great Lakes
    * Colorado River and all rivers
    * All ponds
    * All wells
    * All water sheds
    * All snow melts
    * All bottled water companies

    Yep, COMPLETE GOVERNMENT CONTROL OF IT ALL including
    everything YOU own!! If this doesn't scare the bejesus out
    of you, I don't know what will.

    You must help wake up others to what's going on — if this isn't
    dictatorship of the worse kind, then I don't know what it
    is.

    You can download your copy of Executive Order #13603 at
    http://www.gpo.gov/fdsys/pkg/FR-2012-03-22/pdf/2012-7019.pdf

  16. DoktorThomas™ | December 13, 2012

    Too late. The government already has your gold.
    See: Executive Order #13603

  17. DoktorThomas™ | December 13, 2012

    As for gold depositories, possession is ownership. In a collapse situation courts will not be enforcing contracts. Hint: A suspicious Germany has already demanded to see its gold being held by the fed.gov.

    • (Admin) Bill Patalon | December 18, 2012

      Dear "Dok"

      Your observation about Germany is correct. In fact, we mentioned that and talked about the implications in a recent Private Briefing report. One caveat … that wasn't a unanimous demand … there are apparently two very strong opposing viewpoints on this topic in that country.

      But good stuff … thanks for mentioning it to the other readers here.

      William Patalon III
      Executive Editor
      Money Morning & Private Briefing

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