That relationship ended in February 2022, when western governments froze Russia’s foreign exchange reserves. Reserve and asset managers globally were left confronting a simple question: if $630bn held in Treasuries, Bunds, gilts and other bonds could become inaccessible overnight, what constituted money? Their answer was gold.
Some of the world’s biggest money managers have rebuilt their gold holdings after prices dropped, betting that long-term drivers of the precious metal will endure even as the US Federal Reserve takes a more assertive stance on inflation.
U.S. citizens need to remember that the U.S. government confiscated civilian gold by executive order in 1933, forcing citizens to exchange gold for Federal Reserve notes. And then changed the price of gold from $20 per ounce to $35 per ounce, causing (in gold-to-paper terms) 50% inflation in one fell swoop.
It read, in part: “Deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933.”
In return, the Federal Reserve Bank would give individuals an equivalent amount in “any other form of coin or currency coined or issued under the laws of the United States” at the rate of $20.67 per ounce.
Once the government got the gold at that price, it did what governments do – it changed the price-fixing to its advantage, raising the price to $35 and devaluing the paper money people received in exchange for their gold…
Violators of the law were subject to up to a $10,000 fine and/or 10 years in prison… [end quote]
If it happened once it could happen again. On the other hand, the U.S. is no longer on the gold standard and the Fed can increase the money supply anytime it wants by simply buying Treasuries with fiat money created out of thin air.
So gold isn’t relevant and confiscation isn’t likely to be repeated.
Of course, among other things, the U.S. has one teeny, tiny advantage over Zimbabwe: the dollar is the international fiat and reserve currency and it will take many years to lose that status, even if current administration practices seem determined to do just that.