One concern of retail precious metals investors is the possibility of a gold confiscation. Imagine having the forethought to buy gold to shield your finances from an economic or monetary crisis—only to have it taken away from you by your government. You’d lose not just the protective buffer you put in place but potentially a chunk of your net worth. Gold confiscation may sound preposterous to investors used to securities or real estate.
But it’s happened in the past enough times to make it a reasonable concern for those uneasy about unsolvable debt levels, runaway government spending, and continual central bank money creation. When a grab is made for people’s savings, governments don’t bother to confiscate instruments like stocks and bonds and savings accounts—those can be wiped out by simply devaluing the currency.
A decade ago, no one talked about tail risk hedge funds, which were a minuscule niche of the market. However, today many large investors, including pension funds and other institutions, have mandates that require the inclusion of tail risk protection. In a recent interview with ValueWalk, Kris Sidial of tail risk fund Ambrus Group, a Read More
But when times are really tough, governments have “requested” citizens turn over their gold—the one asset they’ve historically been unable to control, since it’s not someone else’s liability. When a gold confiscation happens, there unfortunately aren’t a lot of viable solutions. If your government declares it illegal to own a meaningful amount of bullion, you’d have little choice but to comply.
Either that or play the role of a fugitive—with the prospects of financial penalties, forcible confiscation of your metal, and even jail time waiting for you. Many investors believe gold won’t be confiscated today because it’s not part of the monetary system like it was during the U.S. nationalization in 1933, under Roosevelt. While it’s true we’re not on a gold standard today, if the crisis gets bad enough any and all viable solutions could be on the table. Debt in all developed countries is unpayable, for example, especially when you add in unfunded liabilities… where could the government get funds to service it all? One source could definitely be gold. The sober reality is, while lower than in the past, the risk of a gold confiscation is not zero.
The world today can be an uncertain place, and what were once “local” issues can rapidly escalate and have global consequences. This does not mean, however, that we are suggesting a gold confiscation is imminent or even probable; simply that it could happen if one or a series of events having significant worldwide implications occurs.
Without official gold-backing on most major currencies today, the specific motivation to “confiscate” gold that existed during many previous confiscations barely exists today. But as you’ll see, even that hasn’t stopped modern government’s without a gold standard from doing the same, ostensibly as a form of currency controls to slow down market-driven devaluation….
Mike Maloney video below