Storing physical gold abroad
If you decide to store your gold elsewhere than at home, using a third-party vault company that is neither a bank nor government intuition is the only safe solution for asset protection.
The demand for physical gold is clearly increasing since August 2018, stemming from private and institutional investors as well as from Central Banks. The main reason for the increase of demand in physical gold is the ever-increasing uncertainty of our global financial future, which seems to be at the whim of negative interest rates, trade wars, stock market bubbles and near junk of almost half of US corporate debts.
Gold investors wish to preserve at least a part of their wealth against as many risks as possible. Important risks at current times are defaulting banks, risks the banking sector is suggesting in general, crashing financial markets, regional risks and country risks.
Where to store physical gold?
Owning a substantial amount of gold at home or in the backyard is of course not an option. There is no protection against theft and no insurance would agree to insure gold stored at home, in lack of appropriate storage security.
A common option is to store physical gold in security deposit boxes provided by banks. This might be an option for smaller amounts. Larger amounts of gold, or even silver for those who prefer silver, do not fit into security deposit boxes. Another issue is that in most countries, valuables stored in security deposit boxes of banks do a priori belong to the bank in case of a bank’s bankruptcy, unless the lessee of a security deposit box can proof by documents his or her legal ownership.
In Europe, banks are legally obliged to report the content of security deposit boxes to the fiscal authorities, starting with January 2020.
Another common option is to buy gold from banks and to store it with banks. However, this is not a good option for gold holders who want to shield their wealth against risks created by defaulting banks and banking sectors. The background is that physical gold purchased from and stored with banks typically remains on the balance sheets of the banks. Storage “allocated” to the client does not necessarily mean that the legal ownership of the gold changed from the bank’s ownership to the client’s ownership. There are many stories that can be told regarding “allocated storage” offered by banks.
Furthermore, it needs to be kept in mind that banks are obliged to provide information about client accounts and holdings to the financial authorities of their own country. The financial authorities of their own countries will then exchange such information with the financial authorities of the account or gold holder’s country. If privacy is important, private vault companies might be a much better choice.
Private vault companies
The cautious investor prefers to store his or her gold, or silver, with private vault companies that are neither banks or owned by banks or by any governmental institutions like, for example, the vaults of the Precious Metals Exchange in Istanbul, which is owned by the government.
Investors typically opt for private vault companies that are located in other countries than their own country of residence, in order to protect their gold against regional risks and risks of their own country. Unfortunately, more and more countries in the world cannot be considered as being safe anymore but are plagued by regional conflicts, civil wars, terror acts etc.
Another country risk is the risk of confiscation by local authorities or the governments. The laws of the majority of countries is providing for the right of confiscation of valuables by the government in case of emergency cases. Additionally, unfair or unsubstantiated claims and prosecution demands that eventually turn out being unrightful might be a risk for storing gold in one’s own country.
When deciding on the right vault company for high-security gold storage, clients shall scrutinize the following details:
- jurisdiction (country) where the gold storage facilities are located (see next headline);
- security grade of high-security storage facilities;
- surveillance systems;
- type of storage (segregated and allocated in the name of the client, or pooled storage);
- accessibility for viewing own assets (should be 24/7 with immediate effect);
- insurance coverage (coverage of value and coverage of incidents);
- documents provided (invoices, move-in reports, stock reports, move-out reports);
- speed and professionalism of services;
- personal treatment of clients by senior management, where appropriate;
- laboratory for assaying;
- possibility of physical delivery to owner’s location;
- possibility to visit the vault facilities prior to decision-making.
The right jurisdiction for storing gold
When a private or institutional investor wishes to store gold or silver with a private vault company outside of their own country, choosing the right jurisdiction is of utmost importance. Right jurisdiction means a safe jurisdiction in every aspect.
Countries and areas like Switzerland, Liechtenstein, Dubai, Singapore, Hong Kong, the US, Canada, or Panama and the Cayman Islands are known for providing private high-security facilities for the storage of gold, silver and other precious metals.
When deciding on the right country for gold storage, the cautious investor will consider criteria like
- the legal environment in general;
- regulations and environment regarding asset protection and privacy;
- does the country have emergency laws (enabling the government to confiscate valuables in national emergency case)?;
- crime rate of the country;
- political stability;
- economic stability;
- taxes, including VAT, with a prospect of future taxation;
- tax treaties;
- exchange control;
- ease of banking;
- reachability (is traveling to the vault company easy?).
