Category: Federal Reserve

For over 40 years, from 1933 until 1974, the US government made it illegal for citizens to own gold.

Thanks to President Gerald Ford, it is legal for everyone to own gold, silver and other precious metals since 1974.

History of Precious Metals Prohibition

In the early 20th century paper currency was far less common than today. Paper bills were often only available in large denominations commercial and interbank transactions. Much of the currency in circulation was coinage minted of silver and gold alloys.

Economies were still based on the gold-standard. The coins in circulation were minted of 21k gold, which is a mixture of 90% gold and 10% copper for strength and wear resistance during everyday circulation.

Gold coins before 1933 were minted in denominations that include the $2.50 (quarter eagle), $5.00 (half eagle), $10 (eagle) and $20 (double eagle).

In 1921, following the end of the first World War, the Morgan Silver Dollar was replaced with the Peace Silver Dollar. Both coins were composed of an alloy containing a mix of 90% silver and 10% copper. The amount of pure silver in each $1 USD coin being 0.7734 troy ounces.

Also during that time smaller denominations of coins, including the dime, quarter and half-dollar, we also minted from the same silver and copper mixture. The US Mint continued to issue 90% silver coins through 1964.

When clad coins began to circulate in 1965, some citizens remembered the gold seizure that happened thirty-two years early.

The roaring 20’s led to the Great Depression. Wall Street Banks, along with regional banks under purview of the young Federal Reserve system were happy to give out margin loans, unsecured credit in fiat currency.

During the economic hardship many people lost faith in the banking system. Instead of depositing cash into banks, many people turned to hoarding cash at home in the form of gold and silver coins.

During the Great Depression, Roosevelt used an obscure and obsolete piece of legislation meant to prevent the German government to profit from patents in the United States during the World War I as justification for his numerous Executive Orders to confiscate gold coins from the economy.

On April 5, 1933, after enduring several years of the Great Depression, President Franklin Roosevelt signed Executive Order 6102.

With the swipe of his pen, Roosevelt made it a crime for any US citizen to own gold coins, gold bullion or even gold certificates, which were a form of gold-backed fiat currency that was exchangeable for gold. In exchange, the government offered citizens $20.67 in fiat for each ounce of gold that was surrendered.

All gold was ordered to be surrendered to the government. Within the first thirty days the Treasury was able to collect roughly one third of the $1,400,000,000 in gold that was in circulation.

Any person who failed to comply with the presidential order faced imprisonment and fines of up to $10,000. Many private citizens and investors were put on a list, targeted, arrested, prosecuted, fined, imprisoned and had their gold seized.

The order did exempt some items. Such as jewelry, numismatic collectibles, items used by industry, some professions and artists.

In defiance to the order, people drilled holes or attached hasps to the coins to convert coins into pendants to hang on a chain to meet the minimum standard of jewelry.

The seizures, arrests and prosecutions of those who did not surrender their gold continued for most of 1933. Roosevelt signed additional Executive Orders throughout the year.

One of which gave the Justice Department the authority to build a list of citizens suspected to be ‘gold hoarders’. Essentially acting as a government backed gestapo.

During the summer of 1933, agents from the Justice Department visited the homes of “known hoarders of gold” to confiscate more than $38,901,009 worth of gold.

The Emergency Banking Act of 1933 was supposed to help restore faith in the banking system and the economy after the Federal Reserve led the country into the Great Depression.

The prohibition on private ownership of gold continued for 41 years.

Nixon Shock

During the early 1970s, Nixon was facing rising unemployment, high inflation, the looming oil crisis and political foes. In August of 1971, the President called together top economic advisors for a secret meeting at Camp David.

Notable participants in the meeting included Federal Reserve Chairman Arthur Burns and Treasury Secretary John Connally. Also present, then Undersecretary for International Monetary Affairs and future Federal Reserve Chairman Paul Volcker.

Following this meeting Richard Nixon authorized then Treasury Secretary John Connally to break the Bretton Woods Agreement that had defined the rules of international trade amongst many countries following World War II.

Without consulting any international leaders, the actions included the immediate suspension of the “gold standard”.

Nixon directed the Treasury Secretary to abolish the convertibility of dollars into gold through the London Gold Pool. This also removed the fixed price of gold from $35 an ounce to a market based system.

By 1973, the US gold standard that was established by Bretton Woods had been replaced. The new system based on free floating exchange of fiat currencies.

Following the resignation of Nixon, one of the first laws signed by President Ford included a bill which reversed Roosevelt’s Executive Orders.

The bill authorized expansion of the World Bank and included provisions that legalized citizens full authority to purchase, hold, sell, or otherwise deal with gold in the United States or abroad. It has been legal for anyone to own, hoard, buy and sell gold in the United States since December 1, 1974.

The gold bull run that followed culminated in a price peak of $850 USD per ounce in January 1980.

Sovereign Gold Bullion Market

The Gold Krugerrand was the first gold bullion coins to be sold to investors when it debuted in 1967.

At the time, apartheid sanctions against South Africa made it difficult to invest in Gold Krugerrands. The top gold coins of the day included the Gold 100 Corona from Austria and the Mexican 50 Pesos Gold Coin. These vintage gold coins have maintained their popularity with investors.

In 1979, the Royal Canadian Mint introduced the first mintage of the Maple Leaf 1 oz Gold Coin.

The basic design of the Canadian Maple Leaf 1 oz Gold Coin has remained largely unchanged since its creation.

The US Mint made several failed attempts during the early 1980s to woo precious metals investors. One notable attempt is the American Arts Commemorative Series Medallions.

There are ten medallions that are part of the American Arts Commemorative Series that were minted from 1980 through 1984.

The larger medallions are minted 1 troy ounce of pure gold.  While the smaller medallions contain 1/2 troy ounce of pure gold. At the time of release, the medallions were poorly received by collectors, the public and investors.

These medallions were struck from an alloy containing .900 fine gold. Today, these medallions are popular with gold stackers and investors and can are often on sale in the secondary market very close to spot price.

While the series was a commercial failure, it paved the way for Congress to create and establish the guidelines for the American Eagle series of coins from the US Mint.

Gold American Eagle

The American Eagle series premiered in 1986. It continues to be one of the most popular precious metal investment vehicles in the world.

It has been more than 52 years since the Nixon Shock moved off the United States off the gold standard.

Private ownership of gold, silver and other precious metals remains legal throughout the United States today.

Demand from investors continues to grow as more people continue to lose faith in the banking system, traditional investments like stocks and bonds as well as the federal government’s ability to manage and regulate effectively given the massive amount of corruption plaguing Washington.

As of 2023, more than 47 million ounces of gold have been used in minting of four denominations of American Gold Eagle coins. Investor demand for American Gold Eagle coins remains strong after 37 years.