The secure and confidential storage of your gold bullion, whether in the form of gold bullion coins or gold bullion bars (gold bars), is an important factor you need to consider when you decide to invest directly in gold through the purchase of physical gold and its ownership.

However, while it’s important to store your gold bullion in a secure location and to protect your confidentiality, it’s also important to consider the cost of storage. You don’t want to pay a fortune for storage, especially if you have made or are planning to make a relatively small investment in gold bullion.

Here are the various options when it comes to the storage of gold bullion (and other valuables):

1. Home / Office

Storing all of your gold bullion in your home or at your workplace, is not recommended, especially here in South Africa, where burglaries and other forms of crime are rampant. Security measures such as alarms, deadlocks and domestic safes provide very limited protection. Furthermore, natural disasters such as floods and fires can cause extensive damage to one’s home, leaving one’s valuables exposed and damaged. However, despite this, it is recommended that you store at least some of your gold bullion in your home/office. The reason for this is because in the event of a systemic crisis, the government may confiscate your gold bullion and nationalise it. If something like that happens, the softest targets will be hit first, which include safety deposit boxes held at banks, depositories, etc. Needless to say, you will have a much better chance of successfully hiding your gold when its in your home at the time. If you think this is a crazy notion and something that could never happen to you, then you need to consider the confiscation of gold by the US Government on April the 5th 1933 under the Gold Confiscation Act of 1933. If you still think it’s a crazy notion, you need to ask yourself the following question: Do you trust that the SA Government will never confiscate your gold?

When you do decide to store gold in your home/office:

  • it’s best to store it in a floor safe,
  • to tell no one that you are storing gold in your home
  • and make sure that it is insured.

It is not recommended that you hide gold bullion in your garden, or any other obscure place in or around your home/office. There are too many risks attached to such a venture.

2. Safe Deposit Box / Safety Deposit Box

A safe deposit box / safety deposit box is in essence a type of safe, which is used to store valuables such as jewellery, share certificates, gold, silver, etc. in groups inside a bank vault or private safe deposit vault. In a typical arrangement, a renter pays the bank / private safe deposit vault a fee for the use of the safe deposit box, which can be opened only after successfully passing various security tests (correct signature, correct key, correct code, etc.).

Storing some of your gold bullion in a safe deposit box / safety deposit box, is recommended, because it offers a relative secure, confidential, affordable and practical storage solution.

Reasons why you should make use of a safe deposit box to store some of your gold bullion include:

  • Inexpensive – Renting a safe deposit box is normally inexpensive, especially if you consider the value of the gold you can store in such a way.
  • Accessible – Most places that offer such a service provide access at least 6 days a week.
  • Secure – Safe deposit boxes are relatively secure, especially when compared to the alternative of storing gold in one’s home or at one’s workplace.
  • Peace of Mind – If you’re looking for piece of mind, not wanting to worry about whether your gold is safely stored or not, then it’s best to make use of a safe deposit box. It certainly offers peace of mind.

However, you should never store your gold in a safety deposit box that’s kept at a bank. It is best to make use of private safe deposit vaults or depositories which are owned, managed and maintained by private companies:

  • Better Security Features – Depositories normally offer better security features than most banks in South Africa. Security features which include: Security guards, closed circuit televisions, control rooms, fingerprint scanners, seismic detectors, dual key systems, bulletproof glass, armed response, etc.
  • Insolvency / Bankruptcy – Another down side to storing your gold in a safe deposit box at a bank or financial institution, is the risk of bankruptcy / insolvency, especially when the contents are not insured.
  • Private Companies – Most depositories are owned, managed and maintained by private companies. This is a great benefit, especially if one considers the exposure of banks to economic cycles or to a collapse of the financial system. In addition, the sole purpose of depositories are to provide the safest possible environment for the storage of valuables. At a bank however, the storage of a safe deposit box is seen as a secondary function. This opens the door to a lot of unnecessary risks, especially if one considers the cases where safe deposit boxes have been stolen from bank vaults in South Africa.

One must also not forget that depositories are independently insured and make no claims over the assets stored.

Another tip we can give to investors, besides the tip to store their safe deposit boxes with depositories instead of banks, is to always consult their legal representatives first, before signing ANYTHING. Contracts vary and you simply don’t want to sign a contract where the bank / depository totally indemnify themselves against the theft of your gold due to their gross negligence, etc. If they do this and you sign, believe it or not, they will be able to basically do what they like with your gold. If your gold ‘disappears’ or gets stolen under such a contract, you will only have half a leg to stand on in any court of law, and not without going through a process which is emotionally and financially very draining.

The down side to storing your gold in a safe deposit box:

  • Disasters – The items in a safe deposit box are normally not insured against floods, fires, robberies or similar disasters.
  • No Access – If you store your safe deposit box with a bank, you might not be able to access your gold when needed, especially when the bank is closed on a holiday.
  • Confiscation – A safe deposit box is not the safest bet the day government decides to confiscate gold. Gold has been confiscated elsewhere and it might be confiscated here in South Africa as well. It can be confiscated through laws specifically aimed at the confiscation of gold (like mentioned-above), or it can be done through raids disguised as raids aimed at money laundering, terrorism, etc. For example, no less than 7000 safe deposit boxes were confiscated when over 300 heavily armed police raided the vaults owned by Safe Deposit Centres Ltd in the UK in June 2008.
  • Insolvency / Bankruptcy – Another down side to storing your gold in a safe deposit box at a bank or financial institution, is the risk of bankruptcy / insolvency, especially when the contents are not insured.

In addition to the above, it is risky to keep your safe deposit box in a country with a high risk of bankruptcy, because it certainly increases the risk of confiscation.

3. Non-fungible / Fungible Storage

Another option when it comes to the secure, confidential and affordable storage of your gold bullion, is to make use of non-fungible or fungible storage with a bank or dealer.

Non-fungible Storage / Allocated Storage

Non-fungible or allocated storage refers to storage where your gold is tagged or separated from the gold of others. In other words, your gold is not pooled with the gold of others which are not tagged or separated.

Non-fungible storage has many benefits above fungible / unallocated storage:

  • Bankruptcy – If the bank or dealer goes insolvent or bankrupt, you won’t just become a creditor, the gold in your allocated storage should be returned to you in full.
  • Delivery – Non-fungible storage is essential, especially if you’ve got specific bars and coins that need to be sent to you when delivery is requested.

On the other hand, with fungible storage, you have to go through complicated procedures to request delivery of your gold.

Given the above, it is no surprise that most gold investors prefer to make use of non-fungible or allocated storage.

Fungible / Unallocated Storage

Fungible or unallocated storage refers to storage where your gold is pooled with the gold of others with no tagging or separation whatsoever.

Fungible or unallocated storage is normally cheaper than non-fungible storage, but the risks attached to fungible / unallocated storage simply makes it worth while to pay a premium for non-fungible storage.

 

Depositories

 

 

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