by | Dec 5, 2019 | Precious Metals

The current state of the global economy is one of incredible uncertainty and volatility. Given the economic turmoil, many investors turn to gold as a hedge against the economic upheaval and unpredictability against fiat currency. The yellow precious metal is certainly regarded as a good investment option for a small percentage of a diversified portfolio. Yet, the question that arises, is where should your gold be stored? In this our brave, new age, hiding gold in your backyard simply isn’t a feasible option. For some savvy investors of the glittering precious metal, offshore gold storage could be the more viable option. In this article, we discuss 9 things people need to know about offshore gold storage.

Franklin D. Roosevelt Made Gold Ownership Illegal With Executive Order 6102

In April 1933, President Franklin D. Roosevelt made gold ownership illegal with Executive Order 6102. This was the presidential executive order “forbidding the hoarding of gold coin, gold bullion, and gold certificates”.

“The Executive Order issued by the President yesterday amplifies and particularizes his earlier warnings against hoarding. On March 6, taking advantage of a wartime statute that had not been repealed, he issued Presidential Proclamation 2039 that forbade the hoarding ‘of gold or silver coin or bullion or currency’, under penalty of $10,000 and/or up to five to ten years imprisonment,” The New York Times explained at the time.

The rationale for such a measure was essentially to allow the Federal Reserve the ability to increase the monetary supply during the Depression. Although this transpired decades ago, such executive orders could be enacted once again, during desperate economic times.

What Experts Have To Say About Offshore Gold Storage

Situs, Physical/Tangible Asset, Fraud, Fees

 “In this post-recession world of all gold everything, some of our clients have inquired about offshore gold storage, as part of diverse offshore planning. We believe the risk is too high for most average investors. Offshore gold ownership has added risk that more traditional offshore planning does not.

Situs – The locale of the gold storage is of paramount importance. We don’t recommend Offshore planning, unless you can afford to physically fly to the Situs to inspect facilities and meet the companies and professionals you are working with. The suitability of the situs is key. There are a multitude of factors we look at: political stability; economic stability; taxes, costs, and fees; prospects for future taxation; tax treaties; exchange controls; business environment; legal framework; transportation facilities; and language. Does the situs give you tax benefit? These are all things a client should consider.

Physical/Tangible Asset – Gold is a physical/tangible asset. If it’s held domestically, you can physically be in possession or alternatively visit the gold with little to no cost. Unlike intangibles or securities, you have to be more aware of the security the storage facility is using. You need to ask questions such as: How is going to be stored? Is it stored in an unsegregated storage area (this means your gold is in a holding place with gold owned by others)? Is your gold in its own storage vault? Is your gold marked with a unique identifier such as a serial number. Regardless, remember gold can always be smelted and re-forged into another bar.

Fraud – Fraud prevention is key. Beware of fraudulent companies, with fancy websites and letterhead. You will want to work with a recommended facility. You also must be cautious with employees of the institution absconding with your physical asset. Asset protection situs also have a downside, in that they provide asset protection for potential fraudsters, and make tracking down tangible assets near impossible.

Fees – At Offshore facilities fees range from .5% to 1.0% annually. Gold is not an incoming producing or self-replicating asset. It does not grow in quantity. As such, you need to weigh the long term of cost of storing the asset, against your forecast of the value of the asset. We would not recommend, just parking a set amount one time, and let the fees diminish your holding. Look to your financial planner’s advice on how to best mitigate this cost, or have it absorbed by other assets you control.”

Shann M. Chaudhry, Principal Attorney & Managing Member, Shann M. Chaudhry, Esq., Attorney at Law, PLLC

If You Do Have An Abundance Of Gold You Want To Store It Safely Outside Of Your Home With A Reputable And Secure Firm

“Gold shouldn’t be a cornerstone of your investment portfolio. Ideally, gold shouldn’t be more than 5 to 10 percent as a small hedge.

Offshore storage really doesn’t make sense unless you have a million dollars worth of precious metals or more. There are expensive shipping costs and insurance costs. Insuring something as valuable as gold against theft can get pricey.

However, if you do have an abundance of gold you want to store it safely outside of your home with a reputable and secure firm. Such operations are a far better option than a residence vulnerable to burglary, fire, or natural disaster.”

Simon Nowak, CEO, 3CreditScores.net

Be Very Careful About The Pitfalls That Can Potentially Arise When Storing Anything Of Value Abroad

 “As a lawyer, and speaking in a general sense, I would caution anyone to be very careful about the pitfalls that can potentially arise when storing anything of value abroad. For example:

Even if you have a contract, if anything goes wrong, it can be very difficult to sue a foreign entity in an American court. For instance, even formally notifying them of a lawsuit can easily take 6 months or more.

Even if you successfully sue a foreign entity in an American court, not every country will quickly execute an American judgment. That can take time, and will almost surely require that you hire a lawyer in the foreign country.

You will probably have to hire legal and accounting professionals in the country of storage. You will need advice on issues such as taxes, reporting requirements, regulatory compliance, etc.

You will also probably need to consult a tax professional in the US, since some transactions or holdings may trigger US reporting requirements.”

Miguel A. Suro, Attorney, Personal Finance Writer, The Rich Miser

Asset Protection With Private Vault Companies

You do decide to store your gold offshore, there are numerous countries that are regarded as safe jurisdictions to store your gold with private vault companies. Some of the countries include Switzerland, Cayman Islands, Singapore, and Panama, to cite a few. The primary impetus for storing gold in these locations is the privacy component and tax-related reasons, and obviously asset protection.

If you do decide upon offshore storage, storing gold in a private vault company as opposed to a bank is crucial. Utilizing these private storage companies guarantees full protection of your gold, lest something transpires to the bank where your precious metals are stored. If you do choose to store your gold offshore, using a third-party that is neither a bank or government intuition is the only safe bet for asset protection. For those investors who are interested, have a look at the top companies for your offshore gold investment to learn more about the options available within the space.

 

Sarah Bauder

Sarah Bauder is a financial writer with over a decade of experience at numerous online publications, writing about alternative investments, retirement, US politics, world economy and more.