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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

April 2018 - Week 1 Edition

More Q&A about the Coins from the SS Central America

Why were some coins from other U.S. branch mints found in the SS Central America wreckage?

The explorers flooding the California Gold Rush came from all over the U.S. and the world. They brought gold from the Philadelphia Mint as well as the branch mints in New Orleans, Charlotte and Dahlonega, Georgia, all of which were operational from the late 1830s.  The San Francisco Mint was not launched until 1854, so all of the officially minted circulating U.S. gold in California prior to 1854 came from these other mints. These coins were still in circulation in 1857 and made up part of the fortune that the gold seekers were bringing home to their Eastern families when the SS Central America was lost in 1857.

Within the first year of its operation, the San Francisco mint turned $4 million in gold bullion into coins, with more coins minted each year, so the majority of the coins found in the SS Central America wreckage were San Francisco “S” mint coins, but there are quite a few from the other official U.S. mints as well. 

One example of a New Orleans Mint gold coin on the ship was described by Bob Evans, Chief Scientist of the SS Central America project. It was the 1854-O Quarter Eagle, counter-stamped by J.L. Polhemus, a druggist in Sacramento, California. Evans said it was “made in New Orleans at a time when the New Orleans Mint may well have been using California gold to mint coins. Gold Rush gold got around back then!  So this coin made its way all the way to Sacramento, where a shop-keep hammered his name on it. And then, somehow, it made it on to the S.S. Central America, and then, somehow, we brought it back up 150 years later, a couple of hundred miles from North Carolina. That’s a great, full-circle journey!”

How long was it before the nation discovered that the SS Central America had been lost at sea?

The tragedy was known almost immediately, and it spread like wildfire. The new technology of telegraphy was like the “Internet” of the day and the news went “viral,” as there were telegraphs in most major cities.  The ship went down on September 12, 1857 and the public reaction was almost like what we experienced on September 11, 2001. Adjusted for the era’s population and wealth, the two tragedies were similar: 9/11 struck our financial center in New York, and so did the sinking of the SS Central America.  The gold on the SS Central America was vital to help prop up some major New York banks during the Panic of 1857, which had already begun the previous month with some major New York bank failures, so news of the ship’s stop in Havana and its expected arrival date in New York were widely followed in the news.

When news of the hurricane spread, people became concerned about the safety of the ship, so when the first survivors straggled ashore in Savannah, Georgia, news of the sinking spread fast. With over 450 dead, the human interest stories of men sacrificing their lives to save the women and children were as gripping as the true-life stories of the New York City firemen and other first responders sacrificing their lives to rescue those trapped in the Twin Towers on 9/11, so hundreds of newspapers ran long front-page accounts of the last hours on board ship in the survivors’ own words – of how the men formed bucket brigades that went on for hours, all night long, but to no avail. These stories continued for months in over 200 newspapers.

In addition, Commander William Herndon became a national hero after he nobly went down with the ship. Two cities, in Virginia and Pennsylvania, were named after him, as well as two U.S. Navy ships. To this day, there stands a statue and plaque erected at the U.S. Naval Academy in his honor.

What changes were made to protect lives and gold shipments after the Central America tragedy?

The loss of the SS Central America made Californians think more about keeping more of their wealth closer to home and not shipping so much of it out. This convinced Californians that they should start developing more industry locally rather than sending money back east. Those in the east, of course, didn’t like this idea very much, so the loss of the Central America encouraged businessmen, politicians and many editorialists at the leading newspapers to promote the construction of a Transcontinental Railroad in order to avoid the risks of the sea or overland covered wagons, subject to attacks or natural barriers.

This Transcontinental Railroad opened in 1869, which led directly to the formation of the Carson City Nevada mint in 1870, a mint made necessary by the discovery of silver in Nevada’s Comstock Lode.

Gold Up 2.3% in First Quarter

Gold closed the first quarter up 2.3% while the Dow Jones Industrials fell 2.5%, giving gold a 4.8% advantage over the Dow stocks and a 3.4% advantage over the S&P 500.  Stocks were very volatile – rising sharply in January, then falling 10% in early February, then rising and falling in waves – while gold was very steady throughout the quarter, ranging from $1,310 to $1,358 per ounce during the first quarter.

On Monday, April 2, the first day of the new quarter, gold rose $11 to $1,337, while the Dow fell 500 points (-1%), so gold’s advantage over the Dow is up to +7.8% as of the first business day in April.  Since the dawn of the new millennium, gold is up 357% vs. 110% for the Dow and 80% for the S&P 500.

Marking the 85th Anniversary of “Gold Prohibition in America”

In the Presidential campaign of 1932, Democrat Franklin Delano Roosevelt campaigned lustily about the repeal of alcoholic prohibition, which had existed in America for 13 years. (It was eventually repealed by the 18th Amendment on December 5, 1933). But he never uttered a word about instituting a prohibition on private gold ownership in America, which he stealthily instituted by Executive Order on April 5, 1933, just one month into office – 85 years ago this week.  His language was harsh and authoritarian in tone:

“All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership…

“Whoever willfully violates any provision of this executive order or of these regulations or of any rule, regulation, or license issued thereunder may be fined not more than $10,000, or, if a natural person, may be imprisoned for not more than ten years, or both.”

An exception was made for industrial or professional use, foreign government gold or “gold coins having a recognized special value to collections of rare and unusual coins,” but circulating gold coins were mandated for surrender. In follow-up regulations and speeches, the word “hoarding” was constantly used as a pejorative term for those wanting to hold on to their gold.  (Most people would call that “savings.”)

After America’s privately held gold was collected in exchange for the official $20.67 per ounce, the President raised the official price to $35 per ounce the following January (in The Gold Reserve Act of January 30, 1934, drafted on FDR’s birthday), after which he used the profits from gold’s revaluation to help fund his New Deal programs – so there was clearly a “tax collection” angle to his Executive Order.

Amazingly, this gold grab took place without consultation or consent from Congress. It lasted over 40 years without legal challenge. Americans were forbidden to own most forms of gold as it escalated in price from $20.67 to $190 on December 30, 1974, when Americans were finally allowed to own it again.

This was a shameful episode of imperial over-reach in the history of the United States presidency.

 

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