Regards,

Ray

Again the world is full of compromises. It may be that most people may want to have some physical gold near to them. Then some in a holding company overseas or ETF.

The reason Harry Browne wanted some gold outside of the country is primarily so you can drag your feet if the government goes haywire and starts looting citizen’s assets as has happened many many many times in the past. So secrecy of the storage is not nearly as important as having foreign law and jurisdiction problems in the way from such action. For instance if gold is confiscated in the US again (unlikely, but you never know), the first place they will go is the COMEX warehouses. So if you have your gold in an ETF you are in big trouble because that’s where your gold is.

If however you had your gold in a foreign bank, Perth Mint, or one of these other services then it gets murkier. What are the chances that a company domiciled in Australia, UK or Switzerland would comply with such an order? Even if they do comply, will it give you enough breathing room to move the funds or hire an attorney to drag your feet? Probably.

These are all remote risks, but people often wonder why Harry Browne wanted some assets stored outside of the country. The reason is basically that you don’t want all your money within easy grasp of your government. The residents of Argentina can vouch for the validity of this advice when the govt. there froze all accounts in 2001 to devalue the peso and recently seized private pension funds to “protect” them from the financial problems of late.

Those are all good points. The one benefit I see with ETF’s (which is why I elected this option) is that I actually own the asset and can sell it instantaneously with no fear of a company going bankrupt, a country being taken over and not being able to access the gold, etc. I understand it’s not “pure” gold, only a tracking vehicle, but it still trades fairly closely.

Again, great blog with terrific information.

I’ll put this in the Gold FAQ I’m preparing. But basically you ideally want as few people between you and the asset as possible. There are new options such as what Matt says that I really don’t have much experience with. Then you have options like the Perth Mint, etc. These are all ways to own gold but each has more pieces of paper between you and the asset and gets less and less desirable. But the world isn’t perfect and even physical ownership has risks. My informal rating is something like this:

1) Physical control stored somewhere secure against theft and insured.
2) Stored in an overseas bank in segregated storage in your name (overseas means outside of your own country where ever that may be) with a respectable and insured bank. Gold should not be mixed with bank assets.
3) Allocated gold storage in a foreign bank (fully titled ownership in your name, but held with other gold). Although the gold is held with other customer’s gold, it is not a bank asset and is the titled property of the customers themselves.
4) Gold certificate programs like the Perth Mint or maybe these new services like goldmoney/buillionvault. Gold should not be mixed with bank assets. The company in charge should just be a manager with no legal claim to the assets that they store.
5) Gold ETFs or unallocated pooled gold accounts.
6) No gold at all.

Harry Browne would have liked to see #1 and #2. So you’d own some gold locally that you can access and some gold overseas in segregated storage. Unfortunately good segregated storage options are becoming harder to come by. I really haven’t looked too closely into Matt’s recommendation, but plan to in the future. It’s obvious that Goldmoney/Bullionvault and their competitors came about because of market demand and the restrictions being put in place on opening foreign accounts and holding gold. It looks like an interesting option, but I need to research exactly how the company is structured. There were episodes in the past where gold dealers would “store” gold for buyers. When the company went bankrupt the buyers found that the gold being “stored” wasn’t there or was used to pay company operating costs because it was part of the company assets. I doubt that these new companies are setup that way as they cater to people who would not like that kind of risk, but again I need to research it. Perhaps Matt can comment on his experience and research.

Harry Browne did comment on goldmoney, etc. in a radio show and didn’t like the idea. Unfortunately he passed away in 2006 and many legal changes have happened since then to discourage Americans from opening overseas accounts. So we have no way of knowing if he’d have changed his stance in the face of the new “anti-terrorism” and “protect the children” laws that have surfaced since then.

In all cases, when dealing with a gold dealer for what you have locally you need to take physical delivery and store it yourself. If you’re dealing with a bank that buys and sells bullion then this is less of a concern because you have many more protections in place to prevent any funny business. Operations like Perth Mint and some of these newer companies could be a good compromise if you are willing to accept the higher risk of more people involved between you and the asset for the convenience of having them hold gold overseas for you.

Certainly with the ETF there is no problem in holding it as long as you are comfortable with the risks. While a closer control of the metal is always desirable, it’s far better to hold the gold ETF than to have no exposure to the asset at all. It is also much better in my opinion than many of the commodity funds being offered today as a pure inflation protection hedge. Thanks for visiting.

Craig, I do agree with you though that this is really the only commodity one needs to own. I read somewhere recently that all of the gold ever mined in the history of the world still exists somewhere on the planet. This is one of the reasons it’s such a great hedge against inflation.

Regards,

Ray

Storing large amount of gold directly is a logistical problem. There are however some institutions that make it easier to do segregated storage (Everbank is one, Perth Mint is another – although both their fees are higher than I’d like to see). These have their own risks, but I think they are lower than most gold ETFs. Even the gold ETFs though are better than using CCFs for the gold allocation in the Permanent Portfolio. For smaller amounts a safe deposit box at a bank is very reasonably priced and makes it easy to sell or add to your gold position through gold dealers as you require (which shouldn’t be too often).

unfortunately, for those who have never bought and held gold before, it may may not seem so “easy to buy” and store – - – especially in larger quantities when gold makes up 25% of one’s portfolio. i think this learning curve is the one of the bigger deterrents in physical gold ownership.