As Central Banks Buy Gold, Confiscation Risks Are Rising for Investors

A.M. Freyed
May 30, 2012

Europe’s debtors must pawn their gold for Eurobond Redemption … Southern Europe’s debtor states must pledge their gold reserves and national treasure as collateral under a !2.3 trillion stabilisation plan gaining momentum in Germany. – UK Telegraph (5/29/12)

It’s possible that the Basel Committee agrees to banks using gold as Tier 1 Capital, which would create substantial demand for physical bullion … Globally, central banks cannot afford to find themselves in competition with their banks over gold. Just as citizens’ gold remains vulnerable to the confiscation of gold, so commercial bank holdings of gold would be equally vulnerable. – Bullion Vault (5/4/12)

When you set up one of these gold 401K plans, you will be able to invest in the precious metals, but you will not actually be able to take possession of the gold bullion, or gold coins, themselves … After the initial investment is made, you are given semi-annual updates with regards to your investment including its overall value. – 401K Rollover Answers (current)

It remains illegal to export gold from China, which is already the world’s biggest producer of the metal. The increased demand therefore is likely to push up reserves of the metal and reduce the availability of gold for the market.. – China Daily (5/18/12)

Gold is on the mind of Europe’s central bankers and, according to recent reports, may be used as collateral to reduce the indebtedness of Europe’s staggering Southern flank including Greece, Spain and Portugal.

Such a stabilization plan – “hot off the presses” – is now being proposed by some officials in Germany. It calls for these countries to pledge gold reserves as collateral in return for participation in a “sinking fund” that would issue bonds designed to amortize some of the South’s crushing sovereign debt.

It’s not exactly confiscation, as collateral is not capital, but it certainly moves the needle in that direction.

In fact, as central banks buy more gold, there is no doubt that gold confiscation becomes an increasing possibility – not just for certain nations, but for individuals. If this proposal is considered seriously in the capitals of Europe, watch for the Italians, especially, to react furiously. Italy holds gold reportedly worth nearly US$100 billion.

The global elites don’t care, of course. Anything of value is subject to their hoovering greed. And gold is surely on their radar.

While gold has tested highs of US$2,000, the decade-long golden bull likely has a long way to travel. And as price pressures mount, so will opportunities to consider or even implement such confiscation of money metals, especially gold.

Gone is the era where Britain’s Prime Minister Gordon Brown cold easily dispose of tons of the yellow metal – as he did at the beginning of the 2000s to reduce “volatility.”

That staggered sale is today known as Gordon’s Bottom, and many in Britain have regretted it ever since. British gold was sold under US$300 an ounce. Not ten years later, it was worth nearly US$2,000 an ounce.

With so much action in the market, speculation about the market’s looming bugaboo – confiscation – has increased.

It’s not like it hasn’t before, most famously in the United States when then-president Franklin Delano Roosevelt demanded people’s gold in April, 1933. It wasn’t for the reasons people think, however.

The Fed had apparently over-printed money (illegally) in the Roaring ‘20s and Roosevelt and his money men were worried if people tried to turn in their dollars, there wouldn’t be enough gold to go around. Confiscation was the logical antidote.

Of course, this time round the bankers have no such worries about running out of gold for dollars. It is “legal” to print trillions and trillions of paper dollars without any redemption concerns. But this has brought another problem: So much money has been printed, especially electronically, that when it does begin to circulate, gold could go much higher as a result of massive monetary inflation.

Theoretically, one could be looking at, say, US$5,000 gold and 50 percent interest rates. Can the world’s marketplaces tolerate that sort of scenario?

The alternative of course is confiscation … and perhaps the creation of a new currency, maybe a global one. The International Monetary Fund is already positioning itself as the world’s new central bank with its globalist currency, the SDR.

The Bullion Vault (Julian D.W. Phillips) earlier this month listed several reasons why the world seems closer to gold confiscation. The article makes mention of Russia’s and China’s low-key domestic (central banking) purchases and states that various trends now in place ensure nations accumulating gold “retain it either in citizens’ hands or in central bank hands.”

But it could certainly be speculated that once government – and affiliated central banks – have begun monopolizing domestic production, various precedents are being set. The powers-that-be are basically staking a claim to domestic gold and it is not hard to see this extending to private holdings.

The suspicion that some central banks (Venezuela, etc.) are expressing regarding the trustworthiness of British and American gold storage facilities is perhaps another red flag. Governments are starting to be worried about their OWN gold confiscation risks. Has it occurred to those officials that they have the power to remove gold (and silver) from their citizens.

Finally as the article points out, more central bank buyers of gold are from the emerging world. And though holdings in the developing world are currently small, the buying pressure will doubtlessly continue, putting further price pressure on gold. As prices likely go up (and central banks compete), confiscation surely becomes more of a realistic scenario.

There are other buying pressures. For instance, US citizens can now more easily invest in gold via a 401K, but there is apparently a specific caveat: One cannot take delivery!

When it comes to (at least some) precious metals, here is a golden rule: The closer to home the better.

Maybe AT home.

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