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

Since then, criminals developed several scams around gold bonds! Some people lost substantial sums of money. Several scams have been successfully prosecuted, but some are still under investigation and probably will not be resolved for years.

Most of the reported scams try to convince would-be investors that uncancelled gold bonds still have value. Some of the scams weave a second myth that the United States government will pay off those old bonds.

Both stories are total fabrications. But here is the 'logic' the scams try to twist.

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

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

Who would pay such values? Obviously 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 investors knew anything about corporate law or American history, they would 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 government does not guarantee old 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 gold bond scams has been to artificially inflate the prices of uncancelled gold bonds from American railroads.

Criminals and needed uncancelled gold bonds to sell and they saw tremendous potential for "profit." Consequently, they drove up prices for collectible gold bonds quite dramatically in 1998 and 1999. The prices for some gold bonds topped $1000, even $2000. Criminals successfully re-sold some of those for tens of thousands of dollars!

People have already learned from the coin and stamp hobbies that collectors are the ultimate consumers of collectibles. Collectors, even foolish ones, have limits. Speculators can only force collectors to pay so much before they quit their hobbies 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 for the 1998-1999 scams was this 30-year $1000 gold bond of the Chicago Canada & Saginaw Railroad Co. I currently estimate the collectible value of this certificate at about $100.

Values inflated by gold bond scams subsided to a large degree after 2000. Nonetheless, many uncancelled gold bonds are still 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 no doubt collapse back to their collectible values.