Owning Physical Gold & Silver Tips and Suggestions
When owning physical gold & silver there are a few general concepts to understand:
- Don’t tell the world! (2 or 3 is enough)
- You aren’t planning on using them in regular retail businesses in normal times.
- The best thing that can happen to them is you leave them to your heirs (you never needed them).
- They preserve wealth over time (they are not intended to “make money”).
- They are low-cost insurance for emergency money in unusual times and against inflation.
- You don’t have to buy them all at once (add to them as funds are available & needs change).
- You should also store cash (5’s; 10’s & 20’s) for use as needed for emergencies or the unexpected. The goal should be 3 months expenses or @ $2,000.
- Start with small denominations (change not needed & more transactions).
- Having a reasonable supply of things you normally use is a great addition to this plan.
What to own:
- Pre 1965 US dimes, quarters & half dollars (they are 90% silver & usually the lowest premium over spot silver price). Ultimate goal is $500 to $1,000 face value.
- One ounce silver coins (issued by a government) and one-ounce silver rounds or bars (issued by private mints & companies (usually less premium than coins). Watch the premium as it varies from time to time (I personally won’t pay very much extra for American Eagles over other governments coins). Ultimate goal is 1,000 to 2,000 ounces.
- Gold coins (government minted as the premium is less than for silver & less likely to be counterfeit than lesser known brands). Start with 1/10th and ¼ ounce coins for the first 5 to 10 ounces and then add the half & one-ounce coins. The ultimate goal is 10 to 20 ounces.
- Ten ounces and larger bars are good for major holdings but are harder to store & use in daily transactions. Items of this size normally should not be stored at home (theft & insurance problems). The goal amounts shown above can be split between home and safe deposit boxes if it doesn’t get you out of your comfort zone.
How to store at home:
- Storage vessels for small amounts can be made out of large plastic pill bottles using the white plastic plumbers tape for a better waterproof seal.
- Larger amounts may be contained in a two foot long two-inch diameter piece of PVC pipe with a glue cap on one end and a screw cap on the other end. Larger pipe can be used but gets expensive.
- #1 & 2 above may be buried outside or hidden in the buildings (make sure they can be relocated).
- Between the studs metal lock box (generally not waterproof) (hide well).
- Home safe (well hidden & sized to meet your needs).
- Each container should have a variety of type & size of items so they can be used one at a time.
- Oxidation of items (including food & ammo) can be reduced by either putting a piece of “dry ice” in the bottom of the container and letting it evaporate (co2) or adding “nitrogen gas” from a portable tank. These gases are heavier than air & will drive most of the oxygen out. Containers should be sealed quickly (wait for dry ice to evaporate). The nitrogen tank could be fitted with a flexible hose and a four-foot length of ¼ inch copper tubing for ease of use. This is for waterproof sealable containers only.
- If you are a known proponent of owning precious metals, you should also let it be known that you do not store them at home. Your options then are storing at a close by relatives or close friends (small amount) with the rest in a nearby safe deposit box or private vault.
- Insurance for these items can be expensive, hard to get and defeats your secrecy plan.
Safe deposit boxes:
- Contents are not insured and subject to theft, but can provide a fairly secure close by location to store items you are not comfortable having at home. Cost is @ $100 per year.
- Some banks do not allow you to store cash or bullion coins (check the rental agreement).
- Bank safe deposits may not be available to you during “bank holidays” (think Greece).
- Check your area for private (non-bank) safe deposit companies to avoid the bank holiday problem. Remember, your items are only as safe as the company & location that has them.
- Non-bank vaults are preferred to avoid coming under all the various bank laws, rules and regulations.
- Decide if you want the vault inside the “COMEX” warehouse system or don’t care (inside the system avoids having metal retested upon sale) (usually only important for large amounts & large bars).
- Segregated storage is best (you get back the exact same thing you gave them).
- Minimum requirement is “allocated” storage in your name.
- Go to “goldsilvervault.com”, click on the description of services and then click on interview & overview to watch a 40-minute video that covers vaulting very well. I use this vault personally.
- Cost is generally between .6 & 1% per year depending on the total value of metals stored with the vault. This is close to the management costs of ETF’s and such. This means you should have in excess of $50,000 worth of metal to store before considering using a vault for storage.
- Do your homework, you are trusting a very liquid (easy to sell) asset to the care of someone else. I also recommend that you separate who you purchase the metal from and who stores it. This at least gives you additional assurance that the metal was purchased & not just a paper transaction.
- Storage outside the USA is an option, however, usually, that is only as a part of a much larger life plan and beyond the scope of this essay.
There are basically two ways to have physical metal in an IRA. One is to have a trustee store the metal in trust for you at a vault and the other is to set up an “LLC” inside your IRA and have it store the metal at a vault.
Going the LLC route requires legally setting up and maintaining it in some state (costs vary depending on the attorney & trustee & which state) and there are very strict rules on what you can & can’t do as LLC manager.
The metal allowed in IRA’s is also restricted by the US government IRS laws & rules. If you use a trustee it may be very difficult to get segregated or allocated storage and the metal is stored in the trustee’s name. To go the LLC route you should be thinking about around $100,000 of metal because of the setup & annual expenses.
This area of physical storage is complex and should be researched carefully to make sure it is really beneficial to your overall plan and not extra work for not much gain.
Goldsilvervault.com does have segregated storage for IRA’s and works with two trustees that I know of (theentrustgroup.com & mountainwestira.com). You can check out their websites for additional information on IRA’s holding metals. Another trustee & plan set up company is accuplan.net.
I hope this helps you get started, but remember no one will look after your investments for you better than you yourself.
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.