Global Gold has recently introduced a new storage service called Key Box Storage. It allows you to transfer and safe-keep your precious metals, including numismatic and semi-numismatic coins, in a “key box”. You buy the box, place your metals in it and place it in a high-security vault in Zurich, sealed and locked to provide only you with exclusive access.
Back around 2007, a good friend educated me about the merits of unencumbered ownership and physically allocated storage. At the time, we had several client inquiries interested in storing their gold in Switzerland. They had very specific demands: the gold had to be physically allocated, segregated, and safely stored in a high-security vault in Switzerland, and it had to be outside of the banking system.
Prior to this, we had helped clients regularly with placing their gold in vaults with Swiss banks. Moreover, BFI has been and still remains an approved dealer for the well-known Perth Mint Certificate program, in my view still one of the best solutions for holding unallocated precious metals. Many international investors opted for that solution as well. However, in view of growing debt, growing stress on and within the financial system and, frankly, the growing demand from our international client base, we decided to offer a solution. Thus, in 2008, Global Gold was born.
Why you need to keep your gold coins and bars “out of reach”
Of course, keeping some precious metals like a bag of silver coins close to or right at home makes a lot of sense. However, if you’re talking about the storage of significant wealth in the form of precious metals, more planning needs to be considered. Beyond your “emergency nest-egg”, you should be thinking high-security and professionally managed storage, preferably located in a jurisdiction that is politically safe and fiscally sound.
Dirk Steinhoff, our Chief Investment Officer at BFI, has an interesting story to tell in this regard. His grandfather, who had lived in Falkensee, a little town at the outskirts of Berlin, Germany, was forced to flee on short notice right before the Berlin wall was built.
After being warned by a friend that the Stasi, the German State Security Service, was coming to arrest him on allegations of treason (he was apparently not a friend of the communistic regime), he packed up his family in the middle of the night and fled to Western Germany, leaving behind his house, car, and all kinds of other possessions one tends to collect over a life-time, including a lot of memories and a bag of gold coins. Renting a U-Haul, packing boxes, and moving out with a plan was not an option, and being caught carrying a bag of gold would not have been helpful in the quest of survival.
The story is one unbelievable details and tragic turns, and the subsequent adventures of Dirk’s ancestors is one best told by Dirk. But the moral of the story and why I cite it here is to alert you that your valuable gold coins are best stored in a safer place than buried in your yard; ideally they should be kept in a jurisdiction that is safe, sound and not subject to the danger of confiscation.
Is confiscation a real threat?
The tragedy described above happened before the Berlin Wall was built. That may sound like ancient history to many readers, but it isn’t even 60 years ago. Historically speaking, that is not “a long time ago”.
Americans may be aware that in the 1930s, President Franklyn D. Roosevelt banned the ownership of gold by way of Executive Order 6102. The Order prohibited “…the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.” Once the Order went into effect, the ownership of gold became a federal crime, punishable by ten years in federal prison and a $10,000 fine.
Individuals and companies were not allowed to possess monetary gold, in any form, for any reason. The Order commanded Americans to relinquish the gold to the U.S. government. They were then given paper currency in return, at a fixed price of US$ 20.67 per ounce. A fair deal? Well, the dollar was devalued subsequently by setting the gold price at US$ 35.00 per ounce after the confiscation. This translates into a loss of almost 50%(!!) for those who handed over their gold.
Is this kind of confiscation a real threat today? Well, I guess it depends on what you think of the current state of the economy, and the political and financial systems. I’ll leave that for you to consider and decide. There has been much written on the topic, so do your research. In my book, it is a risk to be mitigated for sure!
The main reason to accumulate gold as a savings instrument is to mitigate sovereign risk—the risk that governments and central banks will confiscate wealth by devaluing currencies and running mind-boggling deficits.
Key Box Storage: a solution to safely store coins and bars
Global Gold stores, buys and sells bullion gold coins and bars (as well as silver, platinum and palladium) on behalf of its clients. I won’t describe the various services here. I do, however, want to introduce the latest addition to the Global Gold offering: The Key Box Storage solution, introduced last year. It is unique, and I believe it is quite important.
In brief, this service grants high-security storage of your standard bullion metals or your numismatic collection in a container, the so-called “Key Box”. The box is locked, sealed and stored. You, as the owner receive two keys. Only you have access. In most jurisdictions, including the US, this form of storage is non-reportable.
Contrary to the more conventional and familiar deposit box you may know from banks or services like One Safe in Austria, the Key Box allows easy shipping. In other words, upon request, the box can “come to you”.
Moreover, this service allows Global Gold to accept non-bullion coin and bar formats. The declared content of the Key Box is fully insured. In the case of bullion metals stored, they are insured at the spot market value. However, when it comes to numismatic or semi-numismatic coins, where the price is not fixed and less clear, one of the specialties with KBS is that you, as the client and owner, will specify the insurance value. It will of course always at least be the spot value of the bullion.
For sure, financial privacy no longer exists in the conventional banking sector and can only be achieved to some degree with proper planning. Even in lesser-developed countries, banking secrecy is largely a thing of the past. The OECD and FATCA ensure that intrusive and possessive governments have convenient access to financial information of their taxpayers. Some governments have even started to ban cash transactions over a certain amount.
In terms of privacy, digital currencies like Bitcoin may have some potential, although collectively they are still in their early stages. Precious metals, on the other hand, are grounded in tradition and serve as a sound centerpiece to an international diversification plan.
The logical and straight-forward case for gold
Owning gold in this era of unprecedented fiscal and monetary tinkering is a good choice. My friend, Felix Zulauf, said it best:
“Governments and central banks have no clue how to tackle the economic problems and get our economies back on its former growth track accompanied by rising prosperity for the public. Authorities have entered excessive monetary experiments making the situation worse.”
“The experiments and attempts to devalue currencies are historically unique. If our economies do not improve and rather weaken further over time, we must expect monetary authorities to intervene even more decisively whereby underwriting fiscal programs will be part of it. Whichever way you look at it, the risk is high that the intrinsic value of paper money will decline in the long-term. Gold can protect against such risks, although its market price will hardly be a one-way street.”
Taking it a step further, remember: If you don’t own and safe-keep your precious metals in the proper way, you might as well not own any precious metals at all.