Will the Government Take Your Gold?

Writing about gold sometimes lands me in hot water.

Readers have sent me more than my fair share of nastygrams over the past decade as gold chopped through a secular bear market.

If I marked up a chart that led me to believe the yellow metal was close to another breakdown, my inbox would overflow with letters from angry gold bugs.

Most dissenters were cordial enough. But a few would employ, well, let’s just say unique and colorful methods to express their distaste for my market opinions. Those emails always made me smile. It’s nice to know your work is appreciated!

But lately, I’ve been receiving way too much praise for my analysis. That’s probably because gold has been breaking out, once again topping $2,000 as it pushes toward all-time highs.

And I believe it has a lot more room to run…

Long suffering gold investors are understandably excited about gold’s resurgence and the potential for much higher prices in the weeks and months ahead. But I get nervous when everyone begins to agree with my ideas. The contrarian in me starts to wonder – am I walking into a trap? 

Thankfully, I’m not yet seeing any signs pointing to toppy action in precious metals. The financial media isn’t even buzzing about gold’s most recent march above the mythical $2K level. Instead, we’re watching the move play out without a ton of mainstream buy-in. I’m surprised they’re ignoring precious metals right. But I’m also relieved that gold isn’t gracing the cover of Barron’s this week. We don’t need that type of jinx just as the metal and miners are starting to see some real traction.

In an attempt to ward off any evil bear market spirits, I’m going to dig deep into the mailbag today and attempt to answer some of your most pressing gold questions. While I’ve received many nice notes lately, I also have a stack of inquiries to sort through.

Instead of printing out every note in full, I’ve grouped together the most-asked questions and will attempt to answer them to the best of my limited ability. I think we’ll all benefit from the discussion.

Let’s dive in…

Do you anticipate that the government will confiscate gold and silver?

This question keeps popping up, so I’m going to leave my wheelhouse and try my best to answer it. I’m just a guy who draws lines on charts, but I can tell you I don’t anticipate any organized attempt to confiscate gold or silver in the near future.

Does this mean it can’t or won’t happen? Absolutely not. 

I don’t think it’s farfetched to assume that if the government wants something badly enough, it will attempt to take it by any means necessary. If a serious, prolonged crisis were to emerge, it’s possible that depression-era tactics such as confiscation would bubble up.

Fortunately, it’s easy enough to stay under the radar. The Feds are not tracking physical gold purchases of any kind. Unless you’re slinging ridiculous amounts of reportable cash purchases of gold coins or bullion, I don’t think Uncle Sam is paying you any mind at all.

Ultimately, I don’t believe buying rare or foreign coins would avoid any doomsday confiscation scenario. In a world of increasing government overreach, it would be foolish to assume any tactic is off the table – especially in a crisis.

Perhaps the best move is to stack your gold and stay quiet. Loose lips sink (golden) ships!

Should I invest in physical gold or paper gold? Does it matter?

Whether we’re talking about gold, tech stocks, or crypto, you should always approach your trades with the same simple question: What’s my goal with this investment?

Are you looking to hold for months, years, or decades? Is this a speculative or core portfolio position? What is your stop loss – or the price/event that will trigger a get out or take profits?

We can trade shorter-term moves in gold via the futures market, mining stocks, or through gold funds. We could also buy-and-hold gold using various funds such as the popular SPDR Gold Shares (GLD).

Of course, these are all ways to gain exposure to gold’s price moves. But gold is a different animal than most equity investments. If you’re looking to hold gold as a form of disaster insurance, you’re probably looking to stash away physical gold. It makes no sense to increase exposure to mining stocks or gold ETFs if your ultimate goal is wealth protection against some sort of doomsday event or unprecedented financial disaster.

You don’t have to be “all-in” on one investment or trading goal, either. There’s nothing wrong with a physical gold owner who also trades mining stocks when the timing’s right. Just know what’s what in your portfolio.

How do I convince my (brother/coworker/crazy ex-girlfriend) to invest in gold?

Like many things in life, fights over investments are usually simple misunderstandings between two people with different goals.

But when we lay our money down on an idea, the situation becomes personal.

How could you not see what I’m seeing? Why are you betting against me?

Of course, investing is never actually this black and white. We have our strategies, just as everyone else has theirs. If we like a company or investing theme and want to buy shares for the long haul, we shouldn’t get too upset when a swing trader sells the stock short to make a quick buck. It’s not personal.

But no one bothers to ask these questions. Instead, we treat investing like a team sport. You’re either with me – or against me.

Gold’s performance following its 2011 flame out has scared many investors away over the past decade-plus. That said, I do think more “mainstream” market watchers will start climbing aboard the gold bandwagon over the next several weeks if the yellow metal can maintain this breakout above $2K.

If you’ve had trouble persuading friends or fellow investors that gold is worth a second look, improving market conditions are suddenly making your arguments a lot more convincing.

As precious metals continue to break out, even the most skeptical traders will start slinging junior miner stocks with the rest of us…

If you have any questions, suggestions or feedback on this topic, please let me know here.