In the first edition of this book, I talked a little about gold bonds. I tried to explain that the only value of gold bonds was their collectible value.

Amazingly, since then, criminals developed several scams specifically around gold bonds! Some people lost substantial sums of money. Some scams are still under investigation and probably will not be resolved for years.

The central concept of most of the reported scams depends on convincing would-be investors that uncancelled gold bonds still have value. Some of the scams weave a second myth that the United States government will somehow pay off those old bonds.

Both stories are total fabrications. But here is the 'logic' the scams depend upon.

Gold bonds specifically promise to repay principal and interest in gold coin having a value at a definite point in time. Prior to 1933, that value was $20.67 per ounce in the U.S.

By compounding outstanding principal and interest payments in gold, and then converting to today's dollars, crooks 'prove' that a single uncancelled $1000 gold bond could theoretically be worth anywhere from a few hundred thousand dollars to many millions of dollars.

Who would pay such values? Certainly not bankrupt companies. So criminals suggest that bonds showing 'United States of America' at the top are guaranteed by the federal government.

Such absurd schemes depend entirely on ignorance. If true investors know anything about corporate law or American history, they run away. The most glaring objections to these schemes involve:

	Bankruptcy law. Most surviving uncancelled gold bonds originated with companies that failed. Bankruptcy courts have long ago settled legal claims for outstanding loans they may have had.
	U.S. law. Every reference to gold repayment in every bond was nullified by the 'Joint Resolution to Suspend the Gold Standard and Abrogate the Gold Clause' (H.J. Res. 192, 73rd Congress, 1st Session). While the language of many laws can be obscure, this one is crystal clear. 'Every obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein or made with respect thereto, shall be discharged upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debts.'
	Lack of guarantee. The United States does not guarantee private debt. Nowhere in any railroad bond is there reference to private railroad debt being guaranteed by the Federal government.

Federal and state authorities are prosecuting most of the current gold bond schemes, but there is no guarantee that a new brood of criminals will not try this again. Unfortunately, the result of this current scam has been to artificially inflate the price of collectible railroad bonds that just happened to be uncancelled gold bonds.

Criminals (and unknowledgeable speculators) needed uncancelled gold bonds to sell. There was tremendous potential for profit. Consequently, they drove up prices for this narrow part of the collecting field quite dramatically in 1998 and 1999. Many gold bonds sold for absurd $1000 and $2000 prices. Criminals successfully re-sold some of those for tens of thousands of dollars!

People have already learned from the coin and stamp hobbies that the ultimate consumers of collectibles are collectors. And collectors have limits. Speculators can only force collectors to pay so much before they quit and move to other fields.

Collectors are the only consumers for otherwise worthless gold bonds, so prices will, sooner or later, tumble to reasonable levels. My catalog and database purposely take the long view of the hobby. I purposely ignore artificially inflated values for uncancelled gold bonds.

Visit the U.S. Treasury site for more information about scams as well as many links to on-goings scams and investigations.

One of the most popular certificates used in the several known scams is this 30-year $1000 gold bond of the Chicago Canada & Saginaw Railroad Co. I currently estimate the collectible value of this certificate at about $150. It probably ought to be selling for about $75.

Values are so inflated right now by the bond scams that these certificates are hard to find. Moreover, law enforcement agencies have confiscated many of the bonds and they reside in evidentiary lockup. When the bonds return to the collectible market, values will collapse back to their collectible values.