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BFI Capital
May 7, 2018

Y? Series – Confiscate This!... Why Safekeep My Gold in a Private Box in Switzerland?

In 2017, Global Gold introduced a new storage service called Key Box Storage. It allows you to transfer and safe-keep your precious metals, including numismatic and semi-numismatic coins, in a “key box”. You buy the box, place your metals in it and place it in a high-security vault in Zurich, sealed and locked to provide only you with exclusive access.

Back in 2007, a good friend educated me about the merits of unencumbered ownership and physically allocated gold storage. At the time, we had several clients interested in storing their gold in Switzerland. They had very specific demands: the gold had to be physically allocated, segregated, and stored in a high-security vault in Switzerland, and it had to be outside of the banking system.

In view of growing debt, growing stress on and within the financial system and, frankly, the growing demand from our international client base, we decided to offer a solution. Thus, in 2008, Global Gold was born.

Why you need to keep your gold “out of reach”

Of course, keeping some precious metals, like a bag of silver coins, close to or right at home makes a lot of sense. However, if you’re talking about the storage of significant wealth in the form of precious metals, more “out-of-the-box” planning may be required.

Dirk Steinhoff, BFI’s Chief Investment Officer, has an interesting story to tell in this regard. His grandfather, who had lived in Falkensee, a little town on the outskirts of Berlin, Germany, was forced to flee on short notice right before the Berlin wall was built. After being warned by a friend that the Stasi, the German State Security Service, was coming to arrest him on allegations of treason (apparently, he was not a friend of the communist regime), he ran with his family in the middle of the night and fled to Western Germany, leaving behind his house, car, and all kinds of other possessions one tends to collect over a life-time, including a lot of memories and a bag of gold coins. Renting a U-Haul, packing boxes, and moving out with a plan was not an option, and being caught carrying a bag of gold would not have been helpful in the quest for survival.

The story is one of unbelievable detail and tragic turns, and the subsequent adventures of Dirk’s ancestors are best told by Dirk himself. But the moral of the story and why I cite it here is to serve as a reminder that your valuable gold coins are best stored in a safer place than your backyard; ideally, they should be kept in a jurisdiction that is stable, sound and not subject to the danger of confiscation.

Is confiscation a real threat?

The tragedy described above happened before the Berlin Wall was built. That may sound like ancient history to many readers, but it isn’t even 60 years ago. Historically speaking, that is not “a long time ago”.

Americans may be aware that in the 1930s, President Franklyn D. Roosevelt banned the ownership of gold with his infamous Executive Order 6102. The Order prohibited “…the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.” Once the Order went into effect, the ownership of gold became a federal crime, punishable by ten years in federal prison and a USD 10,000 fine.

Individuals and companies were not allowed to possess monetary gold, in any form, for any reason. The Order commanded Americans to relinquish their gold to the U.S. government. They were then given paper currency in return, at a fixed price of USD 20.67 per ounce. A fair deal? Well, the dollar was subsequently devalued by setting the gold price at USD 35.00 per ounce after the confiscation. This translates into a loss of almost 50%(!!) for those who handed over their gold.

Is this kind of confiscation a real threat today? Well, I guess it depends on what you think of the current state of the economy, and the political and financial system. I’ll leave that for you to consider and decide. There has been much written on the topic, enough to do your own research and to form an educated opinion. In my book, however, it is certainly a risk to be mitigated.

The main reason to accumulate gold as a savings instrument is to mitigate sovereign risk — the risk that governments and central banks will confiscate wealth, not only through executive orders or brute force, but also by devaluing currencies and running mind-boggling deficits.

Why Key Box Storage?

Global Gold offers a number of storage services, all for allocated physical precious metals without exception. I am mentioning the Key Box service specifically, because very often precious metals are passed down to family members over generations and this service allows Global Gold to accept numismatic coin and bar formats.

In brief, this service grants high-security storage for your standard bullion metals or your numismatic collection in a sealed and locked metal box, the so-called “Key Box”.

You, as the owner, receive two keys. Only you have access. Contrary to the more conventional and familiar deposit box you may know from banks, the Key Box allows easy shipping. In other words, upon request, the box can “come to you”. The declared content of the Key Box is fully insured. And, in most jurisdictions, this form of storage is non-reportable.

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