Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
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The US government’s complex and contradictory history with gold has led many investors to wonder: Is it illegal to own gold? This confusion results from unclear legislation surrounding the private ownership of gold which prevents some investors from optimizing their nest egg. Understanding the legality of gold investments is vital for achieving wealth stability and portfolio diversity while remaining on the right side of the law.
The Legality of Owning Gold
Currently, it is perfectly legal to own gold in the United States. There are no restrictions on the amount of gold investors can buy, hold, or sell. People are free to purchase gold in its various forms including bullion, bars, and coins. The Internal Revenue Service even permits the investment of tax-advantaged dollars into gold assets through a gold IRA. The only relevant laws regarding gold ownership come in the form of reporting requirements, tax payments, and IRS restrictions on IRA-eligible metals.
When Was It Illegal to Own Gold in the US?
The latitude in gold investing investors enjoy is by no means the standard of American history. In fact, it was illegal to invest in gold throughout nearly half of the 20th century â from 1933 to 1974. Even before the country’s founding, the economy operated on a bimetallic standard. The gold standard was enshrined with the Gold Standard Act of 1900.
At this point, gold wasn’t just an investment but the cornerstone of the economy. Gold ownership was ubiquitous across all socioeconomic stratifications. A mere three decades after codifying the gold standard, President Franklin D. Roosevelt passed the controversial Executive Order 6102 forbidding the “hoarding of gold coin, gold bullion, and gold certificates.”
Better known as the Gold Confiscation Act, this contentious legislation demanded citizens hand over their gold holdings under threat of hefty fines and imprisonment. There was a small carveout in the legislation for professional usage and rare coins. However, for the first time in American history, it was illegal to own gold.
Why Was Gold Illegal in the US?
The federal government made gold investments illegal in 1933 to expand the money supply in its effort to outspend the negative effects of the Great Depression. The gold standard, which tethered the US dollar to physical gold holdings, severely restricted how much money the government could pump into the economy.
The progressive Roosevelt administration was further hamstrung by the tendency of Americans to hoard gold throughout the economic turbulence that characterized the early 1900s. By centralizing the entire country’s gold reserves, the government gave itself more spending leeway without technically breaking the gold standard.
Within a year of taking full control of the country’s gold supply, the government increased the conversion rate from $20.67/oz to $35/oz with the passage of the Gold Reserve Act. This move drastically augmented the government’s spending capacity while devaluing the dollar. The economic strategy foreshadowed modern quantitative easing programs used to uphold excessive spending.
“[The government] confiscated gold only to revalue it and raise the money supply…tak[ing] away the restrictions [from being able to] print money the way [they] wanted to.” — SBC Founder Eric Sepanek
Shockingly, gold would remain illegal to own in the US until 1974. President Gerald Ford reconstituted the private ownership of gold by signing a bill passed by Congress. Overall, Americans were barred from investing in and holding physical gold for 41 years.
Countries Where It’s Illegal to Own Gold
Currently, there aren’t any countries that outrightly ban the private ownership of gold. However, there have been several examples in the past when governments have restricted gold holdings, similar to the Gold Confiscation Act of 1933. Here are some prominent examples:
- India: The 1965 Gold Control Act severely limited private gold ownership which led to a thriving black market before the legislation was repealed in 1990.
- Australia: Despite being one of the world’s largest producers of gold, the Australian government permitted the federal confiscation of gold from 1959 to 1974, although it was never exercised.
- United Kingdom: With amendments to the Exchange Control Act, the UK restricted gold ownership from 1966 to 1971 to strengthen a fledgling pound.
- Soviet Union: Members of the former Soviet Union were banned from mining and holding gold, underscoring the regime’s focus on centralized control of resources.
- Germany: The overwhelming costs of WWI led post-war Germany to ban gold for a few years.
Could the US Make Gold Illegal Again?
Although the US government could technically confiscate gold again, it’s extremely unlikely. The Gold Confiscation Act paved the way for the legal justification of banning gold hoarding, but it also gave the government greater authority over the money supply and fiscal policy overall. Now, the government enjoys virtually unlimited spending and borrowing capacity.
The government is no longer legally required to hold a certain amount of gold for every dollar it spends which eliminates the only motive behind gold confiscation. With legal justification and broad bipartisan support for the status quo of limitless spending, nobody in the political establishment is arguing for a return to the gold standard amid today’s shifting fiscal and geopolitical landscape.
Gold Is the Answer
The real takeaway from America’s history of gold confiscation is the weakness of paper currency and the government’s irresponsible fiscal policies. When you invest in stocks, bonds, ETFs, mutual funds, and other traditional assets, you’re exposing your hard-earned dollars to the inherent flaws of this fiat currency system.
The obliteration of the gold standard paved the way for the unending borrow-spend spiral that defines the government’s economic policy. Despite the de jure fiat system, central banks and private investors alike are binging on gold to hedge against inflation and the economic fallout of the current economic model.
This free-reign fiscal policy is largely responsible for the astronomical $39 trillion national debt and its exponential pace of accumulation — a trajectory that could push gold prices even higher. Investors face risks of currency devaluation, rising inflation, and a global push toward de-dollarization. Gold offers protection from these economic burdens with its inherent value, high demand, and universal recognition.
If you want to learn more about the experimental fiscal policies that have led to the government’s disastrous spending addiction, grab a copy of our FREE Modern Monetary Theory (MMT) report.