Gold ban - is a new gold ownership ban looming?
Gold ban: What does it entail and how high is the probability at present?
A ban on gold ownership in Germany or Europe, as was the case in the U.S. until the 1970s, worries many gold owners - what's the story? In the meantime for several years the European Central Bank has been trying in vain, with an extremely low key interest rate and other measures, to permanently stimulate the economy within the Eurozone. Due to the aggravated situation caused by the Corona crisis, there are some experts and other voices talking about an imminent gold ban.
Table of Contents
- Attempt at an objective analysis on a gold ownership ban
- Why is a possible gold ban even under discussion in Germany?
- What is meant by a gold or gold ownership ban?
- What could a gold ownership ban look like in practice?
- Gold bans in history are not uncommon
- Gold was also banned in Germany less than 100 years ago
- Historical gold ownership ban in the USA: Executive Order 6102
- Other gold ownership bans in the history of Europe and other continents
- What are the motives of a gold ban?
- How likely is a gold ban?
- Are there signs of an imminent gold ownership ban in Germany?
- What are the arguments against a gold ownership ban in the near future?
- How can citizens protect themselves against a gold ownership ban?
- Hope: Rare and historical coins exempt from gold ban
- Conclusion: How likely is a gold ban?
- Investing in Gold and Alternatives
In our article, we do not want to panic, but rather provide objective and fact-based information on how likely a gold ownership ban currently is. In addition, we explain what would actually happen in the event of a gold ban, what measures there have been in history, what effects such a ban would be accompanied by and how the probability is to be assessed that such a ban could actually be pronounced in the foreseeable future.
Recently, we have been hearing more and more voices that are worried about a possible approaching gold ban. The basis for this is, in particular, the continuing global rise in negative interest rates and the Corona crisis, which could lead to a global recession. Already in 2020 and 2021, for example, the German government has had to invest many billions of euros to support companies and prevent worse economic effects.
Historically, it can be seen that a gold ban was mainly imposed when the state finances were in very bad shape. In addition, there are deflationary tendencies, even if the capital market is more or less flooded with fresh money. Against this background, the discussion about a possible ban on gold ownership is currently flaring up, especially since such silver and gold confiscations have already occurred several times in history, also in Germany and other countries in Europe.
First of all, we would like to define the term gold ban a little more closely. It does not automatically mean that gold or other metals may not be traded or possessed as a matter of principle. Rather, the gold ban refers to the state taking certain measures to significantly increase its own gold holdings while at the same time restricting or sometimes completely prohibiting private ownership of the precious metal.
There are some financial experts, such as the well-known stock market specialist Dirk Müller, who believes that at least a ban on gold ownership in the near future is more likely than ever before. He justifies this above all with the strong demand for the precious metal. In this context, it is important to know that fiat currencies continue to lose value.
This in turn is due, among other things, to developments moving in the direction of the abolition of cash. In addition, digital currencies are likely to succeed in gaining acceptance. Therefore, the introduction of a digital dollar or digital euro is not unlikely. This fact, in turn, could lead to governments wanting to limit so-called "fallback options," such as precious metals.
In contrast to Dirk Müller, there are a number of experts who consider a (soon) gold ownership ban as very unlikely. The experts name here some signs and reasons, which speak against the fact that we must expect in the next years that there will be regimentations with the possession of the gold or also the silver, namely:
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Gold accounts for only a small share of citizens' total wealth. Shares and real estate in particular are much more widespread. Therefore, it would definitely make more sense and be easier for the state to target these forms of investment in planned coercive measures.
Many people hold gold as a so-called crisis currency. Therefore, the precious metal has become increasingly popular in recent years. For this reason, it would be extremely difficult and at the same time very unpopular for governments to actually put any restrictions into practice. Considerable resistance from the population must be expected here.
National bans are almost impossible to implement because of the strong globalization. This is also due to the fact that numerous stockpiling operations take place abroad. It is even less likely that a number of countries will agree on an international ban on the precious metal.
Restrictions on gold ownership are difficult to implement. This is mainly because private individuals can hide their gold holdings relatively easily, for example, in their home vaults, in other places such as their backyards, or in some foreign storage facilities.
State would have much easier means to access the assets of its citizens. This would be, for example, the increase of taxes, the confiscation of foreign assets or so-called forced mortgages on real estate.
There are very high legal hurdles. If the German state wanted to impose a ban on the ownership of precious metals, it would have to overcome high legal hurdles. Private property is particularly protected under the Basic Law. If the worst came to the worst, at least compensation would have to be paid, so that genuine expropriation would be virtually impossible.
So there are some compelling arguments to suggest that a gold ban will not happen in the foreseeable future.
In the previous section, we listed a number of arguments that make a gold ownership ban unlikely. Nevertheless, we would like to inform you about what you could do in case the government still wants to enforce a gold ownership ban or the signs are getting stronger. Again, it's worth taking a look at history, as numerous people have been faced with saving their precious metal holdings due to a possession ban in the past.
One possibility is to hide one's own gold or silver (see guidebook: Storing Gold). This can be done in the home safe, in the garden or in other places known only to the owner. Since it can hardly be assumed that, for example, the law enforcement agency will walk through the woods or dig through the garden, this would be a relatively safe way to protect one's own holdings.
For those who find hiding their own gold too costly or unsafe, there are still a few alternatives available, namely:
- Relocating abroad, especially to Switzerland
- Buying rare collector coins instead of bullion coins
- Switch to other precious metals, for example platinum or palladium
Also good protection is the storage in some countries abroad, because then there would have to be an "extradition agreement" of the stocks in case of a gold ban in Germany, which is rarely the case. Since many investors probably do not want to take care of this themselves, the service of an online precious metal dealer is offered, which also arranges storage in high-security areas abroad. The storage of gold abroad is already being used by more and more investors.
Another option for protecting your gold in the face of a looming gold ownership ban is to opt for collectible or rarer commemorative coins rather than bullion co ins. Historically, at least, it has often been the case that especially older and rarer coins (see also "curant coins") made of gold or silver were exempt from the respective possession ban. This is especially due to the fact that the state can hardly estimate the current value and there are not insignificant price risks, which are not present in the form of bars or pure investment coins.
Ultimately, another variant is that you not only hold gold bars, gold coins, silver bars and silver coins in your portfolio, but - in view of a possible gold ownership ban - increasingly include platinum or palladium bars in your portfolio. In the first place, in fact, the government is likely to actually impose a ban on gold or silver, which does not necessarily apply to other precious metals such as platinum and palladium, since they are used relatively rarely in comparison.
By the way, how well you can protect your investment in precious metals also depends on what kind of investment it is. In this respect, the state would have quite different possibilities of identification and access, which is illustrated in the following table:
|Type of investment||Custody||Access possibility|
|Physical precious metals||At home / depository||very difficult or not at all / anonymity|
|Precious metal shares||Deposit account||easy by transfer|
|Precious metal funds||Deposit account||simply by transfer|
|Certificates||Deposit account||simply by transfer|
|CFDs||Trading account||simply by transfer|
|Participations||Document / Deposit||moderately difficult, sale on the secondary market|
Accordingly, the most insecure is definitely an indirect investment in rights or securities, because access would be easy and, above all, there is always an identification requirement for such "book holdings". Instead, physical gold or silver is recommended. Ideally, have this stored in high security areas abroad. Then the possible access of the state to your assets is most unlikely.
It is true that the threat of a gold ownership ban has been discussed more frequently than before in recent months. This is certainly due to the global crisis caused by the Corona pandemic. The crisis also poses enormous financial challenges for states and will probably lead to a recession or even a depression in many countries. Nevertheless, objectively speaking, it is relatively unlikely that at least the German government or even the new American president will resort to such drastic means.
Moreover, should the state really want to attack the assets of its citizens, there would be much simpler ways and means. First and foremost, these are tax increases or, for example, forced sales of large assets once they exceed certain equivalent values in the million-euro range. In addition, it is important that citizens do not lose even more trust in the government by having it attack their private assets. As a conclusion, it can be said that a gold ban is currently unlikely, but not excluded.
In any case, you should not let yourself be panicked by speculation, but only make fact-based decisions. Even with a coming ban on the possession of gold, there will probably be clear indications in advance, for example in the form of draft legislation.
Accordingly, a gold ban does not automatically mean that private individuals are no longer allowed to hold any precious metal stocks and certainly not that the stocks have to be transferred to the state free of charge. Even in the case of the historical gold ownership bans, the state purchased the gold holdings of citizens.
Since there have already been several gold bans in history, it is easy to explain what could actually happen in the event of such a ban. The state certainly has greater room for maneuver here, so there could be a number of measures that are summarized under the term gold ban or gold ownership ban. In particular, these could be the following measures:
- Private ownership of precious metal holdings is limited in terms of quantity
- Trade in gold is (significantly) restricted
- The state demands a compulsory levy on existing gold holdings
- Precious metals must be sold to the state by law or other regulation
- Complete ban on private and commercial trading in gold
These and other measures could be taken by the state if it wants to enforce a ban on gold ownership. This would certainly be supplemented by the fact that citizens would have to pay heavy fines in the event of a violation.
The current fear of some people of a gold ownership ban is perhaps also due to the fact that there have already been several such bans in history. In almost all historical social systems there have been more or less frequent restrictions or complete bans on private gold or silver holdings. The bans on gold ownership were completely independent of the form of government, as the restrictions existed in monarchies and dictatorships as well as in democracies.
In this country, ownership of gold from private sources has been banned several times. Always an enormous inflation or big problems with the state finances were an important reason for it. For example, in 1923, Reich President Friedrich Ebert completely banned the ownership of the precious metal gold. Several restrictions on the possession of gold were subsequently imposed before the beginning of World War II, for example the obligation to deliver gold, which came into force in 1936 and was ordered by Hermann Göring. Three years later, in 1939, there was an extension of the gold ownership ban to companies.
Among the most famous gold and silver bans in history are certainly those in the United States, also known as Executive Order 6102 and Executive Order 6814. First, there was Executive Order 6102, signed in April 1933 by the then President of the United States, Franklin D. Roosevelt, was signed. This involved prohibiting the people of the United States from hoarding gold bullion. In other words, it was a restriction on gold ownership that was not lifted until many years later.
This was followed a year later, in August 1934, by Executive Order 6814, by which U.S. President Roosevelt enforced the confiscation of silver holdings, again from American citizens. As justification for both Executive Orders, the government of the United States or the President at that time stated that, on the one hand, these were hard economic times - also for the state - and that these were even intensified by hoarding gold or silver, in that the growth of the economy could be blocked and the already existing depression thus worsened.
What was the consequence of the gold ban in the United States?
The effect of Executive Order 6102 in the United States at that time was mainly that citizens had to sell their gold coins, gold bars and also gold certificates - except for a small residual stock - to the government. At that time, there was a fixed price of $20.67 per troy ounce of gold. Translated into today's terms, this is roughly equivalent to $400. A direct consequence of this measure at the time was that the U.S. dollar was devalued by over 60 percent against gold. Another effect was that the Eagle in particular became extremely rare as a gold coin from 1933. Today, it is therefore one of the rarest and thus most valuable gold coins in the world.
Besides Germany and the United States, gold ownership bans existed in several other countries, as you can see from our table below:
|USA||1933-1974||Executive Order 6120, Duty to pay taxes to the state|
|Italy||1935||Gold for the fatherland, citizens should hand in jewelry etc|
|Germany||1923-1931||Weimar Republic, ban on gold ownership|
|1939||No gold ownership for companies|
|Australia||1959||Confiscation of gold from private individuals|
|Great Britain||1966||Confiscation of gold from private persons|
With all these bans in history, the question arises as to what could actually be motives for gold bans and whether they could also lead to such an event occurring again today, perhaps in the near future.
History shows, among other things, that there was one main motive in particular why states imposed a gold ban. First and foremost, this was a financial emergency, so that the state no longer had sufficient funds to realize its plans. Above all, threatening state bankruptcies were often used in the past as a reason to force citizens to sell their precious metal holdings.
Furthermore, gold ownership bans have often been in place when backed fiat currencies (central bank currencies) have existed. Since such economic systems in the past often ended with paper currencies losing massive value, precious metals should at least provide a tangible asset to counter this.
Another reason for gold bids is that many precious metal reserves have flowed abroad and, in addition, there are high foreign trade deficits. In summary, therefore, the following three reasons and motives in particular could play a role when a possible ban on gold is currently being discussed:
- Financial distress of the state
- Massive loss in value of paper currencies (when backed by gold)
- Outflow of precious metal stocks abroad
From today's point of view, it is positive that the US dollar has not been pegged to gold for almost 50 years (1971). This in turn means that - compared to earlier times - it has become less likely, at least in the United States, that the government could decide to ban gold or silver. In addition, the measure of "money printing" which is common today means that deficits in foreign trade are covered in this way and no longer have to be "cleaned up" by bans on gold.
When it comes to the discussion of a possible gold ban, it refers not only to Germany and Europe, but also to the United States. After all, the most famous gold ownership ban comes from the U.S., namely the previously mentioned Executive Order 6102. So how likely is it that the American state could again take measures to confiscate gold from its citizens in the near future?
True, on the one hand, there is the history already mentioned. However, on the other hand, the conditions in 1933 were entirely different from those today, so a comparison in that form is not realistic. The main difference is that the U.S. was in a significant economic depression in the 1930s. In addition, there was the aforementioned peg of the U.S. dollar to the precious metal, which no longer exists today. At that time, because the economy was under pressure, the American government decided that a devaluation of the dollar had to take place.
This devaluation of the dollar was automatically linked to the fact that the precious metal had to be revalued, namely because of the aforementioned linkage. However, the American president believed that citizens should not benefit from the appreciation of gold, so the precious metal was first confiscated and then revalued. The situation today is completely different, especially based on the fact that gold is no longer pegged to the American currency.
In addition, the gold holdings of Americans in modern times are by no means stored exclusively in the U.S., but in numerous other countries, in particular:
- Great Britain
Based on this fact alone, it is unlikely that the USA will impose a gold ban. The reason is that the above-mentioned and other "stockpiling countries" would have to cooperate, which cannot be assumed, especially from Switzerland. Thus, the repatriation of gold stocks from abroad would often not be possible at all.
Based on what has been said so far, one could be concerned that there might be a ban on gold ownership or a confiscation of the precious metal in the near future. Experts disagree on this point. However, most experts do not believe that a ban on precious metals or certain restrictions are likely. Nevertheless, we would like to take a closer look at possible signs of an impending gold ownership ban here.
Until 2019, it was the case in Germany that precious metals such as gold could be purchased up to a maximum equivalent value of 10,000 euros as part of a so-called table transaction, without the need to provide personal data or proof of identity by means of an ID. From 2020, this limit has been lowered to just 2,000 euros (see "Buying gold anonymously"). In turn, some people are already interpreting this as a sign that the possession of gold could soon be banned - up to a certain maximum amount.
When asked about this, however, the relevant authorities in Germany counter that some neighboring countries have had much lower legitimation limits for some time, such as France. Therefore, it is merely an adjustment to most other states within the EU that the limit has been reduced from the previous 10,000 to 2,000 euros. Moreover, this only concerns the identification requirement for gold purchases and says nothing about possession being generally prohibited or regulated.
Dirk Müller sees gold ban currently more likely than ever
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