You purchased precious metals like gold bars or silver coins to protect your wealth from economic turmoil and safeguard your future. It’s just the first step towards securing your future investment, and the next phase is securing your holding. When people start investing in precious metals, the most prominent question is where to buy precious physical metals, and the next one is how and where to store the metals one has purchased.
As a matter of fact, the need for more awareness of precious metal storage is one of the reasons why people hesitate to purchase gold and silver. While the most typical storage choices are storing metals at home, bank safe deposit or vaults, one must choose the best storage option evaluating their financial circumstance and timeframe of storage.
This article will guide you through everything you need to know about precious metal storage and the options for storage, along with the pros and cons to decide which option suits you the best.
Types of storage options
As a customer, the onus is to understand the storage options, service charges, and their advantages and drawbacks before you pick out the storage option to store your precious bullion. Stay tuned to learn more about the four most preferred precious metal storage options.
Home storage for gold and silver
When storing gold and silver, people must care about the security and availability aspect. Keeping your precious metals within the four walls of your house gives you control over your precious metals and the luxury of purchasing any precious metals in any quantity when you are storing them at your home, free from the legalities and technicalities of an institution. Just purchase secure storage safe, and you’re good to go.
Although there are several factors that you must take into account when storing precious metal at your house, be it the fire outbreak and water leakage issue with your storage safe, theft, or insurance.
Pros of home storage
Accessibility: The main reason people choose silver and gold bar storage at their homes is the ease with which they can reach them. People collect precious metals to use in times of need or unpredictable financial circumstances, and such challenging times may arise anytime. From the perspective of emergency use, home storage makes sense.
Self-reliance: When you opt for home storage, you don’t need the involvement of a third party, be it a private or public institute or an authorized person, to sanction your precious metals. You are the only one accountable for all the handling when you store it at home.
Cons of home storage
Damage protection: The environment and temperature at which you store your precious metals are also what you must consider to preserve the physical outlook for your metals and save it from rusting. While gold doesn’t corrode, no matter how you store it, silver does oxidize and loses its original charm, yet the value of the metal is not lost. Having said so, when selling such deteriorated metals, the buyer has to go the extra mile to melt them and start from scratch. So keep in mind that might affect your selling price. Overlooking all these factors can be tedious and expensive for someone new to all of this.
Ease to steal: Another serious issue with storing your precious metals at your house is the risk of theft and the safety of everyone living in that house. Holding such valuable metals at our home makes you vulnerable to burglary and attack if the word gets out. There are better options than house storage for someone who wants to avoid the looming worry and stress of keeping valuable metals at their house.
Bank safe deposit boxes for precious metals
If you are considering storing gold or any precious metals that have high security, holding your precious metals at the bank’s safe deposit is considered safe for precious metals over keeping them at your house. First, do proper research about the banking partners you’ve narrowed down, make sure they have a good reputation, and provide top-notch security to your metals against theft and damage. Also, consider the accessibility aspect when opting for a bank deposit and be well aware of your withdrawal options beforehand.
Pros of Safe Deposit Box
Security: Banks, as it is, are high on security, so when you select the safe deposit box provided by banks, you can rest assured about the risk of theft or damage to your metals.
Affordable: The prices of safe deposit box may differ in different locations and also depends upon the size of the deposit box, but don’t worry, it doesn’t cause a hole in your wallet. The fees start from as little as $15 up to $150 a year.
Cons of Safe Deposit Box
Restricted access: When you choose banks as your precious metal storage option, you must consider the working hours of banks and hence, the time restriction it brings you. You have to follow the operating hour of banks if you want to withdraw or store them and add the paperwork time.
Expensive Insurance: Banks need to provide you with the insurance facility for the goods you store in your deposit box. If you want the double assurance and the security of your precious metals, you must purchase separate insurance, which adds to your cost.
Government Seizes: There is no law in place that states that the government is authorized to hold the precious metals you store in your safe deposit box, but under crises, they can seize your valuable assets in the form of an executive order. Also, under some circumstances or suspicions, the government can issue you a legal notice to access or seize your safe deposit box for an indefinite period or until the legal proceedings are over.
Private vaults for gold and silver storage
You can also choose private vaults to store your bullion because they provide an added level of security. The depository/vault storage service providers offer security to your precious metals, protecting them from elements that can distort their appearance. The most exciting feature of private vaults is that you have complete ownership of your metals, and the depository also takes care of the insurance of your metals.
Pros of Private Vaults
Easy to sell: When you go for the private vault route, you can sell your metals anytime, and the amount will be wired to your bank account within the same day.
Insurance Coverage: Along with the security, private vault depositories provide full insurance and are subject to yearly audits by unbiased third parties.
Open For Delivery: Private bullion vaults also provide you with the facility of 24/7 delivery and shipment of your bullion. Depending on your location, it can be delivered overnight or within a specific day.
Cons of private vault storage
Lack of Physical Access: High security and safety with private vaults mean you are not permitted direct access to your precious metals. You are not authorized to enter the vault under any circumstances, but you get the delivery option of your metals anytime you wish.
Cost Add-On: The charge for a private vault is more on the pricier spectrum because they are based on the insurance provided for holding your personal metals and your account size (i.e., the valuation of your precious metals). The two combined, and gradually over the years, a fraction of your investment will be gone just in paying for the private vault storage services.
Offshore storage facilities for gold bars
Owning precious metals, you should be aware of the 1933 Executive Order 6102, where Americans were banned from holding physical gold unless it was jewelry or collection coins and restricted from trading. Offshore storage is the best way to secure your precious metals to avoid such extreme steps from the government. Do choose an offshore financial center when going for offshore storage.
Pros of Offshore Storage
Well-rounded Protection: Offshore holding of bullion metals has the complete protection of your assets from the changes in government laws against precious metal holdings and economic fluctuation. The offshore storage also provides full security and safety for your physical metals.
Diversification: Considering offshore precious metal storage is wise for large investors as they can diversify their storage onshore and offshore. Political diversification means you can be assured your precious metals are safe and secure even when your home country has a political, political, or economic crisis.
Cons of Offshore Storage
Transparency Issue: With the offshore facility, regulation or oversight may differ from your local storage facilities, which is an issue when it comes to monitoring the safety and security of your precious metals.
Currency Difference: The rate of your local currency plays a role when choosing offshore storage because the decline in the local currency undoubtedly impacts the value of investment of your precious metals.
Insurance Expenses: Securing insurance for your gold and silvers in a foreign country can be a hassle with offshore storage and an additional expense compared to the ease of local storage.
Legal and Regulatory Considerations
Physical bullion is labeled as “collectibles” by the Internal Revenue Service (IRS), and the bullion in any form makes you subjugated to capital gain tax. So, when storing such precious metals, they fall under a specific law you must be mindful of and follow strictly. Here we’ve listed some critical legal and regulatory considerations you must be up to date on.
Tax implications of storing gold and silver
Precious metals labeled as capital assets are specially classified as collectibles by the Internal Revenue Service (IRS), so you’re subjected to capital gains tax if you invest on such investing on such precious metals in any form and when the holding has exceeded a year.
Physical precious metals are accountable to a capital gains tax equal to the marginal tax rate, which totals 28%. Short-term gains for precious metals come with tax at ordinary income rates.
Reporting requirements for precious metals storage
The jurisdiction of your precious metals’ location and storage arrangement greatly affects the reporting requirements. The guidelines are listed below:
Local Reporting Requirments: If you choose a local storage facility to store your precious metals, you must report the holding on tax returns and other regulatory filings. A tax advisor can guide you about the specific reporting requirements in your jurisdiction.
Offshore Reporting Requirements: When choosing an offshore storage facility, you must report the holdings to your local tax authorities or the tax authorities in your storage facility’s jurisdiction.
FATCA Reporting: Foreign Account Tax Compliance Act (FATCA) demands foreign financial institutions report certain U.S. taxpayers’ account information to the Internal Revenue Service (IRS). As a U.S.A taxpayer, if you’re storing your precious metals offshore, the storage provider may need to report the holdings to the IRS under FATCA.
Compliance with anti-money laundering laws for gold bar storage
Precious metal storage providers comply with anti-money laundering (AML) to prevent the storage and movement of illicit funds or assets. Precious metal storage provider must comply with the AML Laws, which requires them to have the identification documentation of their clients, run a background check when needed, assess their financial standing, monitor the activities on their bank account, and keep an eye out for any illegal financing to prevent money laundering.
All in all, the choice of precious metal storage depends upon the requirements and financial competence of the precious metal owner. Whether you feel that keeping gold and silver at home makes more sense for you or you wish to go the extra mile for security by employing storage facilities to store your bullion, it’s your choice. Before making any decision, ensure that you’ve understood the legalities and security aspects of all the storage options and their pros and cons to make an informed decision.