Owning Gold Is One Thing, Storing It Quite Another
“So in addition to benefiting from secure, specialized bullion vaults that are insured, you obtain good geographic and political diversification for your gold,” Turk says. “Also, you have exceptional liquidity because you can sell your metal 24/7 and have the proceeds wired the same day to your bank account anywhere in the world.”
When considering storing gold in a depository, Clark says investors should always ask if their investment is being held on or off of the holding company's balance sheet.
“If their precious metals are being held on the company's balance sheet, they should understand that their investments are co-mingled with the assets of that company, and they will become general creditors in the case of the company’s bankruptcy or failure,” says Clark.
“In such a circumstance, investors will receive whatever portion of the company's total assets the bankruptcy court or ‘receiver’ may determine, which may very well be only a fraction of the actual market value of their precious metals, Clark adds.
“If held off the company's balance sheet, investor assets are held separate and apart from those of the company, and thus, they will not get tied up in bankruptcy proceedings should the company fail," he says.
In addition, Clark says investors should always know whether their holdings are insured and, if so, under what type of policy.
“Are their precious metals simply covered by a general liability policy of the company holding them, or is there a specific "all risk" custody policy in place, underwritten by a reputable insurer — like Lloyds of London — that specifically protects the precious metal of its customers?
Finally, investors should be certain their metals are in an account or sub-account titled in their name, so in the event a company fails its records will show who owns what.
Turks says one clear advantage of using professional storage is independent third-party audits, which confirm essential details and come with unlimited online access.
Clark also notes that investors can take delivery of their gold at any time. The precious metal can be delivered by armored car or shipped overnight. In addition, Clark says, gold can be posted as collateral to receive a loan, avoiding tax consequences of selling the commodity. Multi-redundant security systems also make depositories an extremely safe option, he notes.
The fee structure for storing gold in a depository is similar to purchasing any other financial asset.
Fees can range from 1/3 of 1 percent to 1.25 percent, depending on the depository and the account value, according to industry players.
Clark says at Diamond State, an account valued at $50,000 would incur an average storage fee of $375, or 0.75 percent. Firms calculate the fee daily based on the price of gold multiplied by the number of ounces in an account, multiplied by the percentage fee and divided by 365 (days) to determine the annual rate. Fees are also based on a sliding scale up to $5 million, the larger the account value, the lower the fee.
No matter which storage option investors choose, most agree peace of mind is worth its weight in gold.