Gold Ban 1933
Also: Executive Order 6102, US gold confiscation, Gold recall 1933
A 1933 US legal order that forced private individuals to surrender gold to the Federal Reserve and banned private gold ownership for around 40 years.
The gold ban of 1933 is regarded as one of the most far-reaching state interventions in private property rights in modern economic history. Its trigger was the Great Depression: mass hoarding of gold drained liquidity from the banking system and threatened the US gold standard. On 5 April 1933 President Franklin D. Roosevelt signed Executive Order 6102, which obliged all US citizens to surrender gold coins, gold bars and gold certificates worth more than USD 100 to the Federal Reserve by 1 May 1933.
Content of the rule and compensation
The authorities paid the official fixed price of USD 20.67 per troy ounce as compensation. A few months later - with the Gold Reserve Act of January 1934 - the government raised the official gold price to USD 35.00 per troy ounce. Those who had surrendered gold thus lost around 41% of purchasing power at a stroke, which passed directly to the state budget. This devaluation of the dollar against gold was politically intended: it was meant to break deflation and make exported goods cheaper.
Exceptions applied to:
- Jewellery and dental gold up to certain quantities
- Gold objects of recognised collector value (numismatics)
- Industrially used gold
Repeal and aftermath
The prohibition on holding gold remained in force for almost four decades. Only on 31 December 1974 were US citizens again allowed to acquire and own physical gold without restriction - shortly after the Bretton Woods system collapsed under Nixon in 1971 (see Bretton Woods). The gold price then rose rapidly in the following years: from USD 35/oz (1971) to over USD 800/oz (January 1980).
| Event | Date | Gold price (USD/oz) |
|---|---|---|
| Executive Order 6102 | 05.04.1933 | 20.67 (official) |
| Gold Reserve Act | 30.01.1934 | 35.00 (newly fixed) |
| End of the holding ban | 31.12.1974 | ~186 |
| Peak of subsequent bull market | Jan. 1980 | ~850 |
Lessons for investors
The gold ban demonstrates that states in extreme crises are capable of direct interventions in private property. For today's investors the historical episode is a recurring argument in the debate over physical gold versus paper gold and over the choice of storage location. Diversification across jurisdictions - for instance via a bonded warehouse - is partly justified by it. The historical price development shows how strongly the gold price reacted after the release of private ownership.
Not tax or investment advice: whether and how past state interventions should influence future investment decisions is a matter of individual judgement; please consult a financial or tax adviser if needed.
In brief
The US gold ban of 1933 forced private individuals to surrender gold well below the state price soon raised thereafter and remained in force until 1974 - a formative example of state intervention in the precious metals market that influences the debate on physical gold ownership and storage-location diversification to this day.