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Ask Olivier

Should I Store Precious Metals in Multiple International Locations?

“For a non-US resident, what are the advantages and disadvantages of storing my precious metals in one vault location vs. multiple locations?” —M.M.

Dear M.M.,

“Where should I store gold?” and “Should I store in multiple international gold storage facilities?” are some of the most common questions I receive from our customers.

In short, the main reason why investors would consider storing precious metals in more than one international location is risk mitigation.

In addition to being a store of value, precious metals are insurance against a number of potentially disastrous scenarios: financial crashes, civil wars, political unrests, and other crises.

Unfortunately, any form of wealth can become a prime target of theft or government seizure in times of great distress. And diversification between storage locations can help mitigate it.

Here are the four serious risks to your metals holdings that international diversification will help avoid or reduce:

  • Confiscation or outlawing of personal gold ownership.
  • Capital controls—the government limits or denies a citizen’s right to carry or send any form of money abroad.
  • Administrative actions—seizure of property by a government agency without notice or due process; becoming enmeshed in a frivolous civil lawsuit.
  • Currency debasement/inflation will lower one’s standard of living and destroy wealth not adequately protected.

The most likely risk is that someone (including a family member) finds out that you store gold at home and steals it—or worse. For this reason, taking possession of large amounts of precious metals puts your wealth, as well as the lives of your family, at risk.

A better option is to store some of your precious metals in a safe storage location somewhere nearby. This way, you reduce the risk of theft and can quickly take delivery of your holdings.

I do not recommend storing your precious metals with a financial institution, though.

The reason is that the contents of a bank vault is not adequately insured.  In addition, financial institutions would be amongst the first casualties in a financial crisis. Further, your holdings would become an easy target in case of government seizures.

If you have enough precious metals to be concerned about government seizure/confiscation or capital controls, you should consider jurisdictional diversification. Storing precious metals abroad makes it much harder for a desperate government to seize them.

Besides, you could access part of your holdings in case you have to flee from your homeland for any unexpected reason like war.

For real-world examples, look no further than Europe in the 1930s and 1940s. Many Europeans were fortunate enough to have assets in Switzerland or the United States during the 1930s and 1940s. The offshore assets were their escape tickets from fascist regimes and wars.

If you decide to go global, make sure you store metals with the most reputable independent vaults. Look for precious metals storage companies that safeguard assets for large institutional investors and governments, such as Brink’s.

Further, be sure that your precious metals are fully insured and available for immediate delivery at all times.

Another important decision is picking the destination countries to store some of your safety nest. 

I suggest looking for the most stable countries with a long history of depositor protection.  Don’t forget the destination country will have its own set of regulations controlling the import of precious metals, too.

But in the end, you have to choose a location that makes sense to you.

I would personally more likely choose Switzerland or Australia than Singapore. That’s because I would be more likely to relocate near one of these two countries than to Asia. 

But this is a personal preference, and your criteria may be different.

For non-US investors, the United States may be a great place to store metals.  Switzerland is also attractive because it has the longest track record of political stability and neutrality. Singapore’s financial history is much shorter, but the country appears to be very stable.

England, Australia, New Zealand, and Canada are also great alternatives. 

The key is to diversify across jurisdictions as much as it makes sense based on the size of your precious metals holdings. I personally hold precious metals in four different jurisdictions, including the United States.

The only drawback of storing assets abroad is that foreign-held assets require greater awareness and planning:

  • Access to your metals may not be as quick and easy. Foreign-held bullion is for those with sufficient gold and silver already stored at or near home. Storing all your precious metals overseas defeats one of its purposes—to have it handy for an emergency.
  • The receipt of proceeds after a sale could take time. The delay between selling your foreign-held gold and receiving the funds can be days. Offshore precious metals should not be considered ready cash.
  • While the US may pose the greatest threat to a US investor, a foreign government could move to control certain assets as well. The risk varies by country and is generally greater within the banking system than with a private vaulting facility. Be sure to perform your due diligence before selecting a country. Choose a location with a history of strong depositor protection, governed by the rule of law, and solid property rights—and select bullion storage facilities with the highest reputation.
  • Understanding and complying with reporting requirements is essential.

The bottom line: Gold stored abroad is all about minimizing risks and maximizing options. As your metals holdings grow and governments become increasingly desperate, diversification becomes increasingly important.

One last thing I want to note is that I do not advise you carry gold or silver bullion across a border yourself. While it is legal, the risks are too high.

I know of numerous cases when ignorant customs agents confiscated precious metals. US Federal Government rules and regulations are muddy and complex in this regard, so you may not be able to find justice.

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Olivier Garret

Olivier Garret, CEO
Hard Assets Alliance

 

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