When I read about prepping for disaster, especially of a financial nature, one of the suggestions is to invest in precious metals. The metals themselves, not certificates. Gold and silver are mentioned as the best metals to collect. Whether you collect these metals through having jewelry, coinage, or simply the unrefined metal ore seems to not matter as long as it is something you have "in hand".
A Brief history of Gold as currency
The World Gold Council tells us gold has always played an important role in the international monetary system and is commonly referred to as hard money. Egyptians were the first to smelt gold around 3600 BC.The first record ofstandardized coined gold, thestatercomes from Ancient Lydia around 564BC. The Lydian empire predated the Persians in what is modern day Turkey. King Croesus, son of King Alyattes, is credited with minting the first gold coinage. It had a standardized weight and purity guaranteed by King Croesus.
Julius Caesar, the last leader of the Roman Republic between 49BC 44BC instituted the use of gold coins in greater quantities with the minting of the 8 gram goldaureus, the first known widespread use of gold coinage as a currency system.
Emperor Constantine, in 312 AD, issued new gold coins called soilidus to replace the aureus and flooded the economy with these new coins, restoring some stability in the fragile economy Rome was experiencing at the time. Even after the fall of the Roman Empire, the solidus continued circulating for hundreds of years.
Gold is easy to press into various shapes. It does not tarnish or rust. It is easy to identify because of its color and density. It is portable, private, and permanent. In addition it fits into the three generally accepted conditions to be used as money: it is a medium of exchange, a unit of account, and a store of value. Gold also has non-monetary uses, most notably as jewelry but also in electronics and dentistry. This means there will always be a real demand for gold beyond currency. The amount of gold in circulation is limited to how much can be mined. The gold standard can also be used to fix international rates of exchange between countries (think BRICS).
In August 1971, Richard Nixon removed the US paper currency from the gold standard and began using an oil standard creating the petrodollar. The US-Saudi Arabia petrodollar deal ended June 9, 2024 after the 50-year contract expired and was not renewed by Saudi Arabia. So, right now, US paper currency is not backed by anything. The Scottsdale Mint tells us that no current currency currently being used in the world is backed by gold.
What about silver?
In addition to gold coinage, which was mostly used for large purchases, silver coinage was also used for everyday expenses.
When Julius Caesar introduced the 8 gram aureus, it was worth 25 silver denarii. By the 16th century, silver was traded at a rate of 15.5 times or at a rate of 1 ounce of gold to 12 ounces of silver. By the 1900s silver was traded at 50 times gold. In December2020 the gold/silver ratio was 1:75 (and that was down from 1:114 in April 2020).In reality, there is about 7 ounces of silver mined for every ounce of gold mined showing the actual ratio of gold to silver to be 1:7. This chart shows the current and historical ratio of gold prices to silver prices from 1915 to Feb 2025. The gray bars indicate government-acknowledged recessions. The interactive version of this chart can be found on the Macrotrends website.
Over 5,000 years ago, the Sumerians in Mesopotamia used silver coins for commerce. Around 600 BCE, gold was added creating a bimetallic standard. It was not until the 1700s that a transition from primarily using silver to primarily using gold occurred when, in 1717,Sir Isaac Newton, as Master of the Royal Mint, set gold/silver exchange rate to favor gold creating a "gold standard". The gold standard is a monetary system backed by the amount of physical gold in circulation. A country is not supposed to issue more paper currency than the amount of gold it has on hand. Investopedia tells us:
The gold standard is a fixed monetary regime under which the government's currency is fixed and may be freely converted into gold. It can also refer to a freely competitive monetary system in which gold or bank receipts for gold act as the principal medium of exchange; or to a standard of international trade, wherein some or all countries fix theirexchange ratebased on the relative gold parity values between individualcurrencies.
What this means is that a country first sets the price of gold and then issues paper money that reflects that price. So, if the US sets the price of gold at $100 per ounce, the value of a $1 paper currency note would be 1/100th of an ounce of gold. The US would then be required to buy and sell gold at the price they set.
The US Government confiscated gold once, can they do it again?
Franklin D Roosevelt, via Executive Order 6102, forbade people from hoarding gold coin, bullion, or certificates by declaring a national emergency in banking and for other purposes. Hoarding and person are defined in Section 1 of the EO as:
. . . withdrawal and withholding of gold coin, gold bullion or gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.
There were exceptions listed, such as an amount of $100 per person, coins that had collectible value, imports/exports, and what may be required for legitimate and customary use.
Why did Roosevelt make hoarding gold illegal?
There was a banking panic between 1930 and 1933. People were going to the bank and withdrawing their gold. As Scottsdale Mint explains:
Initially, the Fed was created to prevent such failures from happening, but there was not enough liquidity in the public system, hence the meltdown. Part of the blame could be shifted to the gold standard. If the Fed were to stop the bank panics with the printing of more paper money, it would have lost the public trust in gold. These doubts would have led to even more exports of gold, as investors were looking for higher returns. An increase in exports would decrease the gold holdings and make it more difficult to remain on the gold standard.
Ray Dalio, co-chief investment officer of Bridgewater Associates, recently wrote that policy makers short on money will likely raise taxes and prevent capital flows into other assets like gold and Bitcoin. E.B. Tucker, director of Metalla Royalty and author of Why Gold, Why Now said that the government already has the tools to do this.
Everyone gets this idea that the [government] will raid your house and look for your gold. Its not necessary. All you have to do is limit the ability to transact gold in the legal market, and then you assess an excise tax.
Tucker also noted that Roosevelt didnt exactly confiscate gold, he "exchanged your gold for US debt notes (i.e., paper money).
How do you prep knowing that your preps can be taken away by a simple Presidential Executive Order?
Remember that the Presidential Executive Order had exceptions for what was being made illegal: coins that had collectible value and "what may be required for legitimate and customary use".
In Part 2 we will cover the idea of Goldbacks as currency in addition to gold and silver coinage.
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