History of Gold in the US – Part III

The granting of such licenses is to be subject to the usual criterion of judgment. No gold coins struck after 1959 will be admitted, except for those issues already granted exemption by ODGSO prior to April 30, 1969. (A list of the exempt post-1959 gold coins will be found on page 286.) The 1969 modifications of the Gold Regulations bring a wel- * It appears, however, that there still may be formidable difficulties to contend with. Some of the early reports from collectors who ordered coins by mail from abroad, subsequent to the April 1969 modifications of the Gold Regulations, are hardly reassuring. They tell of lengthy delays while coins are held in customs houses pending “inspection,” and worst of all there have been reported incidents where rare coins were mutilated by having their “authenticity” tested by means of a metal punch wielded by some thickheaded or vindictive customs or postal inspector. I do not know whether these indefensible practices are yet widespread, are destined to become so, or merely represent isolated cases. In any event, I feel that collectors should be alerted to these possible dangers. The Color of Gold 65 come breath of fresh air into the bureaucratic smog that has shrouded the rulings and statements of the Treasury and ODGSO since 1961. However, one can only regret the arbitrary cut-off date of 1959, which automatically excludes such highly desirable numismatic treasures as the Canadian $20 centennial gold coin of 1967, and most of the post-1960 commemorative gold coins of Israel. Fortunately, past history has demonstrated that common sense eventually triumphs, even in the Treasury; we can therefore con- tinue to hope that the absolute 1960 cut-off ruling will also be re- considered one day. By contrast, however, British gold collectors were apparently dealt a severe blow when in 1966 the Bank of England issued regulations requiring the registration of all coin collectors and limiting collectors to no more than four gold coins minted after 1837.

But fortunately, as was the case with the original numismatic provisions of our own Gold Reserve Act of 1934, these rules were softened considerably in their administration. Although not spe- cifically stated in the regulations, it has been made known that “collectors may possess two gold coins or sets of any one type or series, that is, two 1887 five-pound pieces, two 1902 two-pound pieces, two 1937 proof sets, etc.—only holders of large quantities of common-date sovereigns will be required to surrender them.”” The citizen of the United States, if interested in acquiring a speculative or investment position in gold, is then limited to gold- mining stocks or gold coins. The citizen of Great Britain has the same options except that he is much more limited in the area of coins. The natives of Canada, France, Switzerland, Germany, South Africa, and innumerable other areas of the world, presumably not as far along on the path of enlightenment as we, are free to do as they please regarding gold. There has been some talk that once gold was successfully de- monetized by the U.S., the free holding of gold by its citizens would be permitted. If this is ever tried, it will be as a last desperate bluff to prove that the dollar is better than gold. But like our former policies of trying to hold down the international price of gold by selling it freely through the London “gold pool” and trying to hold down the price of silver through massive Treasury sales, it will be just another phenomenal failure. By its demented economic and fiscal policies of the last three decades, the U.S. government has forfeited all confidence in its ability to maintain the value of its currency. If U.S. citizens were now granted the right to cash in some of their paper dollars for gold, what is left of our national gold reserve would disappear in a month. In Russia and the Marxist countries of Eastern Europe, there are of course no gold-mining stocks.

If it were not for the Communist ideology, however, no doubt there would be; the Soviet Union is thought to be the third largest producer of gold in the world ( after South Africa and Canada), although the actual pro- duction figures are a closely guarded state secret. It is also reported that the Russians pay production costs equivalent to $100 an ounce for their gold. Despite Lenin’s boast that gold would one day pave the public rest rooms in the worker’s paradise, the Russians seem to have found other uses for it—like buying vitally needed equip- ment and raw materials in Europe, Africa and Asia. But as we have said, private trafficking in gold bullion in the Soviet Union is considered (as in the United States) a most serious crime. Surprisingly, coin collecting, including gold coins, is per- mitted. The state mints occasionally issue gold commemorative coins and medals, and sometimes restrikes of older gold coins. We can assume they are sold on a strict one-to-a-customer basis at home, although some of these restrikes have been widely exported to the West ( and smuggled into the United States) for profitable sale. However, whether a tovarich can acquire a collection of gold coins without arousing the suspicion that he is surreptitiously planning an “economic crime” I do not know, but I imagine the mental hazards are discouraging. The general worldwide availability and popularity of gold coins as an investment and speculative medium, and the rather intense activity of recent months call for diligent, thorough and hopefully objective investigations into the merits, hazards, techniques and problems involved in the purchase and collection of gold coins.

That is the main purpose of this volume. It is hoped that it will also serve an auxiliary purpose by revealing something of the extent of monetary deterioration in the West and by showing the absolute necessity, as well as the advantages, of finding alternative stores of value to rapidly depreciating paper currency. An analysis of the virtues, risks and comparative values of various gold-mining stocks is not within the scope of this work except as it serves to compare the character of gold-mining issues as a group with coins and other forms of investment.

Notes

Said to be the largest single object of gold in existence. According to the ancient Greek historians, Xenophanes and Herodotus. Numismatic specimens of these first coins have been recovered. Robert Friedberg, Gold Coins of the World, 2nd ed. (New York, 1965). A peculiar notion that seems to gain prominence in direct but inverse proportion to the decline in our monetary gold stocks. In 1946, when the U.S. Treasury contained most of the world’s gold, our government was equally insistent on proclaiming that gold was the only real money and that gold must be the foundation of all international monetary arrangements. One is reminded of the old proverb: “Those who fail in an enterprise do not thereafter speak highly of it.”  William L. Graham, Jr., The Coming Gold Crisis (Glenview, Ill.: Hickory Press, 1966), p. iv. Freud has suggested that part of this attraction is derived from the subconscious association of gold with the erotic fantasies of childhood—a notion I find too abstruse to comment on. Gold is not entirely unique in this respect. There are six rare metals I I of the “platinum type”—platinum, palladium, ruthenium, osmium, rhodium, and iridium—that are also immune to normal atmospheric conditions. But they are all considerably more scarce and expensive than gold. Of the six only platinum has been used for coinage in the past. Between 1828 and 1845, Russia minted three denomina- tions of platinum coins. (Recently the island kingdom of Tonga announced plans to mint commemorative coins of palladium.) Most monetary reserves are kept in the form of ingots or bars (the 30-kilogram size is preferred—about 66 lbs.), but considerable quantities of gold coins are also held by many countries, including France and Mexico, as part of their central bank reserves. Statistics on gold production are derived principally from U.S. Bureau of Mines Bulletin, no. 630 (G.P.O., 1965), with embellish- ments by author. 12. In 1966-67 all U.S. silver coins disappeared in just such a manner, with the public probably outreaching the Treasury for most of them. Cynical Frenchmen used to say they could judge the future of the franc by the trend of the antique markets. When the antique busi- ness was booming they knew the franc was headed for devaluation again. (The antique business in the United States is now better than ever.) Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds, 2nd ed. (London, 1852; reprint ed., with Foreword by Bernard M. Baruch, New York, 1932), p. 100. The U.S. dollar is “defined” by law of Congress to be an amount of gold equal to 1/35 of a troy ounce (13.71 grains) of fine gold. The Continental nations have let it be known that any future IMF currency or “drawing rights” must also be defined as a specific amount of gold to get their approval. Those dollars that “buy” foreign coins eventually return as a claim on the American gold stock and the cycle will continue until: a) all good foreign coins are gone, or b) all our gold is gone. Headline of a feature article in Chicago Daily News, February 26, 1968, read: “Gold backing an echo of past.” See John Maynard Keynes, General Theory of Employment, In- terest and Money (New York, 1936), for these and similar ideas. 19. The wealthy and sophisticated can more easily obtain and better judge the value of such things as stocks, real estate, works of art, antiques, etc. Precious metals have traditionally been the “poor man’s” inflation hedge. Witness the popularity of gold ornaments among the masses of India. Occasional accounts in the Soviet press concerning trials and sentences for gold dealing, hoarding and similar “economic crimes” tend to verify this. Prior to and following the banking acts of 1933-34, which in- cluded devaluing the dollar by 41 percent, the stocks of gold- mining companies underwent an enormous increase in price. The The Color of Gold 69 shares of Homestake Mining Co., for example, rose 1,600 percent, reaching their peak in 1936. The Supreme Court in a narrow (5-4) decision ruled otherwise. Until the recent series of gold crises of 1966-69, American gold coins could readily be obtained at the Bank of Nova Scotia and several Canadian banks at a price only slightly over their bullion value. The bureau’s ruling was based on an assumption that nearly all American gold coins were surrendered and melted in 1933-34, and therefore those that remained outstanding were rare. (That was the essence of its original statement, at any rate.) Thomas G. Wolfe, Speech to Professional Numismatists Guild, Coin World, May 21, 1969. 26. Ibid. Information from Spinks, Ltd., Coin Dealers, Numismatic Circular (London, August 1966). III From Caesar to Napoleon