FMX | Connect – www.fmxconnect.com - (Reported 3/3/2011)
Overcoming The Storage Challenges of Investing in Physical Gold and Silver
By Laura Gross
With gold closing at a new all-time high and silver flirting with $35 an ounce, it seems an appropriate time to explore the unique sets of challenges that investing in physical gold and silver presents. The main problem concerns storage, especially for those who purchase silver. Since silver has been significantly undervalued over the last several years, it doesn’t take long to acquire a lot of it in a relatively short period of time and for storage to become an issue. Investors have the option of storing their metals at home, with a bank, or at a logistics company. Given a recent event during which an individual had his life savings in silver stolen and the tendency of large banking interests to fail to purchase and/or store physical gold and silver for their clients, storing gold and silver with a logistics company remains the most attractive option.
A couple weeks ago, one of my Twitter followers @wealthrat alerted me to a story that makes a compelling argument to store precious metals outside your home. The article from The Providence reports on “a Chiliwack man [who] was punched, stabbed and tied up by home invading thieves who made off with his life savings in silver bars.” The thieves, disguised as police officers, told the man “they were investigating a domestic assault, then said they were looking for methamphetamine in his vault.” One of the thieves was armed, and after punching the victim, he forced him to provide the combination to his safe. The men then stole approximately $750,000 worth of silver. Click here to read the full article: http://www.theprovince.com/health/silver+stolen+from+home/4300052/story.html
With gold and silver in a secular bull market, it is only a matter of time before the media and the public wakes up to their value, so this story serves as a warning for those who invest in physical metals. For those who store their metals at home, if they tell the wrong person, they too could risk having the bulk of their savings stolen. Therefore, it is necessary to explore other alternatives. James Dines had often said that safety is more important than wealth, so he encourages his subscribers to store their precious metals outside their home. Because stories abound of banks not having the gold and silver available that they supposedly purchased for their clients available for delivery, however, it is important to store your gold and silver outside the banking system.
In June of 2007, for instance, Morgan Stanley paid $4.4 million to settle a class-action lawsuit with clients who purchased precious metals and paid storage fees. According to Reuters, “The suit. . . alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store. But Morgan Stanley either made no investment specifically on behalf of those clients, or it made entirely different investments of lesser value and security, according to the complaint.” Click here to read the full article: http://www.reuters.com/article/2007/06/12/idUSN1228014520070612
Morgan Stanley denied any wrong-doing and maintained that it’s practices were standard within the industry, but considering their track record, investors would be wise to steer clear. Morgan Stanley still offers pooled gold accounts, but it does not allow clients to take physical delivery, so it is likely that there is little to no gold in any of these accounts.
In addition, last fall Jim Rickards and James Turk alerted King World News of two separate incidents involving wealthy individuals who wanted to take delivery of their gold and silver from the Swiss banks that stored their holdings. The banks, however, didn’t have the metals for either investor. According to Rickards, one of the individuals got his attorneys involved, so the bank was forced to acquire the gold and deliver it to the client. At this point, no one knows where the client’s original gold went; perhaps it was leased or never purchased on the individual’s behalf. The names of the banks were withheld from the interviews, so it is unclear if more than one bank in Switzerland was involved, but the point is the same: those who wish to invest in physical gold and silver simply cannot trust the banks to store their metal and have it available for delivery.
For these reasons, investors should consider storing their gold and silver with a logistics company like Brinks or Viamat since both operate outside the banking system. Brinks, for example, remained open for business and shipped valuables even during the week of 9/11 when banks closed, so customers can access their precious metals even during a crisis. Both Brinks and Viamat offer segregated storage where the specific coins and bars assigned to each investor are stored separately from that of other investors.
Another option is to purchase gold and silver through a company like James Turk’s GoldMoney. Unlike ETFs and gold certificates, at GoldMoney, investors own allocated metal in their name. They own shares of gold and silver bars that are stored in a large vault along with the gold and silver of other customers. GoldMoney guarantees that all holdings are 100% backed by physical gold and silver. They maintain a one-to-one ratio in their vaults, which are audited by outside companies. They also publish the audit report so customers can review it. The allocated storage makes the fees to store gold and silver some of the most competitive in the industry. Because customers own shares of large bars, Gold Money may not be the best solution for those who eventually wish to take physical delivery; however, they offer specifically assigned 400-ounce gold bars for customers as well. And since there is no minimum balance, it is ideal for those who have limited funds or who would like to start acquiring precious metals slowly.
Though purchasing gold and silver presents a unique set of storage challenges, investors can overcome them by working with a logistics or digital gold company. Both offer segregated or allocated storage to assure investors that the gold and silver they purchase is their own and available when they’ll need it.
Laura Gross
(Laura Gross is a writer, precious metals investor, and the founder of Best Bullion Prices (BBP). Visit www.bestbullionprices.com to follow her research.)
Source: Best Bullion Blog
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