Is gold confiscation one of the risks of buying gold and silver?

Are there any risks associated with buying gold? Of course there are, as there is with literally anything you do. Some of the risks include:

  • The risk of buying too high and selling low in a panic mode (when prices are crashing like the silver price in the beginning of May 2011).
  • The risk of buying fake gold or silver.
  • The risk of buying paper gold; your investment could for example  disappear like in the case of MF Global where investors simply lost all their invested money.

The risks we just mentioned, share one common theme: they are controllable. With a minimum of research and the ability to ask yourself logic questions, you’ll find out what you need to do right in order to avoid the traps.

There is one factor however that is impossible to control: the government. The good news is that there is an answer to avoid becoming victim of it.

The International Man published an article past year about gold confiscation. They write: “It’s an interesting thought that the greatest threat to gold and silver investment might not be the possibility of losing on the speculation, but the government taking it away from you. It’s a thought that I’ve found few want to even think about, let alone discuss.” The article is interesting as it explains a hypothetical scenario about how gold confiscation could play out. An important reason why we like the article is that it makes people aware of the potential risk, which makes it easier to anticipate.

Now as far as the solution to the gold confiscation threat is concerned, we fully agree with the first answer in the comments of the article. One of the readers reacts by saying that “This article makes a good case for geographic diversification. Very thought proving keep the articles coming and spread the information. Knowlege is power, Knowlege plus action gives you an unfair advantage. Bring it on.”

More recently, we’ve found a similar reaction from a highly respected person in the precious metals world: James Turk. The GoldMoney website published a Q&A between followers of Goldmoney and James Turk. One of the questions was: “I am concerned about two things when events really heat up (1) government confiscation (2) new taxes on gold. Is there anything, really, that can be done to protect oneself against this kind of government intervention?”

And here is the answer that James Turk provided: “As we all know, the future is unpredictable and uncertain. So all we can do is look at the things that have happened in the past and take steps to protect ourselves. It is clear from history that when governments are out of control, anything can happen, and there is only one way to protect yourself – diversify. You need to diversify your assets as much as practical. Not all governments act in unison, so even if you lose some assets by grabs from ham-fisted politicians and bureaucrats, if you are diversified, you won’t lose everything.”

As you see, (geographic) diversification of your physical gold and silver holdings is the key to protect against the uncontrollable risks of owning precious metals.


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