Storing Gold & Silver: Safe Deposit Box In Australia
There is no risk free way of owning precious metals (or any asset for that matter) and safe storage is the key factor when dealing with physical.
Get a Safe Deposit Box
This is a personal favourite of mine. If there is anywhere that’s likely to be safe for your Gold and Silver it’s in a facility that is built for that very purpose. Just remember that not all safe deposit box facilities are created equally. Many large banks will offer safe deposit box services, make sure you shop around for the mix of safety and price that best fits your situation as in my experience both of these factors can vary substantially between providers. While I expect it’s far less likely today than in times past, you should consider that keeping precious metals in a safe deposit box does make it an easy target for any government crackdown and confiscation should it occur.
You can’t choose to store your bullion in a SDB facility and expect that all service providers will offer the same level of protection. Several years ago I wrote about a Kennards facility which was broken into with SDBs emptied after the criminals (who were eventually caught and jailed) scoped the warehouse by hiring their own SDB with a stolen credit card. While the Kennards facility provided privacy (no 100 point ID check) and accessibility (24/7 access), it was these same features which put a hole in their security.
Gold Confiscation: In the past when discussing the merits of bank vs private SDBs, some have pointed to Part IV of the Banking Act 1959 (suspended) which can be paraphrased as being unable to “buy, hold or sell gold unless it is a legitimate part of your trade or in the form of jewellery” (via Bron Suchecki at Gold Chat). These restrictions were applicable across the board (until 1976) and while I think it’s unlikely they are reinstated in their current form, I’d expect even if they are or new confiscation laws were introduced that any crackdown on SDBs would be across the board with both bank and private facilities affected in the same way. Private SDB facilities will be compliant with any government request to refuse customer access or seize contents as required by law just as their terms and conditions state. Those who think they will avoid confiscation by using a private facility because it’s “out of the banking system” are being lulled into a false sense of security. In any event I think Gold confiscation is highly unlikely in Australia and if a trend emerges globally of governments doing so then we should have enough notice to change views on the risk of it occurring and act if necessary.
Internal Theft: While theft by an employee is an unlikely event, it could arguably be made easier if the SDB facility has a copy of both keys to your box. Furthermore I have seen some bank facilities where they retrieve the box for you from the vault (so your only key is to a padlock attached to the metal storage box). It may not be the case that every private facility gives you both keys or that every bank facility keeps a copy, but in my experience the risk of internal theft from an SDB is potentially higher at a bank facility (if ease of doing so is the only consideration).
The Canberra Times, 25th April 1991 |
External Theft: The risk of this occurring comes down to the security of each facility. I’d expect that some bank facilities exceed the security of some private vaults and vice versa. Reading through Guardian Vaults list of security measures leaves me impressed, but whether this is a significant step up from other facilities I can’t be sure. While listing security specifics may help clients feel good about their choice, marketing in this way also puts more information into the hands of those who may want to get around it.
The Canberra Times, 10th October 1984 |
Insolvency: In the event of insolvency of any facility the contents of your SDB should be owned free and clear. The biggest risk here is if you want access to your SDB contents while the administration processes takes place (the facility may be closed for regular access while that occurs). Here is where a bank facility might be safer than a private facility. We have a greater insight into the solvency of the banks who are open to scrutiny from the public due to their annual reports and other financial transparency. Even if you don’t personally understand how to read the financial position of the bank you have your SDB with, it’s likely their share price will be an indicator of health and financial news outlets will be quick to report on any trouble. Furthermore it’s a fair assumption that a bank insolvency would result in government support. Contrast that to private SDB facilities, we don’t know their financial position and you’re not likely to have any warning of their insolvency until the day they shut their doors.
Bank Holiday: In the case we see events unfold where there are wide spread bank failures then there’s a chance we see bank holidays. Like insolvencies described above this should only result in a temporary lack of access to the contents of your SDB. Some have suggested that bail-ins may extend to SDBs, but I see that as a highly unlikely. I haven’t seen any evidence to suggest that SDBs in Cyprus were seized as part of their recent bail-in measures.
Bank SDB facilities get characterised as unsafe due to their connection to the banking system, but in my opinion there are some pros and some cons that result from this association and on the whole I don’t see bank SDBs as less safe than their private counterparts.
The banks are written off by precious metal holders as shady, but if the last 12 months has taught us anything it’s that the bullion industry has it’s flaws too (ATO and AFP Investigate Australian Gold Industry Fraud). In fact one of the aforementioned private SDB providers (CV) has management ties to the refiner implicated in the GST fraud story from Vedelago.
As it stands there is no private vault SDB facility in Adelaide so my only option for local storage is with a bank, but I feel comfortable doing so and would only consider moving to a newly available private vault if there were measurable benefits in doing so.
Whichever you choose I think both private and bank (vaulted) safe deposit box services are a smart option and in most cases much safer than keeping your precious metals at home.
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I’m sharing links and opinions daily on Twitter (@BullionBaron).
BB.
Source: http://www.bullionbaron.com/2015/02/storing-gold-silver-safe-deposit-box-in.html
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