The subject of gold’s confiscation has come onto our screens again, but this time, being described as a “Myth” in the future. This thought comes from Canada, a favorite place for U.S. citizens to store their gold in the hopes that it will be outside the reach of the U.S. Federal Reserve.
We respond to the article that described it as a myth, because we are firmly of the opinion that as we move from dollar hegemony to a multi currency, world currencies will find themselves competing against each other [race to the bottom] and increase the prospects for the confiscation of gold held in storage companies and by dealers as well as making such dealing illegal again.
This makes the confiscation of gold and eventually silver, a future reality. It is impossible to give a date when this will happen making now a prudent time to act.
a) Covered in the first part: In this article we will look at the real reasons why the U.S. confiscation took place and its broad objectives as well as the underlying principles behind the confiscation and how they can apply in the future.
b) Covered in the first part: We will show how the confiscation of gold in 1933 was not a money supply issue, nor will it be in the future.
c) Covered in the second part We will highlight why such underlying principles are beginning to appear now, as this new global monetary system arrives on stage.
d) Covered in the second part We will explain why gold is becoming an increasingly important reserve asset and will become needed by governments in the future.
e) We will explain that holding gold outside ones country will not guard it from your government’s hands unless structured properly to protect you and your gold [and in the future silver] from them.
f) We will also explain why important trading nation partners to governments confiscating gold in the future may well act in support of those confiscators.
g) We will look at the need for governments, through the banking system, to control money flows internally but will need to maintain confidence in their currency, to permit it to be used internationally.
h) We will look at how gold can be an anchor for currencies and how its price can be raised against their currency to maintain its acceptance.
i) We will look at how the slow move towards a cashless society being seen in the future must extend to gold and silver.
e) Holding gold outside one’s country will not guard it from your government’s hands unless structured properly to protect you and your gold [and in the future silver] from them.
We turn to the storage companies that hold gold both in your own country and away from their own locations in countries like Switzerland, Singapore, Hong Kong and the like.
These companies are usually based in countries like the U.K, U.S. and the E.U. the main centers for gold markets in the developed world. And they themselves are bound by the laws that govern those nations. The fact that they store gold for clients outside of these jurisdictions does not alter this. They themselves are bound by those laws.
When one considers that last century the total cost of buying/holding gold via the Bullion banks was around 7%, their cost are a tiny fraction of this. Indeed, such custodians provide very professional storage systems where you can buy and sell gold, online, in a heartbeat.
They are unlike the gold ETFs such as the U.S. based SPDR [GLD] and Gold Trust, where you hold shares in a company that owns gold. In these storage systems you own usually a part of a 400 ounce bar with many, many other investors. But this serves traders well, who actually don’t want to take possession of the gold they own, simply trade it over time. Some long term investors can be distracted by the low cost of holding gold this way and don’t realize the parameters that they are held within.
An important facet of owning gold at home is that you have physical possession of it. Apart from the security costs of this [safes – home security systems] this is the cheapest way to own gold and there you have sight and possession of it.
The moment you put the physical gold you own in the hands of others, the quality of your ownership degenerates. But this is one of the realities of life that must be faced.
In the belief that one increases the quality and security of you ownership of gold, many gold investors have been led to believe that the best way to hold your gold is to buy it through a renowned Storage company or dealer, which then moves it to Switzerland, Hong Kong, Singapore or even Timbuktu on your behalf.
And so the gold investor, using these avenues feels safe from the dangers of government confiscation in their own jurisdiction.
Is this indeed so?
Let’s be clear, these storage companies and dealers are highly professional experts and do provide a good service to those who wish to use them. But they don’t even pretend to have a system that will prevent the confiscation of your gold, let alone protect you from your authorities at home when push comes to shove.
We did. We asked one of London’s leading gold dealers and storage companies and were told, “Yes, we would make appropriate noises, but at the end of the day we would hand over the gold to government, no matter where it is held. Another such companies simply got uncomfortable and avoided the question.
With this in mind we suggest you take a closer look at just how clear and solid your ownership of your gold is and what control you have over your gold!
1) As we said earlier, they are based in the U.S., U.K, E.U. mainly and will have to respond to any decree or law issued by the government of that Jurisdiction, no matter where they hold gold for clients.
2) If we take a look at a facet of gold ownership that one expects comes with its purchase, you should ask, “Can I go and collect it from the company/vault?” The answer is usually “No!”
One of the most important elements in the ownership of gold is that you be able to take possession of your gold from the Custodian. If this is blocked, or obstacles put in the way or suchlike, then your ownership of the gold may be provable, but you don’t have control of it.
In times when gold becomes the ultimate measure of value, it appears pointless if you cannot control it? To achieve this may cost a little more, but it is worthwhile when one considers the financial climate, when you want to use it!
Usually your gold, when you ask for it, will only be sent back to your home address at additional, high cost. This negates the entire reason for holding that gold overseas!
3) The costs of the exercise of bringing you gold home to yourself are very high, round about 2.5% to 5%, also negating the cheapness of holding your gold this way!
But it is important to emphasize that both ETFs and storage/dealing companies are a cheap way of trading the gold price, but don’t delude yourselves into believing you both cheaply own and control the gold you have bought!
While the gold is overseas and you don’t have to report it yet [under FATCA] the day will come when you do. You can lie and risk the ire of your government or you can simply accept the situation. There is another way [see the statement in bold at the end of this article]!
e) Why important trading nation partners to governments confiscating gold in the future may well act in support of those confiscators.
In the U.S. with its powerful global presence, few nations will risk going directly against it. But in the retail gold world, there is a belief that by holding one’s gold outside of one’s nation in another, friendly nation, such as Canada, Canada, would not support any attempts by the U.S. to have their citizen’s gold repatriated back to the States.
Nothing could be further from the truth!
Most nations are keenly aware that they risk upsetting their trading partners if they took a policy line that directly went against them. In the matter of U.S. citizen’s gold held in Canada weighing trading interests against preventing the U.S. from accessing U.S. owned gold the decision would be simple.
Some would say that there is no evidence that Canada would act in such a way and that the lack of such evidence would set the pattern for other nations more distant too. Again nothing could be further from the truth.
While U.S. citizens were prevented from owning gold for 41 years until 1974 there were incidents of Canada cooperating with the U.S. Monetary Authorities in the past as recently as 1974, just before U.S. citizens were allowed the privilege (not the right) to own gold again.
We refer you to the story of the famous newsletter writer C.V. Myers of “Myers Finance and Energy”. This illustrates just how close the Canadian Authorities are to the U.S. Authorities and remain so. We refer you to the personal account of the son of C.V. Myers who lived through the experience. In order to verify the story we contacted John Myers in Calgary. He confirmed that the story was true. Click here for that story.
Hence there is evidence of Canada supporting the U.S. in actually attacking the Custodians of U.S. gold in Canada. Nothing has changed in U.S. / Canadians since then!
So Canada is not the safe-haven many take it to be.
Do you feel that either Singapore or Hong Kong would take a different line?
The issues are the same as for Canada. Singapore would not let any issue such as gold held by foreigners in Singapore get in the way of smooth relations with the U.S. or China. And Hong Kong is part of China.
The only nation in this world that has a history of preventing foreign governments [including their neighbors] is Switzerland.
Switzerland has done so through two World Wars. Can a U.S. citizen get such protection now? We know they can! And the Swiss will be even more robust in guarding foreigner’s assets within their borders, now that they have adjusted matters since the UBS debacle.
The bottom line is that your gold has to be held in a structure that is capable of preventing your government from being able to force your custodian from handing over your gold to your gold in the event they want it, without you being in the firing line as its owner.