How much gold do Amer­i­cans own?

Los Angeles Times - - OP-ED - James Led­bet­ter is the edi­tor of Inc. mag­a­zine and the au­thor of “One Na­tion Un­der Gold: How One Pre­cious Metal Has Dom­i­nated the Amer­i­can Imag­i­na­tion for Four Cen­turies.” By James Led­bet­ter

Did you know that 23% of U.S. house­holds have more than one re­frig­er­a­tor? Or that Amer­i­can work­ers who earn be­tween $75,000 and $99,999 con­trib­ute an av­er­age of 7.7% of their in­comes to re­tire­ment ac­counts? Amer­i­cans live in what is al­most cer­tainly the most quan­ti­fied so­ci­ety in the his­tory of hu­man ex­is­tence. We are mea­sured and sur­veyed around the clock, par­tic­u­larly re­gard­ing the facts of our eco­nomic lives — al­ways of in­ter­est to com­pa­nies try­ing to find a bet­ter way to sell us things.

Yet there is at least one sig­nif­i­cant-seem­ing eco­nomic ques­tion with no re­li­able an­swer: How many Amer­i­cans own gold?

Cer­tainly a no­table por­tion of the coun­try be­lieves that gold makes a good in­vest­ment. Gallup an­nu­ally sur­veys Amer­i­can adults on their per­cep­tions about in­vest­ments; in 2011, when gold prices were rel­a­tively high, gold was deemed the best long-term in­vest­ment by 34% of re­spon­dents (real es­tate was next at 19%). As gold prices sub­sided, the per­cent­age nam­ing gold as the best long-term in­vest­ment fell. None­the­less, in 2017’s sur­vey, gold still ranks as the third best-per­ceived long-term in­vest­ment, be­hind real es­tate and stocks/mu­tual funds.

Cu­ri­ously, the higher an Amer­i­can’s house­hold in­come, the less likely he or she is to pick gold as the best long-term in­vest­ment — and the more likely to choose real es­tate or stocks and mu­tual funds. Gold, it seems, is the pre­ferred in­vest­ment ve­hi­cle for those who can’t af­ford it.

But per­ceived value is, of course, a very dif­fer­ent mat­ter than how many Amer­i­cans ac­tu­ally own gold in coin or bul­lion form.

We do know that the gov­ern­ment sells a lot of gold. In 2015, the U.S. Mint sold about $1.2 bil­lion worth of Amer­i­can Ea­gle and Amer­i­can Buf­falo gold coins. That rep­re­sents a fresh sup­ply ev­ery year of hun­dreds of thou­sands of coins, and some Amer­i­cans also pur­chase gold bul­lion and coins from other coun­tries. Mar­ket va­garies, how­ever, make it dif­fi­cult to ex­trap­o­late from that fig­ure how many Amer­i­cans are buy­ing. Some in­di­vid­u­als may pur­chase large quan­ti­ties of coins, and there is no easy way to track sec­ondary coin mar­kets or the num­ber of non-Amer­i­cans buy­ing gold in the United States.

The World Gold Coun­cil, which gath­ers and dis­sem­i­nates moun­tains of sta­tis­tics about gold, says it can pro­vide no es­ti­mate for the num­ber of Amer­i­cans who own gold as an in­vest­ment. Met­als Fo­cus, a Lon­don-based pre­cious-met­als con­sul­tant, says it has no fig­ures that it can re­lease. When I passed along an es­ti­mate that fewer than 10% of Amer­i­can adults own gold as an in­vest­ment, a spokesman wouldn’t con­firm, but hinted that it was ac­cu­rate.

A de­tailed 2010 poll de­signed to elicit the views of Amer­i­cans sym­pa­thetic to the tea party move­ment found that 5% of those who viewed the move­ment fa­vor­ably said that they had pur­chased gold coins or bars in the pre­ced­ing 12 months. (The poll did not re­port a re­sult for the same ques­tion from the gen­eral pop­u­la­tion.) Many of the news­let­ters and con­sul­tants that ad­vise peo­ple to buy pre­cious met­als es­ti­mate that be­tween 1% and 3% of the Amer­i­can pop­u­la­tion owns pre­cious met­als.

These guesses sug­gest that some­where be­tween 2.5 mil­lion and 25 mil­lion Amer­i­cans own gold as an in­vest­ment — a range so wide it makes any con­crete anal­y­sis im­pos­si­ble.

The truth is that we have prob­a­bly never known how many Amer­i­cans owned gold. For most of Amer­ica’s his­tory, that ques­tion has either been close to ir­rel­e­vant (through the 19th cen­tury, the vast ma­jor­ity of Amer­i­cans could not af­ford to in­vest in any as­sets be­yond those that kept them alive) or a non se­quitur (from 1933 to 1975, it was not le­gal for Amer­i­cans to own gold as an in­vest­ment).

When the Hoover ad­min­is­tra­tion be­gan crack­ing down on gold “hoard­ers” in 1932, of­fi­cials es­ti­mated that as much as $1.4 bil­lion worth of gold was in pri­vate hands. If ac­cu­rate, that im­pres­sive fig­ure rep­re­sented twice the amount of re­serves in the Bank of Eng­land. Two years later, after the gov­ern­ment had of­fi­cially bought up all pri­vately held gold, the Trea­sury es­ti­mated that there was still some $287 mil­lion worth of gold coins in pri­vate hands. Be­cause that num­ber couldn’t be rec­on­ciled with the fact that gold was now il­le­gal to own, the gov­ern­ment sim­ply sub­tracted that fig­ure from all its books go­ing back to 1913. Var­i­ous bankers and economists con­cluded that this gold was smug­gled out of the coun­try or per­ma­nently hoarded — but no one will ever know for sure how much of it was ever ac­tu­ally there.

While we may think that we live in a more ac­count­able era, our lack of knowl­edge about gold own­er­ship sug­gests oth­er­wise. Back when all ma­jor cur­ren­cies were tied to gold, there were eco­nomic (and, ar­guably, na­tional se­cu­rity) rea­sons to be vague about how much metal resided where. Yet even after a half­cen­tury of a float­ing cur­rency in this coun­try, a legacy of se­crecy still sur­rounds the metal.

One price of this in­for­ma­tion void is con­spir­a­to­rial think­ing. Some of the con­ser­va­tive and lib­er­tar­ian fig­ures who de­mand that the Fed­eral Re­serve be au­dited, for ex­am­ple, grum­ble that there may be a lot less gold — maybe none! — in Fort Knox than of­fi­cial num­bers al­low. Per­haps that la­cuna does only min­i­mal dam­age to the body politic, but it’s hard to think of any good pur­pose that is served by per­pet­u­at­ing our ig­no­rance about gold.

A legacy of se­crecy still sur­rounds the pre­cious metal.

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