Storing Bullion Internationally
Mark O'ByrneSafety Deposit Boxes and Depositories in the UK, EU and most importantly Switzerland
The fundamental tenet of investment theory is diversification or in layman's terms to not have all the proverbial eggs in the one basket.
Thus a wide range of assets including a variety of equities with exposures to different market sectors and regions; a variety of different countries' bonds; a diversified property portfolio; a cash component with sound international currencies and 10% to 20% allocation to gold and silver bullion would be considered a sensible, conservative and prudent properly diversified portfolio. The key obviously is to determine what amount or ratio of each asset class to have. In a globalised and increasingly integrated global economy this should be decided based upon global macroeconomic fundamentals.
The global macroeconomic, and indeed geopolitical, fundamentals are increasingly negative and thus merit a reduced exposure to equities, bonds and property in general. The anchor or base of the portfolio is the allocation to gold and silver bullion and a move to some 20% seems increasingly justified. We believe that the Perth Mint Certificate Programme is one of the best, most cost effective and safest ways for investors to own bullion. Especially for investors looking to store their bullion in a secure, wealthy, AAA rated offshore country.
The precious metals component of a diversified portfolio should be diversified also. And bullion owners should not allow themselves to be dependent on any one institution. This is why a combination of precious metal certificates, gold or silver bullion or numismatics in your possession and storage of bullion internationally with a secure and specialist third party should all be looked at.
Why Own Bullion and Store Bullion Internationally?
When investing in precious metals one of the most important things to consider is where to store your bullion. What type of facility or institution to store it with and whether it should be stored locally, nationally or internationally. The short answer is to store your bullion with the safest and securest facilities or institutions locally, nationally and internationally. Again the eggs in basket cliché is important.
Investors buy bullion primarily to insure and hedge against macroeconomic, geopolitical and particularly systemic and systematic risk. Systemic risk includes the collapse of a financial system, such as a general stock market crash, fiat currency crash and or a breakdown of our modern day fractional reserve and derivative laden banking system. Any of these would have serious ramifications and could lead to deflation, stagflation or hyperinflation in various jurisdictions and the collapse of the current global financial system. Systematic risk describes risks which the whole financial market or economy faces such as business cycles, terrorism wars, peak oil and or global warming.
Today in our globalised and massively interconnected financial world, a systemic or systematic financial crisis will likely result in a chain reaction involving waves of individual and corporate bankruptcies and large financial institutions would be at risk. In this environment, all the conventional investments - derivatives such as exchange traded funds (including the precious metal ETFs), stocks, bonds, property - will be seriously affected and marked down in price.
The massive creation of derivatives, what Warren Buffet calls 'Financial Weapons of Mass Destruction', and particularly credit derivatives has led to a huge increase in the dispersal of risk throughout the entire financial system. While risk dispersal has helped the system weather shocks so far this decade, some policymakers fear that if a really big crisis were to hit, this dispersal might create a "contagion" effect. That could make a crisis far worse and lead to a Depression. Jean Claude Trichet, the head of the ECB, recently warned echoed Warren Buffett regarding this risk.
Besides the negative effect these risks pose to investment portfolios, it is important to remember that most people's primary wealth is the home they own and their financial wellbeing is dependent on their work and or their business. In a systemic or systematic crisis even these can be affected. Unemployment goes up and people can lose their job. One's business can go bankrupt. One's home can have negative equity and or can be foreclosed by the banks.
This is not alarmist doom and gloom mongering. Many people experienced exactly these economic hardships in the US in the 1970's and in the UK in the early 1990's. But thankfully it was on a small scale. People in Italy, Israel, Thailand, Russia, Ecuador, Mexico and Argentina are a few of the entire societies who have had currency crisis and systemic crisis in recent years. Thankfully, this has not been experienced on a mass global scale since the 1930's.
There is increasing global systemic and systematic risk in the form of
- Geopolitical Instability and 'The War on Terror'.
- Rising Oil & Energy prices and Peak Oil.
- Growing realisation of the long term impacts that global warming will have on all societies and economies as clearly outlined in the Stern Report
- Overvalued and Plateauing Property Markets.
- Rising Interest Rates in the US and globally.
- Record & Unprecedented US Trade, Budget & Current Account Deficits.
- Record Consumer, Mortgage and National Debt Levels in the US & much of the western world.
- Increasing Pensions Difficulties with underfunded pensions and the 'Demographic Time bomb'.
- A depreciating and declining US dollar - the global reserve currency;
Increasing global investor demand for safe haven assets & Central Bank demand for gold in order to maintain full faith and provide stability to unstable currencies and monetary reserves.
These systemic and systematic financial and economic risks create political risks. Historically protectionism, trade frictions, capital controls, nationalism, radicalism, communism, fascism and militarism can result. Increasing diminution of civil rights in even the most liberal western countries must give pause for thought. These authoritarian trends generally become more pronounced in times of recession or depression.
These factors mean that having one's bullion outside of the financial system is important. This can be either through personal possession or storage with a secure third party who can deliver the bullion upon demand.
However, these factors also mean that besides having one's bullion outside of the financial system it is also important to have some of one's bullion outside of the jurisdiction in which one is domiciled or is a citizen. This lessens geographic risk. For these reasons it is important that investors consider 'internationalising their bullion' to safe haven jurisdictions.
HOW to Store Bullion Internationally?
Safety deposit boxes in banks and specialist depositories can be used and allocated accounts in specialist depositories are optimal.
What is a Safe Deposit Box and what is a Depository?
A safe deposit box or safety deposit box is a type of safe usually located in groups inside a bank vault, in a secure room of a bank or post office or in a specialist depository. It usually holds important and valuable possessions such as important documents (wills or property deeds), currency and or precious metals that a person might be reluctant to leave at home due to fear of theft, fire, flood, tampering or other reasons. In the typical arrangement, a renter pays the bank a fee for the use of the box, which can be opened only with production of the assigned key, the bank's master key, the proper signature, or perhaps a code of some sort. Additionally, some banks are using biometric security to complement the already increased security procedures.
A depository is a place where valuable objects are kept or deposited for safekeeping or storage, e.g. a high security warehouse or vault for important documents, precious works of art, valuables, heirlooms, cash and bullion. Depositories also come in the form of the night depository of a bank or a bank chosen for the depositing of government funds but they more commonly refer to specialist facilities where very valuable items can be deposited for storage or safekeeping.
There are many specialist depositories in the US, EU and Switzerland which facilitate investors in this regard (many of which are listed below).
Where and in Which Country to Store Bullion Internationally?
Before looking at where to store bullion internationally there may be some who would rather have their bullion closer to home. This may suit those with smaller amounts of gold bullion or for those 'who hope for the best but are prepared for the worst' and want to be prepared for a meltdown scenario of a currency collapse and hyperinflation and want to own real money, gold and silver, that will retain or increase in value. It is important to have at least some bullion in one's possession. They could consider a small local branch of a state, national or international bank providing the bank is highly solvent and or has a high credit rating from one of the international ratings agencies (which is not too many!). Knowing and trusting the local bank manager is also very advantageous. Some fear that in the event of a systemic crisis then deposit boxes in banks and financial institutions could be sealed and the bullion confiscated as was done under the Gold Confiscation Act of 1933 at the height of the Great Depression. It seems likely that in the event of such a crisis many bullion dealers pool accounts and depositories in the US might have their gold confiscated and might have their assets nationalized.
Safety Deposit Boxes in Banks
In the US, as of June 2006, Wells Fargo Bank, N.A. is the only bank in the United States to receive the highest possible credit rating, Aaa, from Moody's Investors Service. Wells Fargo has 6,165 retail branches, over 23 million customers, and 167,000 employees.
In the UK, the 'Big 4' UK banks, Lloyds TSB, Barclays, HSBC and Nat West all offer safety deposit boxes to their clientele. As of September 2006 Lloyds TSB Bank plc was the only AAA rated bank. It is one of only two pure private sector banks in the world with the Moody's Aaa rating.
In the EU, Rabobank is one of the few banks in Europe that the world's leading rating agencies have awarded the AAA rating - the highest possible rating available. Indeed, Rabobank Group is the only privately owned bank in the world with the highest possible credit rating from both Standard & Poor's (AAA) and Moody's Investors Service (Aaa); it is also ranked in the world's top three safest bank by Global Finance magazine.
It has offices internationally but in the US it only has local offices in California where clients can "store important documents and valuables in the security of Rabobank's vault storage boxes."
In Switzerland, Rabobank took over Bank Sarasin, which was founded in 1841 and one of Switzerland's leading private banking institutions and largest private banks. Sarasin's clients can use their safety deposit boxes.
There are many other secure Swiss banks who as a matter of course provide safety deposit box facilities to their clientele.
Safety Deposit Boxes and Depositories
In the US, many of our clientele have used the Delaware Depository and some are beginning to use First State Depository Company.
Some of the safety deposit boxes and specialist depositories used by our clientele in the EU include:
Metro Safe, London Branches, England
Bank House, Middlesex, England
Das Safe, Vienna, Austria
Safety deposit boxes in Société Générale, one of which is Bvd Haussmann, Paris, France
Société Générale has credit ratings of AA (Standard & Poor's) and Aa2 (Moody's).
Zürcher Freilager, Zürich, Switzerland
Switzerland obviously remains the favourite for storing bullion internationally due to its tradition of non intrusive, non authoritarian, stable government, its combined benefits of privacy, strength and safety and its safe haven attributes. Say "Switzerland" and people throughout the world think "quality", "security", "safety" and "wealth." There are good reasons for this.
Robert E. Bauman wrote an excellent article for the Sovereign Society entitled 'A Visit to Switzerland: The World's Most Trusted Asset Haven', explaining why Switzerland remains the ultimate safe haven country. "For 300 years, as European empires rose and fell, Switzerland's mountainous topography, its official neutrality and its determination to defend its sovereignty have made it an island of stability. After 50 years of saying "no," the Swiss recently joined the United Nations, but they repeatedly have rejected European Union membership, rightly fearing EU interference with Swiss privacy and banking laws and even more importantly an end to their important military and political neutrality.
A few years ago, a national ballot soundly rejected a proposal to ease Swiss bank confidentiality laws. Current public opinion polls are much the same. A global survey of private banks found that the major attraction for a bank's potential customers is Switzerland's reputation. Certainly, Switzerland's solid financial reputation explains why this nation serves as "banker to the world." In times of crisis, even greater flows of foreign cash enter Swiss banks, confirming the belief that Switzerland is one of the best places to safeguard cash and assets. Currently Swiss banks are estimated to manage at least one-third of the world's private offshore wealth."
Of all the bullion storage options in Switzerland - and we have researched them all - we believe that the allocated accounts offered by VIA MAT International in the tax free zone of Zurich Airport are the most attractive in terms of cost and security.
VIA MAT INTERNATIONAL is part of Mat Securitas Express AG, of Switzerland, one of Europe's largest and oldest armoured transport and storage companies. VIA MAT INTERNATIONAL specialises in the international valuables logistics and storage business and offers a wide range of valuables services. For 60 years they have transported, stored, insured and processed valuables with great efficiency and diligence.
At their Zurich Airport facility which is in a tax free zone they offer the following services
- Domicile-to-domicile solutions to all important financial centers
- Storage for valuable goods in customs-free warehouse
- Customs clearance of shippings including neutralising, dividing and repacking
- Monitoring of transit mailings
Advantages of VIA MAT Zurich
- Excellent IT solutions with automatic data transfers to the airlines as well as to the customs authority
- A large fleet of armoured vehicles in Switzerland, GPS-monitored for pick ups and deliveries
- Flexibility - fast reaction times
- International experience and expertise
- Market leader in Switzerland and internationally
- Storage in secure depository in tax free zone in the safe haven country which is Switzerland
Don't delay in deciding what is the optimal offshore storage solution for your bullion and where to store it.
Decide on an offshore storage plan and location and order your gold and silver bullion as soon as you have done your due diligence.
Gold Investments will provide further information or contact details on any of the options listed above to interested parties. Questions and comments are welcome to email@example.com . Gold Investments do not endorse any of the offshore bullion storage options listed (except for the PMCP and VIA MAT) and investors should do their own due diligence on all providers.
Mark O'Byrne is the Managing Director of Gold and Silver Investments Limited, Ireland's Asset Diversification and Wealth Preservation Specialist ( www.gold.ie ). He is regularly quoted and writes in the financial media and was awarded Ireland's prestigious Money Mate and Investor Magazine Financial Analyst of 2006.
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