by Kerry Lutz
If you buy precious metals, you have a problem, where’s the safest place to store them? Unfortunately, every storage option has its inherent limitations and risks. After the financial crisis, there are grave concerns about the trustworthiness of any bank or its safety deposit boxes; their contents are subject to seizure by the government, creditor claims or falling under state abandoned property laws (escheatment). If the bank goes out of business, it may be difficult or impossible to redeem the contents. Paper based precious metals, ETF’s such as GLD and SLV or even their more transparent brethren; the well-audited Canadian closed end funds (CEF, GTU, SVRZF) also raise concerns. Do you believe these funds really have what they claim? In an “emergency” will the government expropriate their metal stocks in exchange for worthless paper currency? If there’s a financial market meltdown, what value if any will your ETF holdings have?
Some people believe in the efficacy of foreign-based metal depositories. They prefer London, Zurich, Dubai, Singapore or Hong Kong. Jim Willie believes that the only remaining safe overseas depository in the world is Hong Kong. He thinks that all the other financial centers have either been infiltrated or taken over by the “Banksters” or they present certain geo-political risks. For example, Dubai ranks high in integrity, but it’s precariously perched in the volatile Mideast.
Holding metal in a home safe provides ease of access and Bankster theft prevention. The concerns here are obvious. In an ever more lawless United States, the potential for home invasions and burglaries is increasing. Having a small amount of metal in your residence is wise, but large amounts can present unacceptable risks.
Using several of these methods may help diversity your risk, depending upon your economic position. Even people with smaller holdings can diversify. Sending some metal overseas to Hong Kong could be advisable, holding a small amount in a bank safe deposit box makes sense, and placing a portion of funds in CEF and similar funds that actually have the metal they claim will spread the risk.
But we’ve come up with a unique extremely useful storage method that is off the grid and will enable you to access your metals 24/7, including holidays! At first blush it may seem absurd–Casino Safety Deposit Boxes. Casinos with table games, i.e. blackjack and craps, usually provide players’ club members with complimentary safe deposit boxes. They’ve been doing it for decades. The boxes are in the secured area of the casino floor, known as the cage or cashier. Since there’s millions of dollars floating around here, there is constant video and human surveillance. As with a bank safe deposit box, two keys are required to gain admittance, the house key-held by the casino and the other held by you. Most casinos never close, so you can access your gold on a moment’s notice. When robbers have hit casinos, they go for the cash in the cashier’s station. They have neither the time nor the inclination to start drilling boxes open. They want cold hard cash and they want it now! Best of all, the cost for this service is usually zero. Some casinos may charge a small fee, or key deposit. Other casinos require you to visit the box once every 30 days. For those who live near areas that have many casinos, splitting up your holdings into multiple casinos further minimizes the risks. Just be certain to keep an accurate list of the locations and an inventory for each box. Multiple locations quickly get confusing.
Just like a bank safe deposit box, your holdings will not be insured, so you’ll be at risk for loss or theft. If marshal law is implemented, you may not be able to access the casino (or get to your bank or anywhere else), for either a brief or extended time period. The casinos aren’t plugged into the banking grid and your box will not be reported to any governmental entity. However, it will still be subject service of subpoenas and court orders. Storing your metal at an Indian Casino can provide protection against certain types of legal proceedings, but don’t count on it. And of course, on occasion casinos do go out of business; so make sure you keep track of these establishments; they’ll never close on a moment’s notice. A safe deposit box in an Atlantic City casino was temporarily inaccessible during the recent Hurricane Sandy chaos, but so was everything else. Also, that large quake that will eventually hit the West Coast could present problems there as well.
There are many options for storing your precious metals, from ETF’s, to domestic/foreign depositories, to burying your metal 10 feet deep in your back yard. Every storage option presents its own particular set of risk factors. When you’re not the physical custodian of your metals, then counter-party risk will always be at the top of the list. If you have enough metals, diversify over several different alternatives. This will provide the maximum protection and will insure that you’ll be able to access at least some of your metals under a number of possible, but not necessarily likely scenarios.
For more information email kl@KerryLutz.com