Myths by Bill Haynes |
July 6, 2016
Many gold and silver dealers
foster the circulation of many myths, misunderstandings,
and outright lies about the purchase and sale of gold and
silver. Generally, these misconceptions and falsehoods promote
the notion that the government may again call in gold as
it did in 1933 and that “reportable” transactions are preludes
to confiscation. By cultivating such fears in investors,
unscrupulous firms can sell high-priced (and nearly always
overpriced) coins with greater margins of profit. Investors
who believe these stories invariably pay too much or buy
the wrong coins. After reading this expose, no investor
need be taken advantage of.
The most frequently used technique to promote
high-priced coins is to raise the issue of confiscation.
Many telemarketers tell investors that old U.S. gold coins
and old European gold coins are not “subject to confiscation,”
leaving the impression that modern gold bullion coins are.
Consequently, many investors buy old U.S. gold coins at
prices significantly higher than the value of their gold
content. The idea of buying “non-confiscatable” gold sounds
like a powerful argument but wilts under scrutiny.
Many precious metals firms maintain that
old U.S. gold coins, proof sets, and commemorative gold
coins are “collectibles” and would not be subject to another
gold recall. Some firms say that premiums of at least 15%
automatically make coins collectibles. Another notion holds
that coins one hundred years or older are antiques and therefore
not subject to confiscation. One large firm that sells rare
coins goes as far as to say:
Under current federal law, gold bullion
can be confiscated by the federal government in times of
national crisis. As collectibles, rare coins do not fall
within the provisions permitting confiscation.
No federal law or Treasury department regulation
supports these contentions.
The myth that specific types of gold coins
are “not confiscatable” stems from the Executive Order that
President Roosevelt issued in 1933 calling in gold. The
Executive Order exempted “gold coins having a recognized
special value to collectors of rare and unusual coins,”
but it did not define special value or collector and certainly
not collectibles. Nevertheless, telemarketers promoting
old U.S. gold coins perpetuate this myth because it makes
easier the selling of high-priced coins.
Just because Roosevelt exempted “gold coins
having a recognized special value” does not mean that any
future call-in would exempt collectibles. Roosevelt’s Executive
Order would have no legal binding on another gold call-in.
Besides, on December 31, 1974, with Executive Order 11825,
President Gerald Ford repealed the Executive Order that
Roosevelt used to call in gold in 1933. This was necessary
because on the same day Congress restored Americans’ right
to own gold. Furthermore, in 1977 Congress removed the president’s
authority to regulate gold transactions during a period
of national emergency other than war.
Even if a law did exempt certain coins from
future confiscation, the government could change that law.
Sadly, the government often simply ignores laws. Dealers
who sell so-called “non-confiscatable” gold have no basis
for making such claims.
For further discussion of this matter, assume
there was another gold call-in. Would old U.S. gold coins,
which make up the bulk of the “not-confiscatable” market,
be exempted? Probably not because they are common coins.
(The old U.S. gold coins most often promoted are the $20
Libertys and the $20 St. Gaudens, also known as Double Eagles.
A $10 coin is called an Eagle, a $5 coin a Half Eagle, and
a $2-1/2 coin a Quarter Eagle.)
Although Roosevelt’s Executive Order required
Americans to turn in their gold coins and gold bullion,
foreigners continued to redeem paper dollars for gold until
August 15, 1971, when President Nixon closed the gold window.
From the end of World War II to 1971, our gold reserves
were cut in half.
It is generally believed that all the gold
coins surrendered under Roosevelt’s call-in were melted
or refined into .999 fine bullion bars. That was not the
case. It was to the government’s advantage to give the foreigners
gold coins instead of bullion bars.
With the official price of gold at $35 an
ounce, a foreign bank presenting $35 million paper dollars
received 1,000,000 ounces if the Treasury delivered gold
bullion. However, when the Treasury delivered gold coins
with a face value of $35 million, it delivered only 967,500
ounces, saving 32,500 ounces. Each $20 Liberty and St. Gaudens
(Double Eagles) contains .9675 ounce of gold. The smaller
coins contain the same proportions. Therefore, it was to
the Treasury Department’s advantage to give out U.S. gold
coins instead of bullion bars. Additionally, before Roosevelt’s
call-in, millions of old U.S. gold coins already had made
their way to Europe.
So, in view of the government’s policy of
delivering “confiscated” gold coins to foreign governments,
how can a promoter of old U.S. gold coins claim to be selling
“non-confiscatable” gold when the coins he delivers may
have been called in back in 1933?
Promoters of old U.S. gold coins rarely
reveal the sources of their coins. They foster the idea
that the coins they sell somehow survived the 1933 call-in.
Probably, the coins being promoted just arrived from Europe
a few weeks earlier. Several large numismatic wholesale
firms have offices in Europe for finding hoards of old U.S.
coins. One firm advertises “Shipments coming in from Europe
daily.” Another firm boasts offices in Brussels, Paris,
As noted above, the premise of “non-confiscatable”
gold lies in Roosevelt’s Executive Order that exempted “gold
coins having recognized the special value to collectors
of rare and unusual coins.” Are old U.S. gold coins “rare
and unusual” today? No, they are not. Hundreds of thousands
have been graded and slabbed by PCGS and NGC, the two dominant
coin grading services.
Between 1850 and 1907, U.S. mints turned
out over 100 million $20 Libertys. Between 1908 and 1933,
they coined some 65 million $20 St. Gaudens. Today, no one
knows how many have survived, but the number is undoubtedly
in the tens of millions, with the bulk of them residing
in European bank vaults.
Because of all the old U.S. gold coins in
Europe and because of the huge premiums they carry, old
U.S. coins are dangerous investments. As gold moves higher,
European banks may become sellers, causing old U.S. gold
coins to fall in price while gold goes up.
Or, the European banks may decide to increase
their gold holdings by selling their high-premium old U.S.
coins and using the proceeds to buy bullion. Such a move,
of course, would put downward pressure on the prices of
old U.S. gold coins. For a further discussion about why
old U.S. gold coins are overpriced, visit our page on Old
U.S. Gold Coins.)
Since 1989, PCGS and NGC, the two major
grading services, have “slabbed” millions of coins rated
MS-60 or higher. Now, the two services are grading 200,000
to 300,000 coins a month. Millions of lower-grade coins
(VF through BU) do not even warrant being submitted. Yet,
they are sold as “non-confiscatable” semi-numismatic coins.
Low-grade coins that have no real collector value are called
semi-numismatic. VF/XF common-date Double Eagles are definitely
Add in the uncounted smaller denomination
old gold coins ($10 Eagles, $5 Half Eagles, etc.) and the
number of available old U.S. gold coins grows even bigger.
There is no way the old U.S. gold coins being promoted as
“non-confiscatable” have a “recognized special value to
collectors of rare and unusual coins.”
The concept of “non-confiscatable” gold
is counterfeit. The idea lives only because dealers continue
to push it for their own benefit. Investors who do not have
the facts are unable to know otherwise. Readers of this
page, however, need not be victims to the hype and promotion
so prevalent in the gold coin industry.
Investors wanting to buy gold should go
with the bullion coins: American Gold Eagles or Krugerrands.
These coins move dollar for dollar with the world price
of gold and are easy to buy, sell, and trade. Additionally,
tracking the value of these coins is easy. No “expert” has
to look at them, as is the case with St. Gaudens and $20
Beware of old European Gold Coins
Telemarketers often assert that European
bullion gold coins dated before 1933 would be, as telemarketers
claim about old U.S. gold coins, legally beyond the reach
of the government in another gold call-in.The imported coins
most commonly promoted as non-confiscatable include:
- French Twenty Francs (both the Roosters
and the Angels);
- British Sovereigns (usually with the images of Queen
Victoria or Edward II or George V);
- Swiss Twenty Francs (also called Helvetias);
- Belgium Twenty Francs (a.k.a. King Leopolds);
- Swedish and Danish 10 Kroners (Mermaids);
- Swedish and Danish 20 Kroners;
- Dutch 10 Guilders.
Investors should avoid European
coin promotions because, as noted above, the notion of “non-confiscatable”
coins has no merit, and dealers promoting European coins do
so because they provide bigger profits. That’s bigger profits
for the dealers, not their clients. Still, at time old European
gold coins are good buys. More on this below.
Promoted European coins are not worth the high prices promoters
ask. Regardless of the dates on them, they are not “non-confiscatable.”
Additionally, they hold little, if any, numismatic potential.
It is a peculiarity of the coin collecting that coins are
prized by numismatists (coin collectors) only in their countries
of origin. Americans collect U.S. coins; the British collect
coins of Great Britain; the Japanese collect Japanese coins,
Furthermore, the European coins are often compared with
old U.S. gold coins, which can and do achieve premiums at
times (See Old U.S. Gold Coins). European coins, as a rule,
are simply bullion coins and will never attain genuine numismatic
premiums. Some of the coins have been around for a hundred
years and have always sold at only a few dollars above the
value of their gold content. That is why telemarketers promote
them. They buy the European coins near bullion prices and
mark them up, ensuring big profits for themselves
And, there is another feature peculiar to European coins:
they contain unconventional amounts of gold, such as .1867
oz, or .2354 oz, or .1947 oz. Americans prefer full ounce
coins, or fractions of ounces they easily understand, such
as 1/2-oz, 1/4-oz, or 1/10-oz.
Further, Americans prefer coins stamped in English. The
European coins, obviously, are stamped in the languages
of their countries of origin. But perhaps worse, the European
coins do not have their gold content stamped on them. If
you have to use such coins in an emergency, how are you
going to convince someone other than a coin dealer that
the coins contain the gold content you say?
Your best buys in fractional ounce gold coins are American
Eagles and Krugerrands. These coins have their gold content
stamped in English and come in sizes Americans are used
to dealing with. Always, Gold Eagles and Krugerrands are
cheaper than promoted European coins. There are no compelling
reasons for Americans to buy European coins, except when
they can be found at very low premiums, such as when offered
on our Gold Specials page.
Often, promoters will claim that the coins
they offer are not subject to “reporting.” Such statements
imply the government requires gold transactions be reported.
However, no government regulations require the reporting
of the purchases of any precious metals, per se. If payment
is made by cash greater than $10,000, however, it becomes
a “cash reporting transaction.” It is not the gold that
the government wants reported but the cash. Such reporting
applies to all business transactions involving more than
Regarding cash transactions, Official General
Instructions for IRS Form 8300 read: “Who Must File. – Each
person engaged in a trade or business who, during that trade
or business, receives more than $10,000 in cash in one transaction
or two or more related transactions must file Form 8300.
Any transactions conducted between a payer (or its agent)
and the recipient in a 24-hour period are related transactions.”
This regulation applies to cash – greenbacks,
paper money. It does not apply to personal checks, wire
transfers, or money market withdrawals. When cashier’s checks
or money orders are involved, cash reporting may be triggered.
Form 8300’s General Instructions define
as cash “a cashier’s check, bank draft, traveler’s check,
or money order having a face amount of not more than $10,000.”
Using a cashier’s check less than $10,000 would be a “cash
transaction,” but it would not be reportable because it
is less than $10,000. However, two cashier’s checks, each
less than $10,000 but totaling more than $10,000 for a single
purchase, would be considered cash and subject to reporting.
Further clarification: If an investor makes
a $15,000 investment in gold and pays with a single $15,000
cashier’s check, it is not reportable. If, however, he pays
with two or more cashier’s checks each less than $10,000,
the dealer would be obligated to report.
Cash reporting requirements were not written
specifically for the precious metals industry but for all
businesses. The purchase of a car, boat, or jewelry, and
payment with two cashier’s checks, each less than $10,000
but totaling more than $10,000, would be a reportable transaction.
Another example: an investor agrees to buy
precious metals totaling more than $10,000, again say $15,000,
and wants to make payments with money from two accounts.
If the investor withdraws $8,000 from the first account
and gets a cashier’s check, and then gets another cashier’s
check for $7,000 from the second account, the transaction
becomes reportable. A purchase of $30,000 and payment with
two $15,000 cashier’s checks would not be a reportable transaction.
The significant amount is $10,000.
Personal checks drawn on the payer’s own
account are not considered cash. Form 8300’s General Instructions
read: “Cash does not include a check drawn on the payer’s
own account, such as a personal check, regardless of the
Form 8300’s General Instructions say “Transactions
are considered related even if they occur over a period
of more than twenty-four hours if the recipient knows, or
has reason to know, that each transaction is one of a series
of connected transactions.” For example, if an investor
agrees to buy $20,000 in gold but makes installment payments
with cash in amounts less than $10,000, the purchase would
It is often erroneously thought that banks
report to the government all personal checks more than $10,000.
Banks do not. But, a cash transaction exceeding $10,000
requires a bank to fill out and file a Cash Transaction
Report (CTR). A cash deposit more than $10,000 to any bank
or other financial institution account by an individual
possibly would be reported.
However, purchases of cashier’s checks with
cash for amounts $3,000 to $10,000 require banks to complete
Monetary Instrument Reports (MIRs). (Some banks call them
Monetary Instrument Logs.) MIRs are not filed with the government
but are records that enable banks to help comply with cash
reporting requirements. It is not clear when an MIR requires
the completion and filing of a CTR, but an individual regularly
purchasing cashier’s checks between $3,000 and $10,000 would
probably be reported.
If a business reports a cash transaction,
the customer will know it. Form 8300 requires name, address,
citizenship, and social security number. It also asks for
a method of identification, driver’s license, passport,
etc. Additionally, Form 8300’s General Instructions call
for anyone filing a Form 8300 to “provide a written statement
to each person named in a required Form 8300 on or before
January 31 of the year following the calendar year in which
the cash is received.”
Finally, Form 8300 General Instructions
has a box to be marked if the transactions appear “suspicious.”
The box can be marked for transactions less than $10,000
if the recipient believes the purchaser is trying to avoid
No one wants any red flags at the IRS. Unscrupulous
dealers know this and use it to avert clear thinking; they
use the threat of “reporting” to raise investor fear. This
enables them to sell overpriced coins. Investors justify
higher prices by thinking they are getting “non-reportable
gold.” No investor need be taken advantage of this way.
Customer sales to dealers of certain precious
metals exceeding specific quantities call for reporting
to the IRS on 1099B forms. The 1099B forms are similar to
other 1099 forms taxpayers commonly receive; the “B” means
they have been issued by a business other than a financial
Reportable sales (again, customer sales
to dealers) apply to 1-oz Gold Maple Leafs, 1-oz Krugerrands,
and 1-oz Mexican Onzas in quantities of twenty-five or more
in one transaction. Reporting requirements do not apply
to American Gold Eagles, no matter the quantities. Furthermore,
reporting requirements do not apply to any fractional ounce
Only one common silver product is reportable
when sold: pre-1965 U.S. coins. The quantity that causes
the filing of a 1099B, however, is not clear. The IRS bases
its authority to require reporting on CFTC-approved contracts
that call for the delivery of $10,000 face value. Consequently,
many dealers do not report sales of pre-1965 U.S. coins
unless the sale totals $10,000 face value; others report
Sales of American Silver Eagles, privately-minted
1-oz silver rounds, and 100-oz silver bars are not reportable,
no matter the quantity. Other precious metals products are
reportable, but they are not covered here because the average
investor does not trade them.
Most investors have no first-hand knowledge
of these matters; consequently, when precious metals dealers
talk about cash reporting, 8300 forms, or 1099s, investors
are unable to know that they may not be hearing the whole
story. Wanting to avoid the government knowing about their
precious metals investments, many investors are delighted
to learn that their purchases will not be reported and end
up buying overpriced coins.
As explained under “Reportable Purchases,”
no precious metals purchases are reported unless cash reporting
thresholds are exceeded. Investors wanting to avoid reportable
sales should buy American Eagles.
The above discussions about cash reporting,
IRS Form 8300, and bank reporting are for editorial purposes
only and should not be relied on as definitive and final.
Persons involved in cash transactions should consult their
attorney or accountant.
Investors wanting to buy gold should go
with the popular bullion coins: Krugerrands or American
Gold Eagles. These coins move dollar for dollar with the
world price of gold and are easy to buy, sell, and trade.
Additionally, tracking the value of these coins is easy.
No “expert” has to look at them.