This article was originally printed in the latest issue of Numismatic News.
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A Florida reader has asked about whether possible gold seizure actions by the U.S. government, which some say is in the offing, make out a case for investing in gold coins of foreign countries, and asks as an ancillary question whether or not those who strongly believe in gold ought to consider holding some (or all) of their gold outside the United States.
First things first. No one has signaled either at the Old North Church (“One if by land, two if by sea”) of Paul Revere’s famous ride, that such a move is imminent. In fact, if I get to write about it far in advance, it would be the biggest case of dumb luck since I tried to get someone named “E-Z” in the Carter Administration, and found myself talking to “Azie Taylor Morton,” who became the new Treasurer.
So no advance word.
Next, no one who is contemplating this has shown me the text of the proposed Presidential Finding and Declaration that would be most likely to be necessary in order to force the surrender of bullion, hallmarked items and coins. But I can guess what it will have to say (“national emergency”) and several other key lines of verbiage based on past action.
So without advance word and with no knowledge of what a Presidential order might say, on this thin basis I proceed with this column.
One of the things that I like about being a lawyer is that there is a natural symmetry about how potential problems can be sorted out. For example, for me, step one is to look at what happened previously, for as the late Georges Santayana (1863-1952) wrote, “‘Those who cannot remember the past are condemned to repeat it.” (Life of Reason, Reason in Common Sense, Scribner’s, 1905, Page 284).
Here’s what happened last time the President and the secretary of the Treasury got together and decided that there was an economic crisis. William Woodin, the Treasury chief, was a long-standing coin collector. (The Adams-Woodin book on patterns used for 50 years before Dr, Judd wrote his book, shows the extent of his interest).
Woodin found the crisis, FDR decreed it, and it became a patriotic obligation to turn coins in. Some argue that this was a voluntary act (Maurice Rosen, in his numismatic advisory letter, as well as in a conversation in Boston at his year’s American Numismatic Association convention), reminded me that there was but one criminal prosecution for failing to turn coins in.
Disobeying the request by FDR and Woodin was in the face of a cash penalty of $5,000 fine and/or five years in jail, or both. So to the extent that storm troopers did not round up the holders of gold, and ransack houses – yes, the entire program was voluntarily undertaken. But some people knew that it did stink.
Just how successful the program of turning in gold was has not been fully explored. I took my collection of Mint reports that go back to 1867 and put a spreadsheet together. See the chart below.
Here’s what these statistics mean: the government’s “voluntary” gold coin retirement program actually took in and melted 125 million gold coins of 351 million gold coins ever produced by the United States from 1795-1933. That constitutes melting 39 percent of all the double eagles struck, 47 percent of all the $10 coins manufactured, and about a third of the $5 gold coins that were produced by the U.S. Mints. Most of this took place 1933-1939 under the “voluntary” recall.
Quite besides the $1 to $20 gold pieces melted, foreign gold coin was also turned in. According to the 1934 Mint report, between 1870 and 1934, the U.S. was a net exporter of gold coin to the extent of about $1,651 million ($1.6 billion, valued at $35 an ounce (or about 45.7 million troy ounces of gold.
However, saved from the melting pot were collector coins. During the 1933 gold recall, citizens were permitted to retain “rare and unusual coin,” as much because the constitution prohibits a taking without just compensation, as because even in 1934, coin collectors and the general public understood that coins had a value that exceed face value or metal content.
To give this point a context, in 1935, B. Max Mehl sold the coin collection (by mail auction) of a collector who happened to have a 1794 dollar in fine condition. The specimen sold in fine condition for $165. A 1795 dollar (Draped Bust) was a $35 coin and an 1884-S Morgan dollar in BU hauled in a whole $2, but these prices make the point that some coins have a collector value in excess of face value.
The regulations promulgated by the Treasury allowed collectors to retain up to five coins of each date and mintmark. In retrospect, it is not clear if proof gold coins were treated the same way (though the Treasury sold them at a nice premium above face value from the 1850s onward). That means (to pick a common coin) that a collector could hold and keep five 1907 double eagles (Philadelphia Mint, which made 1.45 million), five 1907-D (mintage 842,000) and five 1907-S (mintage 2.1 million).
My longtime editor, Dave Harper, commented to me that he doubts that the collector protection of 1933 would afford people today with a sense of protection strong enough to justify a gold buying opportunity, but I think that this point misinterprets the scope of what the prior regulations did.
Some fast calculations: The coins that were ultimately declared “collectible” were all U.S. gold coins made prior to 1933; later, all foreign gold coins minted before 1960 were in the equation. Specifically, the law and regulations allowed up to five of each date and mintmark to be held.
That is, for a $20 gold piece, $100 face value in gold coin for each date and mintmark. There are over 190 double eagles and that would allow a collector to acquire 950 gold double eagles at a minimum), which amounts to about 919 ounces of gold worth at current gold price (about $1.1 million). The $10 gold coin set has over 336 eagles in it or about 1,680 coins.
In context, the value at melt is about 806 troy ounces or another $967,000. What the heck: the $5 gold piece collection has over 225 dates and mintmarks from 1839 to 1908, alone (1,125 coins) (another 288 ounces, or about $345,000).
Completely forgetting numismatic value, the gold content of that collection alone would be around $2.5 million (and we haven’t gotten to quarter eagles yet). That should be enough to shield most people from seizure of their gold assets.
But that begs two questions: should gold now be held in U.S. gold coins, or South African Krugerrands, British sovereigns, the Swiss Vreneli, 20-franc coin – and the second significant question, where and how should they be held.
I have some suggestions that are completely legal right now that you may wish to consider. They will be published in the next column or two.
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