Peter Schiff on Gold Confiscation; sees Gold Rush coming, slams former Goldman Sachs’ Dennis Gartman

In the latest of his regular appearances on Goldseek Radio, Peter Schiff takes on the question of the possibility of the U.S. government instituting a 1933-style gold confiscation against the American people—a tactic that crosses the minds of holders of gold who fear a desperate government will deploy desperate measures in the event of a Fed failure to save America from a serious collapse in the U.S. dollar.

First, Schiff clarified the event surrounding FDR’s Executive Order 1602, signed into law on April 5, 1933, which required U.S. citizens to deliver to the Federal Reserve all but a small quantity (more than 5 ounces) of gold held by them in exchange for $20.67 per troy ounce.

Contrary to myth, Exec. Order 1602, he said, didn’t include the threat of law enforcement knocking on doors and “ransacking” homes.  Instead, citizens quietly  volunteered to deliver their gold to their nearest Fed facility on their own.  There was no rough stuff from the Feds.

The word, confiscation, as it has typically been termed to describe Exec. Order 1602 is really somewhat of a misnomer, according to Schiff.  Even though penalties for not complying with the Order included stiff financial penalties, imprisonment, or both, it was not considered a realistic threat.  At that time, Americans typically rallied around the president during times of trouble, and were more likely to sacrifice for the good of the nation.

Today, a cynical populous would most likely take another Exec. Order 1602 as a sign that the dollar was imminently in trouble, therefore most likely affecting an opposite reaction by the American people and global participants; the rush into gold would be fierce, and probably would be the trigger that collapses the greenback.

Other stories of banks allowing Treasury officials across the nation access to privately held safe deposit boxes are just another twist to the mythology.

From Wikipedia:

In fact, safe deposit boxes held by individuals were not forcibly searched or seized under the order, and the few prosecutions that occurred in the 1930s for gold hoarding were executed under different statutes. One of the few such cases occurred in 1936 when the safe deposit box of Zelik Josefowitz, who was not a U.S. citizen, containing over 10,000 troy ounces (310 kg) of gold was seized with a search warrant as part of a tax evasion prosecution.  In 1933 approximately 500 tonnes of gold were turned in to the Treasury “voluntarily” at the exchange rate of $20.67 per troy ounce.

Though another FDR-style confiscation wouldn’t work today, Schiff said, it’s not something gold investors should ultimately fear today.  In fact, the government’s mission to devaluing the dollar has never been easier, he said.

“The reason we had confiscation in 1933 was because we were on a gold standard,” Schiff explained.  “And Roosevelt wanted to devalue the dollar, but he couldn’t do that unless he took everybody’s gold first.  Well, we’re not on the gold standard any more.  We’re devaluing the dollar every day.  Ben Bernanke just runs them off the printing presses.  That’s what Quantitative Easing is.  The government can devalue the dollar without confiscating gold.”

On the state of the gold market, Schiff senses a big move up in the price of gold is imminent and scoffs at the notion that gold is in a bubble.  He said the opposite is true.

“I think the bull market is about to go into, or has just entered into a brand new phase that’s going to see even more profits made, particularly in the mining sector,” Schiff stated.

And, on the subject of the publisher of The Gartman Letter, Dennis Gartman, Schiff slammed the “sheep-in-wolves’-clothing” (as many in the gold industry refer to him) and former Goldman Sachs analyst, chiding Gartman for gold bubble talk as pure “nonsense.”

Schiff explained that for gold to be in a bubble, more than just talk of a bubble in the gold market would lend credence to the idea.   Gold will enter a bubble phase when those talking about a bubble in gold, now, eventually become holders of gold themselves.  But by then, he added, they won’t see the bubble in gold.  That’s when a discussion on the subject of a gold bubble would make more sense to Schiff.

Back up the Truck on Gold and Silver, says James Turk

The slow summer months for the precious metals market will be anything but slow this year, according to precious metals expert, James Turk.

In an interview with Eric King of King World News, the founder of bullion storage firm, Goldmoney.com, said he expects gold and silver to rally strongly this summer, bucking the 30-year established seasonal trend of softness in metals prices during the summer months of July and August—the time of year when gold and silver typically put in lows for the year.

However, Turk believes the lows were already made in May during the cascading sell off in silver from its perch of nearly $50, taking the white metal to the $32 level and the yellow metal to $1,480 in a sell off—triggered by some profit taking and multiple, rapid succession, and controversial futures margin hikes instituted by the Chicago Mercantile Exchange.

“What we are seeing right now is a double-bottom in silver with gold staying strong near $1,500,” Turk said to KWN.  “With options expiration on both exchanges now behind us, we can expect a bounce from here.”

Turk cites growing tensions among populations around the world as politicians increasingly shift the burden of bad loans made by banks onto the public books.  Greece’s spectral will prove to be only the beginning of civil unrest in Europe this summer, Turk predicts.

“We’ve got civil disobedience growing in different countries,” said Turk.  “People are becoming fed up by bad decisions made by politicians that favor bankers rather than taxpayers.”

“People just have not come to grips with the fact that governments are running out of money,” Turk added, “which brings to mind my favorite Margaret Thatcher quote, ‘The problem with socialism is that eventually you run out of other people’s money.’  There is also a great deal of non-union tension as rising costs are continuing to erode people’s living standards.”

In sharp contrast to predictions made this week by Swiss money manager Marc Faber, who said on CNBC TV12 on June 29 that all asset prices will sink from a lack of Fed “stimulus” from its QE programs this summer and early Fall, Turk sees a rerun of the summer of 1982, instead.

It was then that the government of Mexico failed to make interest payments on its dollar-denominated sovereign notes during Paul Volker’s (the, then, chairman of the Federal Reserve) punishing interest rate increases of both the federal funds rate and discount rate.  Through several currency devaluations, which ensued through to the end of the year of 1982, the Mexican government  kicked off a run on the peso to the safe haven of gold.  Gold soared to more than $520 by the first quarter of 1983, from approximately $290—the low set at the start of the crisis in July of 1982.

Turk expects another run to gold, but this time the people of Europe’s peripheral PIIGS (Portugal, Ireland, Italy, Greece and Spain) will trigger another golden summer of 1982.

“In fact, with bankruptcies of governments becoming more and more likely, the reasons for owning gold and silver have become even more pronounced,” Turk continued.  “Summer has only just started, but I still see this as a summer that will be like 1982, one for the history books.”

Additionally, Turk points out that the gold/silver price ratio has widen significantly since the 31:1 print reached on April 28.  The ratio has since moved back sharply to levels not seen since the 45:1 ratio was taken out to the downside in February during the silver price breakout above the closing high of $30.84 set on Dec. 31, 2010.

“I actually like the action of the gold/silver ratio; yesterday it closed at 44.5 so it is back at support,” said Turk.  “This is a further indication to me that the correction has reached its nadir.  The interesting thing about corrections like this Eric is how rapidly bullish sentiment evaporates even while the fundamental factors driving the metals higher this past ten years remains very favorable.”