Expropriation of gold property in Germany: Legal background, historical examples and possible scenarios

Gold expropriation in the light of the Basic Law

The Basic Law (“Grundgesetzt”; GG) of the Federal Republic of Germany protects property in principle in Article 14, paragraph 1: “Property and the right of inheritance shall be guaranteed.” However, paragraph 3 of the same article authorises expropriation under strict conditions: “Expropriation is only permissible for the public good. It may only be carried out by law or on the basis of a law that regulates the type and extent of compensation.”

A state expropriation of private gold ownership would therefore have to be in line with Article 14 of the Basic Law and regulated by law. Such an intervention could theoretically be legitimised in the event of a serious economic crisis or national emergency, e.g. to ensure monetary stability. However, it would have to be proven that the measure is in the interests of the “common good” and that no milder means are available.

Historical examples: Gold bans and expropriations

• USA (1933): Under President Franklin D. Roosevelt, Executive Order 6102 banned private gold ownership in the USA. Citizens had to hand over their gold to the government and the price of gold was later increased by the state, which effectively amounted to expropriation.
• Germany (1936): During the National Socialist regime, private ownership of foreign currency and gold coins was strictly regulated. This was mainly done to strengthen the Reichsbank’s gold reserves.
• India (1963): The Indian government severely restricted private gold ownership in order to improve the balance of trade.

Such measures were usually taken in times of economic or currency crises.

Alternative measures to expropriation: Taxation and regulation

A direct ban or expropriation of gold ownership would be difficult to enforce legally and politically in Germany, although it would nevertheless be conceivable and feasible in the event of a serious economic or currency crisis that is interpreted as a threat to the common good, particularly with reference to Article 14 of the German Basic Law, which allows expropriation in the public interest.

However, alternatives to a direct gold ban or expropriation could have similar indirect effects:

• High taxation: The government could introduce a substantial capital gains tax on gold profits or levy a one-off wealth tax on precious metals. This would significantly reduce the attractiveness of gold as an investment and would in fact be tantamount to an indirect restriction on gold ownership, as investors would be deterred by the increased costs and may have to liquidate their holdings in order to fulfil the financial requirements.
• Restrictions on trading: The government could regulate the trading or storage of gold and, for example, only allow certain quantities or purposes. In addition, reporting obligations could be introduced to make anonymous buying and selling more difficult or prevent it altogether. Such measures could be aimed specifically at reducing private demand for gold and facilitating state access to precious metal stocks.
• Compulsory sale: As in the USA in 1933, the government could stipulate that gold owners must sell their holdings to a state agency.

These measures could have the de facto effect of a ban without being explicitly formulated as such.

Effects of storage in Switzerland

Gold stored outside the EU, for example in Swiss high-security storage facilities, is largely unaffected by EU national laws and restrictions. Switzerland is not part of the EU and has a long tradition of neutrality and the protection of property rights.

This could mean for German investors:

• Protection from state intervention: Gold in Switzerland would be protected from possible expropriation or regulatory restrictions in Germany.
• Restrictions on repatriation: If gold ownership is banned or strictly regulated in the EU, German citizens could have difficulties repatriating their gold from Switzerland.
• Access: Investors would continue to have access to their gold in Switzerland and could liquidate it if necessary, but only subject to Swiss and German tax and reporting obligations.

Scenario: Gold-backed currencies and geopolitical tensions

If countries such as Russia or the BRICS states were to introduce a gold-backed currency, this could have a significant impact on the global financial market and gold ownership. Such a scenario could prompt the EU and other Western countries to regulate gold ownership in order to curb the demand for gold and limit the influence of such currencies.

• Possible EU measures: A ban on gold trading or high export duties could be introduced to prevent gold from leaving the EU.
• Risks for investors: In such a scenario, German investors could be forced to sell their holdings or transfer them to state-controlled institutions.

Silver ban: Less likely than for gold?

Yes, a silver ban in the EU would be less likely than a gold ban for several reasons, with the industrial importance of silver playing a decisive role:

• Strong industrial demand: Silver is not only a store of value, but is also used in numerous industries, including electronics, medical technology, solar technology and electromobility. As silver is an essential material for many technologies, a ban would significantly affect European industry and weaken competitiveness on a global level. Governments are therefore more inclined to promote rather than restrict silver as a strategically important metal.
• Economic dependence: The EU is dependent on access to silver in order to achieve its climate targets and the energy transition. Solar technology, which is an essential part of the green energy infrastructure, requires significant quantities of silver. A ban would directly hinder this sector.
• Political realities: A ban on silver would affect broader sections of the population and industry and could provoke considerable resistance, particularly from those sectors of the economy that rely on silver. Such a ban would be difficult to enforce politically.

Conclusion

Expropriation of gold ownership in Germany is legally possible, but involves hurdles. Alternatively, indirect measures such as taxation or regulation could be implemented. Storing gold in Switzerland offers protection against such scenarios, albeit with potential restrictions on its return to the EU.

A geopolitical scenario in which gold-backed currencies gain in importance could give Western countries additional incentives to regulate gold ownership. It therefore remains crucial for investors to diversify their strategy well and ensure the protection of their assets through international storage options outside the EU.

While gold could be a more frequent target of regulatory intervention due to its role as a currency reserve and store of value, silver is considered, for now, too essential for technological and industrial development to be subject to similar treatment. Instead of a ban, strategies that prioritise access to silver for industry, for example through import restrictions or export controls, are more conceivable in the EU.