Gold Ownership Regulations Limited Collectors’ Choices in the 1960s

Recently I ran across a 1967 issue of the Numismatic Scrapbook magazine in my files. The magazine was a favorite among collectors from generations ago. It was published from 1935 to 1976. Ultimately it was “merged” with Coin World and eventually ceased to exist in any form to chagrin of some collectors.

Among the many ads, which contain thousands of coin prices from 50+ years ago (If we could only go back!), was an article that sounded a warning for dealers and collectors concerning gold. The article reminded dealers and collectors that they had to obtain a license from the Treasury Department before they could import any gold from abroad. The requirement for the license even applied to U.S. gold coins dated before 1933 which had been declared legal to own in prior rulings. Failure to obtain a license before the import transaction would result in confiscation of all of the gold.

These regulations stemmed from the Gold Surrender of 1933. President Franklin Roosevelt issued that executive order on April 5, 1933 to take control of the gold market. It was strengthened by two acts of Congress. The order required all citizens to turn in their gold coins and gold certificates for paper currency on or before May 1, 1933. Citizens were allowed to keep gold coins with a face value of up to $100. Exceptions were made for “customary use in industry, profession or art.” Those professions included artists, jewelers, dentists, sign makers and others who could show that gold was an essential part of their business. U.S. citizens were forbidden to hoard or invest in gold. They could not own gold and store it in a foreign country.

There was an exception for "gold coins having recognized special value to collectors of rare and unusual coins.” These included coins dated 1933 and before, although coins dated 1933 presented special problems. The gold eagles ($10 gold pieces) dated 1933 (Coinfacts estimate, 40 survivors) are legal to own, but subsequent court rulings have made all but one 1933 double eagle illegal to own. It is interesting to note that Louis Eliasberg, who assembled one of the most complete collections of all time, became a collector during this period.

Why did President Roosevelt take this bold action? The perception was that many people were hoarding gold coins and not spending them. Since the U.S. was on the Gold Standard, it limited the amount of money in active circulation which economists thought was stifling the economy during The Great Depression.

After Roosevelt confiscated the gold, he raised the price from $20.67 to $35.00 an ounce. That allowed the government issue more money and lowed the value of the dollar, which made U.S. exports cheaper and more attractive to foreign buyers. More exports increased the amount of goods produced. Both actions were directed to toward stimulating the U.S. economy and pulling the country out of the depression.

These actions had two adverse results for coin collectors. First, many collectable gold coins were turned into the government and destroyed. Second, collectors were barred in subsequent years from acquiring many desirable foreign gold pieces which were dated after 1933. For example, American collectors could not own the 1937 George VI coronation gold set nor many other interesting or significant coins or medals that might have interested numismatists.



The 1937 King George VI gold coronation set was one of many gold coin issued, dated after 1933 that U.S. collectors could not legally own.

At the time when the 1967 Numismatic Scrapbook article was published, Canada was issuing a 100th anniversary commemorative Proof set that included a very attractive $20 gold coin. Like all other late date gold coins, U.S. collectors were forbidden to buy it. Canada issued a set for Americans that had a silver medal in place of the gold piece.

Coins magazine sent a photographer and a reporter to Canada take photographs of the coin. It appeared on the cover of the magazine, and there was article about the “forbidden fruit” that American collectors could not have.



Americans could not collect the 1967 Canadian commemorative $20 gold coin. Coins magazine was forced to send a photographer to Canada, with all of his equipment to get a picture of the piece. Surprisingly the editors did not want to show the piece with the "black and white" reflection shown on the piece above. Instead they published a "flat" view of the reverse in the cover of the June 1967 issued of the magazine that was a colorized version of a Polaroid camera shot.

Unfortunately the provisions of the Gold Surrender Order remained in effect for 40 years. Finally President Gerald Ford signed a bill into law that ended the restrictions on American gold ownership. The bill took effect on December 31, 1974. Since then collectors have been able to add any and all genuine gold pieces to their holdings.

So, what has happened to the 1967 Canadian $20 commemorative gold piece that was “forbidden fruit” for American collectors? Once the allure of owning a forbidden coin was gone, and the years passed by, the interest in the piece fell to point where it now sells for close to its melt value. Sometimes when something is no longer banned, it becomes mundane.

 

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The reverse is also true - when something is banned, it becomes highly valued, regardless of it's actual worth, book banning included.

 

The lesson I take from all of this: government promises aren't worth the paper they're printed on. Just compare the current value of a 1928 $20 double eagle with that of a $20 gold certificate from the same year. Oops!

 

I am not sure of what you are driving at. The gold certificates were demonitized and ever illegal to own from the time Roosevelt issued his order until the mid 1960s when the government finally made it legal to own and collect them. They now get their value as collectors’ items.

The value of gold and effects of inflation on the value of currency are as old time. Every economy has had inflation; it’s inevitable. The question is can governments act responsibly? That is the real issue.

 

The real issue is that the answer to that question is "sometimes they can, and sometimes they can't; sometimes they do and sometimes they don't."

 

Yep compare the value of a $20 bill and the value of the gold in a $20 double eagle and it's pretty pathetic.

But if that $20 bill had been invested in real estate back in 1928, what would it look like now compared to the value of the gold in a $20 double eagle?

 

IMHO, the most interesting and frightening thing about today's economy is that the way the U.S. Economy is set up and manipulated today is so different from the way economies of the past were set up, that we almost can't learn much from the past.

The way stocks trade, options, futures, derivatives, REITS, etc. The Federal Reserve playing around with all of it, manipulating it while Europe and all of our trading partners around the world are doing the same. The fact that the world economy goes into turmoil when Russia - a country with a GDP smaller than California - goes to war with Ukraine - a country with an even smaller GDP. The fact that our economy is so extremely dependent upon other countries and Global Markets for so such a significant percentage of our basic everyday needs (grain!).

The fact that Gold, Silver and other precious metals are traded on a futures market and in stocks and mutual funds. The fact that everything is electronic and one major "Solar Storm" can knock out half the country for an inordinate amount of time. The fact that every stock market in the world, but especially the U.S. Stock Market - all of the indexes - has billions of dollars of "Wall Street Betting" moving the markets in both directions, and tens of millions of people can invest and divest in mass quantities in seconds.

All of the above has never been going on before and therefore we have almost no idea how a SHTF (shxx hitting the fan) event will play out if or when a SHTF event happens. We have nothing to compare it to. The "Preppers" believe we will revert to Silver and Gold for trading. But there aren't enough Silver and Gold coins to do the everyday business that 400 million Americans will need.

We've never been in this type of situation before in history with the complexity in which our world operates. I wonder whether that is a good thing and that we can therefore weather it better because of all the tools at our disposal. Or if that is a bad thing because things have become SO complicated, that when the SHTF things will be that much worse.

Darn if I can only get my crystal ball to work!

 

The markets can stay irrational longer than we can stay solvent, and the fan can stay clean longer than any of us can keep breathing. It's good to be prepared for disaster, but unhealthy to count on it.

 

The broader point is that the paper gold certificates were supposedly redeemable for gold coin, if the text on the bills is to be believed. At the end of the day, the government was unable to keep that promise; hence, the devaluation of the dollar, confiscation of monetary gold, etc.

 

I would suspect that coin collectors wanting to own gold coins were much more limited by their finances than by any gold ownership regulations.

I was 16 years old in 1964 when I spent $50 for a 1927 $20 US gold coin and that was a large amount of money then.

 

I bought a Choice Uncirculated $5 Liberty gold piece for $31 during that period. They were around for $27.50, but I was not well versed at spotting counterfeits at that age and bought from established dealers. I paid $45 for a $5 Indian that eventually graded MS-63. I bought a $10 Indian in “Unc” for $42. For only a few dollars more, you could get a “Choice Unc.” that grade MS-63 to 65 today. That was a huge bargain in retrospect.

Yes, you had to work longer for that money, but it was still cheap compared to today’s prices.