Gold and silver investors have strong opinions about third-party storage of metals. Privacy, the lack of counterparty risk, and precious metals’ role as “crisis money” are among the most attractive features of physical bullion. So it is no surprise that many investors are totally committed to storing metals at home or someplace else that is both private and accessible 24/7.
We wholeheartedly agree with that sentiment and always recommend personal possession when it comes to at least some of your metals. However, there are a number of circumstances where third-party storage makes a heck of a lot of sense. Let’s take a look at the most common…
Physical Security and Insurance Coverage are a Top Priority
Some folks live in high-crime neighborhoods and may have experienced a home invasion or burglary. Others may have a large holding where maximum, around-the-clock security is only prudent given the stakes involved.
We even have customers worried about family members with an addiction problem and a history of stealing.
There are ways to improve security when storing at home. However, when it comes to physical security, a professional vaulting service such as Money Metals Depository cannot be matched – not even by banks. The best depositories offer armed guards, Class 3 vaults, multiple perimeters, state-of-the-art electronic security, dual controls, fully segregated storage, and, perhaps most importantly, insurance coverage for your holding.
People with safe deposit boxes at a bank are often surprised to learn the contents of their box are NOT insured. Worse, banks have a history of working with regulators and may well be complicit in any government scheme to declare a bank holiday and “bail-in” or confiscate assets.
Secure storage at a non-bank institution is a far better idea.
Silver Can Be Heavy and it Needs More Space
A monster box of 500 silver American Eagles weighs roughly 40 pounds. That is more weight than some customers want to handle. Some simply can’t.
Silver can also be space intensive. 500-ounce silver boxes are roughly the size of a larger shoe box. The more of them an investor accumulates, the greater the chance the holding will outgrow the space available in their safe. And getting a larger safe isn’t always an option.
Minimize Costs and Transact More Efficiently
Bullion investors are well acquainted with the advantages of holding tangible coins, rounds, and bars. But buying and selling involve transaction costs, including shipping.
Of course, some companies such as Money Metals Exchange ship and insure all orders at no cost. However, when it is time to sell metal, there is going to be some expense involved with the return shipment. Not to mention the time and effort needed to get the metals packaged and mailed.
None of this is a big deal for investors who plan to buy and hold the metal indefinitely. It’s another story for investors who trade more often. Some trade based on the gold-silver ratio and periodically swap one metal for the other. Other investors are buying and selling metal on a structured basis – perhaps weekly or monthly.
Then there are individuals who simply want the lowest possible premiums and prefer exchange-sized gold and silver bars. For these bars, a third-party vault which offers storage locations inside the COMEX system, is essential.
100-ounce gold bars must be shipped via armored truck in order for the shipment to be insured. That can be prohibitively expensive and difficult to arrange. 1,000-ounce silver bars weigh 70 lbs apiece, making them both awkward to handle and very expensive to ship via the Postal Service or UPS.
On top of this cost and hassle will be costs associated with having the bars melted and re-assayed when they are sold. This is a requirement for all bars coming from outside the COMEX chain of custody.
There is no cost to ship and insure when customers buy from Money Metals Exchange and store with Money Metals Depository. The reverse is also true; there is no shipping cost when selling stored metals back to us. And transactions can be completed without hassle or transit delays.
Hold Bullion inside an IRA
More and more people are dumping conventional (paper) securities and transferring funds into self-directed IRAs where they can invest in tangible assets such as bullion. However, IRS rules restrict investors from directly holding the assets. That means finding a depository to store the IRA metals.
Note: A few IRA custodians and metals dealers are promoting “self-storage” or “home storage” IRAs that attempt a clever work around to the third-party storage requirement of the IRS. The scheme requires strict record keeping, significant set-up expenses, and plenty of risk because it has not been fully tested in court. It may be disqualified, leaving people liable for taxes and penalties. Accordingly, we advise great caution and strongly suggest storing with an approved vault instead.
To sum up, people should at least have an “emergency stash” of metal they can access at any time. That does not mean 100% of investors should have 100% of what they own stored at home. There are plenty of cases where a secure storage facility is the way to go.
Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.