Why President Reagan Made Gold Legal Again

There had not been legal to buy or own gold bullion Eagles for over 50 years when the Gold Bullion Coin Act of 1985 was passed into law.

When FDR signed Executive Order 6102 requiring all citizens to turn in their gold coins, bars and certificates in to the Federal Reserve, effectively ending the sale of gold bullion Eagles for over half a century. Usually through local banks, in conjunction with the nearest regional Federal Reserve office, everyone was paid the same “official” US price of $20.50, since an ounce of gold had a face value of $20.

Shortly after the May Day deadline, the price of gold was officially raised to $35 per ounce, deflating and dangerously inflation-addled US economy. The country remained on the gold standard, meaning you could walk up to any Federal Reserve and draw the amount of gold from your account that the certificate declares to be “payable to the bearer upon demand.”

However, with the confiscation of gold, the majority of the US was effectively “off” the gold standard.

With no gold Eagles, defined along with the silver dollar as the only two types of “real” money that exist, made after 1933 (in fact, less than a handful of 1933 gold bullion Eagles still exist). From what was once coin (defined as money) and three types of paper manifestations of said money (gold or silver certificates, banking notes and reserve notes). Only the Banking notes remained after the last silver certificates were done away with by LBJ in the 1960s.

It wasn't until the trade wars of the 1970s that the final action was taken Very shortly after Nixon made his three-pronged final separation from the existing International Monetary Fund (IMF) agreements. Other governments followed and US currency has been “fiat” since. This act, however, didn't result in the stability that Nixon had hoped for – in fact, several recessions ensued and continue to plague the US and World economies.

However, in 1981, the treasury under Donald Regan (and former Merrill Lynch CEO) began looking into whether it was feasible to put the US back on the gold standard at the President's request. The resultant commission that looked into his notion was stocked with several experts, fundamentally opposed to the idea. The result was the passage of what is largely thought of as a compromise bill, now known as the Gold Bullion Coin Act of 1985. But, it did make it possible for US investors to purchase gold Eagles of contemporary manufacture for the purpose of investing in bullion.

This act specifies that as much gold coin, in four specific denominations ($50, $25, $10 and $5) of the same design, shall be minted and sold by the US Mint, with minimal overhead costs, to all US investors who want them. It also notes that all such coins are are produced shall be considered of numismatic value.

Today, those who buy gold Eagles for investment purposes are guaranteed a coin that contains exactly one-ounce of pure bullion. Gold Eagles, even with the massive increase in demand that has been seen since late 2008, still represent just a fraction of the gold that was

However, in the signing statement that was attached to the bill reveals some of Reagan's thinking with regards to the compromise nature of the legislation. He was of the opinion that the US was missing out on a good opportunity to make some money when it mandated that all gold bullion Eagles must be minted from newly mined gold rather than the massive reserves still kept on hand at the Federal Reserve.

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Sam Brown

March 19, 2009