Federal Law for Buying Gold

Federal Law for Buying Gold
••• gold coins image by OMKAR A.V from Fotolia.com

Since the mid-1970s, when an executive order and an act of Congress made the possession of gold for U.S. citizens legal again, the United States government has not regulated the buying and selling of the metal. Federal law does take an occasional interest in the sale of gold, however, such as when large amounts of cash changes hands as a result of the sale of gold. The sale may be legitimate, but that much cash is also a red flag for illegal activities.

Gold Outlawed

In 1933, President Franklin Roosevelt signed an executive order, as part of taking the country off the gold standard during the worst days of the Great Depression, obliging private owners of gold to surrender their holdings in return for a payment of $35 per ounce. For more than 40 years afterward, it was illegal for U.S. citizens to own gold. The executive order specifically allowed ownership of "gold coins having a recognized special value to collectors," though it did not define that phrase.

Gold Legal Again

At the end of 1974, President Gerald Ford signed another executive order that repealed Roosevelt's order, pursuant to an act of Congress that re-legalized gold ownership for Americans. A few years later, Congress took away the authority of future presidents to ban gold ownership by executive order, except in time of war -- a serious economic dislocation is no longer enough to justify such a move. Gold ownership is now quite popular among Americans, so it would be a very difficult political undertaking for Congress to forbid gold ownership again.

Freedom to Buy and Sell

Under current law, Americans are free to buy and hold as much gold as they want to in any form, including bars, bullion coins, collectible coins and jewelry. No federal law or regulation oversees individuals trading in the metal. Furthermore, there are no reporting requirements on the purchase of gold, whatever the quantity, with one exception. A seller must notify the government when he uses more than $10,000 in cash to buy gold (or anything else).

IRS Form 8300

Regarding Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, the IRS says: "The general rule is that you must file Form 8300... if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions." Note that the reporting requirement isn't specifically about gold, just large cash transactions. The federal government takes an interest in this kind of transaction since large amounts of cash, while perfectly legal tender, are also an exchange medium of choice for money launderers, narco-criminals and terrorists.