U.S.
asset managers worried Obama could confiscate gold Author: Lawrence
Williams - Posted: Thursday , 10 Jun 2010
Anecdotal evidence suggests some major U.S.
asset managers prefer to hold gold outside the U.S. for
fear of confiscation in an echo of Roosevelt's 1933 decree.
LONDON - Speaking at the FT Silver conference in London
yesterday, lead-off speaker John Levin, HSBC Bank's Managing
Director, Global Metals and Trading (HSBC is one of the
world's top precious metals traders and its vaults in the
U.S. and Europe hold huge holdings of gold and silver bullion)
recounted conversations with some of the U.S.'s top asset
managers controlling massive amounts of capital asking if
HSBC had the capacity in its vaults to store major gold
purchases. On being told that the bank's U.S. vaults had
sufficient space available he was told that they did not
want their gold stored in the U.S.A. but preferably in Europe
because they feared that at some stage the U.S. Administration
might follow the path set by Franklin D. Roosevelt in 1933
and confiscate all U.S. gold holdings as part of the country's
strategy in dealing with the nation's economic problems.
While in Mineweb's view such a move is unlikely, one needs
to bear in mind that President Obama is a keen follower
of Roosevelt's views and policies and that the very fact
that some asset managers controlling huge volumes of money
feel that such a move is possible is a significant factor
- and one that is perhaps heightened by the huge amounts
of money flowing into gold at the moment in both ETFs and
bullion.
As a reminder to readers - Section 2 of Roosevelt's Act
read as follows: All persons are hereby required to 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, except the following:
(a) Such amount of gold as may be required for legitimate
and customary use in industry, profession or art within
a reasonable time, including gold prior to refining and
stocks of gold in reasonable amounts for the usual trade
requirements of owners mining and refining such gold.
(b) Gold coin and gold certificates in an amount not exceeding
in the aggregate $100.00 belonging to any one person; and
gold coins having recognized special value to collectors
of rare and unusual coins.
(c) Gold coin and bullion earmarked or held in trust for
a recognized foreign government or foreign central bank
or the Bank for International Settlements.
(d) Gold coin and bullion licensed for the other proper
transactions (not involving hoarding) including gold coin
and gold bullion imported for the re-export or held pending
action on applications for export license.
At that time of course, the dollar was exchangeable for
gold at a set value ($20.67 an ounce) so compensation for
such a move would have been easy to calculate. Roosevelt
subsequently revalued gold to the $35 level which stood
for over 30 years. Nowadays that kind of process would be
a little more difficult, but perhaps not beyond the means
of a government, already versed in printing large sums of
money to try and re-stimulate the economy. Perhaps a figure
of the average gold price over a 3 month period at a certain
date would meet an initial compensation valuation, but in
today's much more litigious society such a move might well
fail anyway.
Indeed current economic analysis of the Roosevelt move
suggests that it was not successful in helping drag the
U.S. out of depression and indeed may have contributed to
a recession within a depression - a pretty dire situation.
It probably took World War II to end the Great Depression.
Levin's presentation - a trader's view from the coal-face
as he put it - contained much anecdotal material of interest
and was a refreshing change from the usual analysts' viewpoints.
More of that in a subsequent article.