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Owning and storing gold

My advice on owning and storing gold: buy the physical gold and store it yourself. The form of the gold, be it Krugerrands, American Gold Eagles or gold bars, is not as important as taking physical possession.

CMIGS does not hold or store gold for its clients—we ship it to them—and we strongly warn against trusting a third party to look after one’s gold. Gold is too important to trust to someone else’s care.

However, Americans who put gold or silver in their IRAs have to use precious metals warehouses. For those investors who buy gold (and silver) outside IRAs, we recommend that they secure the metal themselves.

As to whether the gold or silver should be stored in a bank safe deposit box or secured away from a bank is a decision that each gold owner must make. Investors who own their homes have many more storage options than investors who live in apartments. Frankly, we caution against keeping gold in apartments; we think that bank safe deposit boxes are the preferred storage places for apartment dwellers.

A final note on storing gold or silver at home, whether a house or an apartment: never, ever store gold or silver in a bedroom. That’s the first place that a common burglar goes, looking for cash, guns and jewelry.

What about owning “other forms of gold,” such as ETFs, futures contracts and gold mining shares? With ETFs (Exchange Traded Funds) you do not own gold. You own shares in a company that owns gold. You get the price action dollar for dollar with prices of gold, but you do not own gold.

With futures contracts, by going “long” them, you have the “right” to take delivery of the gold represented by the contract when it matures. With futures contracts, you get dollar for dollar price action plus you gain the advantage of leverage, meaning that you have to put up far less money than if you were buying gold for physical delivery, such as from CMI Gold & Silver Inc.

As with ETFs, when you buy futures contracts you do not “own” gold. You have the right to take delivery of the gold represented by the contract when it matures and you pay the full value of the contract. As for the leverage that comes with futures contracts, it also works against you if gold goes down before it goes up. Futures contracts are not suitable for gold investors and should be left to commodity speculators.

Mining shares also provide greater leverage than the outright ownership of gold because stock shares trade “times earnings.” Further, if you select a mining company that makes moves that increases earnings, you usually see the price of the stock rise. But, with stocks, you in no way “own” gold, you own “proxy gold,” which should increase in value if you select a gold mining company that makes good business decisions.

In reiterate, it my position that persons wanting to hedge against inflation and protect against financial uncertainties should buy gold, be it gold bullion coins or gold bars, take delivery of it and secure it themselves. Leaving someone else to look after your gold is risky.

Still, I recognize that some persons’ circumstances are such that buying and storing offshore, i.e., out of the United States, makes sense. In the past, I’ve had no good recommendations for investors wanting to buy offshore other than to seek out a Swiss bank. Now, though, I do.

BullionVault is a highly-professional precious metals firm owned by Galmarley Limited, a UK-registered company located in West London. BullionVault offers its clients choices of storage in London, Zurich and New York. Obviously, if you choose New York, you are not going offshore, but with BullionVault you have the option of storing precious metals either in London or Zurich.