Avoiding Confiscation

The most frequently used technique to promote high-priced coins is to raise the issue of confiscation. Many telemarketers tell investors that old U.S. gold coins are not “subject to confiscation,” leaving the impression that modern gold bullion coins are. Consequently, many investors buy old U.S. gold coins at prices significantly higher than the value of their gold content. The idea of buying “non-confiscatable” gold sounds like a powerful argument but wilts under scrutiny.

Many precious metals firms maintain that old U.S. gold coins, proof sets, and commemorative gold coins are “collectibles” and would not be subject to another gold recall. Another notion holds that coins one hundred years or older are antiques and therefore not subject to confiscation.

No federal law or Treasury department regulation supports these contentions.

The myth that specific types of gold coins are “not confiscatable” stems from the Executive Order that President Roosevelt issued in 1933 calling in gold. The Executive Order exempted “gold coins having a recognized special value to collectors of rare and unusual coins,” but it did not define special value or collector, and certainly not collectibles. Nevertheless, telemarketers promoting old U.S. gold coins perpetuate this myth because it makes easier the selling of high-priced coins.

On December 31, 1974, with Executive Order 11825, President Gerald Ford repealed the Executive Order that Roosevelt used to call in gold in 1933. This was necessary because on the same day Congress restored Americans’ right to own gold. Furthermore, in 1977 Congress removed the president’s authority to regulate gold transactions during a period of national emergency other than war.

Even if a law did exempt certain coins from future confiscation, the government could change that law. Sadly, the government often simply ignores laws. Dealers who say they sell “non-confiscateable” gold have no basis for making such claims.

Although Roosevelt’s Executive Order required Americans to turn in their gold coins and gold bullion, foreigners continued to redeem paper dollars for gold until August 15, 1971, when President Nixon closed the gold window. From the end of World War II to 1971, our gold reserves were cut in half.

Since 1989, PCGS and NGC, the two major grading services, have “slabbed” over two million coins rated MS-60 or higher. Now, the two services are grading 200,000 to 300,000 coins a month. Millions of lower-grade coins (VF through BU) do not even warrant being submitted. Yet, they are sold as “non-confiscateable” semi-numismatic coins. Low-grade coins that have no real collector value are called semi-numismatic.

The concept of “non-confiscateable” gold is counterfeit. The idea lives only because dealers continue to push it for their own benefit. Investors who do not have the facts are unable to know otherwise.

Investors wanting to buy gold should go with the bullion coins: American Gold Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold and are easy to buy, sell, and trade. Additionally, tracking the value of these coins is easy. No “expert” has to look at them.

Your best buys in fractional-ounce gold coins are American Eagles, Canadian Maple Leafs, or Krugerrands, although fractional-ounce Krugerrands can be difficult to find at times. These coins have their gold content stamped in English and come in sizes Americans are used to dealing with. Always, these coins are cheaper than promoted European coins. Even when you find European coins at bullion prices, fractional-ounce Gold Eagles, Maple Leafs, or Krugerrands are comparably priced. There are no compelling reasons for Americans to buy European coins. Americans should buy Gold Eagles, Maple Leafs, or Krugerrands.

Reportable Purchases

Often, promoters will claim that the coins they offer are not subject to “reporting.” Such statements imply the government requires gold transactions be reported. However, no government regulations require the reporting of the purchases of any precious metals, per se. If payment is made by cash greater than $10,000, however, it becomes a “cash reporting transaction.” It is not the gold that the government wants reported but the cash. Such reporting applies to all business transactions involving more than $10,000 cash.

Regarding cash transactions, Official General Instructions for IRS Form 8300 read: “Who Must File. – Each person engaged in a trade or business who, during that trade or business, receives more than $10,000 in cash in one transaction or two or more related transactions must file Form 8300. Any transactions conducted between a payer (or its agent) and the recipient in a 24-hour period are related transactions.

This regulation applies to cash – greenbacks, paper money. It does not apply to personal checks, wire transfers, or money market withdrawals. When cashier’s checks or money orders are involved, cash reporting may be triggered.

Cash reporting requirements were not written specifically for the precious metals industry but for all businesses. The purchase of a car, boat, or jewelry, and payment with two cashier’s checks, each less than $10,000 but totaling more than $10,000, would be a reportable transaction.

Personal checks or checks drawn on the payer’s own account are not considered cash. Form 8300’s General Instructions read: “Cash does not included a check drawn on the payer’s own account, such as a personal check, regardless of the amount.”

Reportable Sales

Customer sales to dealers of certain precious metals exceeding specific quantities call for reporting to the IRS on 1099B forms. The 1099B forms are similar to other 1099 forms taxpayers commonly receive; the “B” means they have been issued by a business other than a financial entity.

Reportable sales (again, customer sales to dealers) apply to 1-oz Gold Maple Leafs, 1-oz Krugerrands, and 1-oz Mexican Onzas in quantities of twenty-five or more in one transaction. Reporting requirements do not apply to American Gold Eagles, no matter the quantities. Furthermore, reporting requirements do not apply to any fractional ounce gold coins.

Only one common silver product is reportable when sold: pre-1965 U.S. coins. The quantity that causes the filing of a 1099B, however, is not clear. The IRS bases its authority to require reporting on CFTC-approved contracts that call for the delivery of $10,000 face value. Consequently, many dealers do not report sales of pre-1965 U.S. coins unless the sale totals $10,000 face value; others report $1,000 sales.

Sales of American Silver Eagles, privately-minted Silver Eagles, and 100-oz silver bars are not reportable, no matter the quantity.

Most investors have no first-hand knowledge of these matters; consequently, when precious metals dealers talk about cash reporting, 8300 forms, or 1099s, investors are unable to know that they may not be hearing the whole story. Wanting to avoid the government knowing about their precious metals investments, many investors are delighted to learn that their purchases will not be reported and end up buying overpriced coins.

As explained under “Reportable Purchases,” no precious metals purchases are reported unless cash reporting thresholds are exceeded. Investors wanting to avoid reportable sales should buy American Eagles.

The above discussions about cash reporting, IRS Form 8300, and bank reporting are for editorial purposes only and should not be relied on as definitive and final. Persons involved in cash transactions should consult their attorney or accountant.

Investors wanting to buy gold should go with coins such: American Gold Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold and are easy to buy, sell, and trade. Additionally, tracking the value of these coins is easy. No “expert” has to look at them.

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Silver: Used in photography, jewelry, in electronics because of its very high conductivity, as currency – generally in some form of an alloy, in lining vats and other equipment for chemical reaction vessels, water distillation, etc., catalyst in manufacture of ethylene, mirrors, electric conductors, batteries, silver plating, table cutlery, dental, medical, and scientific equipment, electrical contacts, bearing metal, magnet windings, brazing alloys, solder. Silver is mined in approximately 56 countries. Nevada produces over one-third of the U.S. silver. Largest silver reserves are found in the U.S., Canada, Mexico, Peru, and China.

Background

Silver has been known and used since ancient times. Evidence in Asia Minor suggests that people were separating silver from lead as long ago as 3000 B.C.E. Like gold, it is a prized metal, both for its beauty and usefulness.

Silver is sometimes found in the Earth as the mineral native silver. Its chemical symbol is Ag, after the Latin word Argentum. Silver has a bright, metallic luster, and when untarnished, has a white color. Silver is found combined with a number of different elements to form a variety of minerals and ores. It is also found in very small amounts (called trace amounts) in gold, lead, zinc, and copper ores.

As a mineral, silver crystallizes in the cubic (isometric) system. In rare cases it forms crystals. Usually it is found in thin sheets or as long wires and bundles of wires, as in these drawings of native silver from Colorado. Silver is rather soft at 2 to 3 on Mohs’ hardness scale. Like gold, it is malleable which means it can be hammered into thin sheets. It is also ductile, meaning it can be drawn into wire.

Name

Silver was named from the Old English (Anglo-Saxon) word seolfer. This name is related to the German word silber and the Dutch word zilfer.

An early Latin name for this mineral was Luna which means moon, an allusion to its striking, bright luster.

Sources

Silver is found in lead, zinc, and copper ore deposits. A full two-thirds of the silver resources in the world are found in association with these other metal ores. The remaining third is found in association with deposits of gold.

The most important ore mineral of silver is argentite (Ag₂S, silver sulfide).

In the United States, Nevada is the leading producer of silver where it is a by-product of gold mining. Other significant world producers of silver are Mexico, Peru, Chile, and Canada. A number of other countries produce smaller amounts of silver.Uses

Silver has been used for thousands of years for jewelry and decorative items of all types. Likewise, it has been used for silverware. Of all the metals, untarnished silver is the best reflector of light. As a result, it was used in ancient times to make mirrors. Unfortunately, silver tarnishes very easily and quickly, and its use as a mirror could be frustrating. Sterling silver is silver alloyed with another metal, usually copper. For such an alloy to be called “Sterling” it has to have 92.5% silver content. Silver is also used as a currency and at one time, along with gold, was the standard for the currency of the United States of America. Silver bromide and silver nitrate are used in photography. It is estimated that about one-third of the silver used in the United States is used in various photographic materials and processes. It is also used in electrical products because it conducts electricity so well (silver actually conducts electricity more efficiently than copper). It is used by dentists in amalgam fillings. Silver is also used in the production of bearings.

Substitutes and Alternative Sources

There are a number of materials and technologies that can be used in place of silver. Stainless steel is used to make tableware. Film with a lower silver content might be used in photography. Digital photography can conceivably significantly reduce the demand for silver-based films. Digital imaging will also reduce the consumption of silver-based films in the printing industry. Rhodium and aluminum can be substituted for silver in making mirrors.

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