How To Store Precious Metals

This is Breaking The Dollar, the podcast that dismantles some of the biggest misconceptions about money

Presented by Gainesville Coins.

Welcome back to Breaking The Dollar. As always I'm your host, Everett Millman, and on this week's episode we're going to discuss something that even people who do buy gold, and invest in gold sometimes don't consider or think about very much and that is storing your gold.

What storage options are out there? What are some of the benefits and drawbacks of each one and kind of just the general overview of this whole side of of precious metals that make it different than other traditional investments?

I think it's somewhat obvious that it's different.

When you own a paper asset or an electronic asset, you don't have to really worry about storage. Back in the day, you used to actually get a stock certificate. It would be a printed out piece of paper. If you owned stock in a company, we don't really do that anymore. You just own the stock electronically or on paper.

But back when they did, not only were stock certificates very intricate, they usually had more than just a company logo or design. They were usually very artistic and very formal looking. Stockbrokers used to have to carry these things in briefcases and actually you know, protect them and keep them in decent conditions.

So when you think about storing your gold and silver, it does kind of hearkened back to these older times where you did that with every investment.

You almost treated it like a painting or a piece of art that you had to preserve. So the two considerations that really matter when it comes to gold storage and silver storage is the level of risk and liability that is being taken on. So the more that you have the higher dollar value amount you have in metals, obviously that means it's a bigger liability to insure it.

And also to just kind of protect it yourself. There is always the risk that someone finds out how much gold or silver you have.

One of the famous stories in coin collecting is something called the Redfield Horde and it was between the, 1940s and 1970s. A guy just stacked up a bunch of silver dollars and there was this kind of cool aspect to it where he had a shoot in his living room next to his couch that led down to his basement. He had a bunch of boxes or crates in his basement, so he would just drop the silver dollars down the shoot and let them pile up.

Well, he was robbed several times of parts of his collection because apparently people knew about this or told people. It just goes to show that there are certain risks. If you think you can just store your precious metals in a room somewhere.

So the sort of Chrysler or rolls Royce of your storage options, the best possible one, is to keep your gold in an official bullion depository like a bank vault, and you have to make a distinction between a real vault, a true vault that is considered a depository by international standards or for your IRA.

Real vaults are reinforced on every wall. Meaning there's no weak point where someone can bust through the concrete because it's, vulnerable there. A lot of times at small branch banks, they will call something a vault when really it's just a room with a fancy door.

A real vault, a real bullion depository is much more secure than that. It's gonna have industrial grade measures to protect anyone trying to bust in to any of the walls. These depositories also always have comprehensive insurance. It is just the gold standard option. It's the option that all big international institutions use.

If a city is a big gold trading hub like London or Dubai or Shanghai, these are the type of vaults that they're going to use. Another one of the big advantages of storing your gold or silver this way isn't just the added security. It's that liquidating your investment is really easy because these vaults hold a lot of different people's gold.

They may be located in a different country than a lot of their clients who are storing their metals there and so all you really have to do is call them up and tell them you'd like to sell your metals.

Any company or institution that is big enough to have a depository, like a big vault is more than willing to pay you the wholesale price for your metals. That is almost always the case.

It's what we do at Gainesville Coins.

Another advantage you will see is if a depository offers segregated storage, meaning they do not pool together all their different clients metals and just consider them all one pile. That's what some smaller operations like GLD, the gold ETF, that's how they treat the metals that they store.

You really never want to have those types of pooled deposits because in a lot of cases, not each coin or bar of gold or silver is exactly the same as other ones unless you were planning to melt them down.

So clients usually like segregated storage because they know if they want to just withdraw their metals, it is exactly the same items that they originally deposited. So it's just kind of common sense from that standpoint.

Now I will stop here and say that there is a certain opportunity cost in storing or holding gold to begin with. There are obviously some modest storage fees, but there is also the idea that if you just took the money that you own in gold and put it into some sort of yield bearing asset, like a bond or a savings account, you could be making back more on your money than leaving it in gold. So that's called opportunity cost because you could have used that money for something else that is undeniable. There's no way around that. What I will say is that a lot of the big institutions I mentioned before, big financial institutions, central banks, they keep a lot of reserves in gold.

So obviously they are taking on that opportunity cost too. There's obviously a safe side to storing gold rather than having that money tied up in other paper investments.

As you move down the line to less high maintenance storage options, you often hear people say that you can put it in a safe deposit box in a bank and indeed this is rather common. If you have a small amount of precious metals and you don't want the liability of keeping it at home, a safe deposit box is a very common option. Now there are more drawbacks with this then a big depository in that number one, there's far less space clearly and secondly, the whole liability problem takes a slightly different form. Yes, you are the owner of the contents of a safe deposit box, but there is a slightly greater liability of confiscation because you are entrusting a third party that is not an insured bank vault or depository. It's just space in a regular banking institution.

So on one of my earlier episodes about the most controversial gold coin, I talked about how there were these 10 double Eagles, 1933 double Eagles that had been sitting in a safe deposit box for decades. In that case, theft was not an issue. Nobody stole the coins but they were confiscated.

The point is that a safe deposit box is not an extra step removed from the regular banking system. So if you have any concerns about banking in general bank, bail-ins, asset confiscation, all of those concerns are not addressed by the safe deposit box.

Really the only benefit is that your gold is being stored off site. It's not in your home. Nobody can rob it from you.

Now that leads me into another storage option, which is self storage. That means just keeping your gold or silver at home and although obviously this raises the liability you have to take on if anyone knows what you have.

I think that a lot of people who are in precious metals kind of like having it in their hands like that rather than trusting a third party or intermediary. You know sometimes it's kind of the attitude like come and try and take my gold because I'm going to protect it. And in these situations usually it's not just left lying around or in a closet. People will buy a safe or install a safe in their home. So that does give you an added level of security.

Again, space becomes a consideration and doubling back to one of the advantages of a depository or vault where you can really easily liquidate your precious metals. When you store them at home, you obviously have to then take them out of storage and lug them around if you want to sell them. Something else that a lot of people aren't aware of that you should keep in mind is if you do choose self storage, no matter how safe it is or how much insurance you buy, you can not then include your precious metals in an IRA. So that's something to consider.

The IRA custodian does require that you use a depository or vault.

One interesting side to all of this is the slight difference in things you should consider with storing silver.

Once again, space is obviously going to be a bigger consideration because it takes up more room to have a higher dollar amount of silver. The type of storage environment is more important with silver. You don't have to worry about gold because it is a completely inert metal. When it's in pure form, it's not going to corrode. It's not going to change color. Silver is a little bit different, although this is less important if you have, you know, 99.9% pure silver bars. If you have silver coins and especially 90% pure silver coins, which is how a lot of people keep their silver, there are environmental considerations that could discolor or tarnish your silver.

Mainly this has to do with oxygen and moisture. If you have a very moist environment, it's kind of warm. Over time, your silver will change color. For this reason, a lot of people who have silver coins, even if they're not major collectors, they will give them to a third party grading service who will not only evaluate the condition of the coin and assign it a grade, but they will also encapsulate it. This means that they put it into an airtight container that protects the coins from environmental damage. This same kind of idea is starting to catch on with some of the name brand silver bars like the Royal Canadian Mint or PAMP Suisse in Switzerland. They have started packaging their silver bars in these really secure blister packs, which will have the same effect of protecting it from any environmental influence. And really when it comes right down to it, these options are all up to the individual investor.

They each have their benefits and drawbacks, and as crazy as this sounds, plenty of people do literally bury their gold and silver in their backyard. It's kind of the equivalent of just stuffing cash in your sofa. People definitely do this and it's not that terrible of an option. As long as you're willing to take on that liability and protect your precious metals wherever they're stored.

So I think that's most of the interesting stuff I wanted to cover about storing your precious metals.

So we'll move on to this week's question from the audience and it comes from Chris in Oshawa.

Chris says, I really enjoyed your gold heist episode. You mentioned that there were other robberies you didn't bring up. Could you please touch on these?

Yes, so some of the biggest examples of gold heists are really government actions that happen but those aren't quite as interesting to me. I like the ones that are actual heist or robberies.

So one that I didn't get to touch on in that episode came about two years ago at a museum in Germany.

They had a giant 100 kilo gold coin on display. They had it on loan to keep for a few months at an exhibit and three people wearing hoodies and masks and black gloves, they somehow managed to break in and steal it from its display. Like happened in many of the gold heist stories I went over in that episode, they never recovered that gold. Although I do believe the perpetrators were caught using some of the video surveillance at the museum in Germany, they never recovered that giant gold coin, which is a shame because it was a specially made hundred kilo gold coin that had this million dollar face value. Really it was for promotional purposes, but at the same time, it's just a very cool thing to behold.

It has almost surely since then been melted down and made its way somewhere on the global gold market.

Another one that happened more recently that just came up in the news was the robbery of a piece of art that was a fully functional gold toilet. So this was on display in a museum, I believe, in the United Kingdom, and it has since been moved from that museum to a more permanent display at a palace in the UK that is the birthplace of Winston Churchill, former prime minister that has since been made into its own little museum.

It's kind of cool that an artist decided to make a solid gold toilet. It's even more strange that it is functional and connected to the plumbing. I believe they were charging if you wanted to sit and use the gold toilet, you could.

So I hope somebody had been washing it.

But this thing hadn't even been moved to its new home for more than three days before someone broke in and stole it.

They obviously busted up the plumbing and that part of the museum. It's kind of crazy to go to those lengths to steal a piece of artwork that's gold because part of its value is the fact that it's in the shape of a toilet, that is kind of unusual.

So they're definitely missing out if the burglars would have to sell the gold for just it's melt value which is far, far less than what it is worth as art.

Because obviously you're not going to be able to get away with selling a gold toilet and have someone not connect it to the story of a gold toilet being stolen.

Yeah, those are some interesting heists and that it is kind of true that these things go on with some frequency.

So that does it for today's show. We'd like to thank everybody for tuning in. We really appreciate everyone listening.

Be sure to join us on next week's episode, as we discuss all the different types of money that have functioned from ancient times to the modern day.

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The views and opinions expressed on this show are for informational purposes only and should not be used or construed as professional investment advice.