Silver, gold, and other precious metal investments are worth protecting. Precious metal investors must be on guard against a variety of risks besides the market. These risks include:
- Theft – either from outsiders or from people well known to you
- Civil unrest or disorder
- Government confiscation
Storing silver and other precious metals yourself elevates your risk due to theft, burglary, and simply misplacing your coins, bars, and other physical silver, gold, palladium, and platinum.
Your homeowner's insurance policy will typically cover only a minimal amount. To protect yourself against the loss or theft of significant silver, gold, and other precious metal assets, you'll need to purchase additional insurance.
Discover the only truly secure way to store your silver and why – inside Goldco’s free Gold Investor Guide
Non-bank vault companies are typically high-security facilities with state-of-the-art security systems. Most carry significant insurance. When structured properly, these vendors will hold all your assets strictly segregated from their own corporate assets, so that even in the unlikely event the vault company goes bankrupt, your assets will be preserved as the company goes through receivership.
Unlike banks, which can lend against your precious metal deposits – creating another level of risk – a non-bank vault will not allow anyone else to use your silver, gold, or anything else of value stored with them as collateral for a loan.
The higher-end vault companies will specialize in precious metals and bullion, and hold nothing else. Specialist vaulting companies offer the best value, since they can pass on the benefits of substantial economies of scale.
If you are storing silver assets held in an IRA, check to make sure your vault facility is an IRS-approved custodian.
With vault companies, you can expect to pay some fees, including maintenance fees, transaction fees, and commission fees, if the custodian is handling trading activity on your behalf.
The fees may be based on a set annual fee, or may be prorated by the value of the assets under their custodianship. Generally, the more you have under their management, the lower your fees as a percentage of your holdings.
Note: Reputable Silver IRA dealers have likely already done the legwork in securing IRS-approved storage options for their clients. Some have negotiated competitive fees and pass those savings onto their clients.
Many Silver IRA companies will even waive all fees for your first year of storage. If you're planning on opening a silver IRA, contact a highly-rated dealer and request their IRA "guide" or information kit.
Some examples of widely used Silver IRA storage facilities are:
Most gold and silver IRA dealers should be flexible if you request storage facility outside of their preferred network.
Mixed-Use Vault Services
Mixed-use vaults also provide high levels of security. However, they will hold other assets besides precious metals and bullion, such as art, collectibles, diamonds, and cash. These services are less likely to be IRS-approved custodians for IRA assets. They also typically don't have the same level of expertise in engaging in IRA-related transactions.
If they have art or other kinds of collectibles, they must invest in climate control to protect those assets. Insurance and valuation are also more complicated. Both of these factors result in additional costs that they must ultimately pass on to customers.
For these reasons, mixed-use vault companies are usually more expensive than precious metal specialist vaults when it comes to storing gold and precious metals, though they can provide similar levels of security and insurance protection.
In either case, many vault companies allow you access to cash loans using your precious metal holdings as collateral. This can be a quick source of liquidity in an emergency. However, IRA investors should bear in mind that IRA prohibited transaction rules prohibit using IRA assets as collateral for a personal loan.
You can, however, borrow against silver and gold IRA assets for loans within your IRA. For example, to fund other investments.
Investing in physical #silver bullion bars or coins? How to store and protect your investment:
Some larger banks provide vault services. These can be convenient if you already have a relationship with your bank, and the facility is local to you. However, there's a significant drawback to storing your physical silver, gold, or anything else of value in a bank vault: In the event the bank collapses, your assets could be on the hook for a 'bail-in.'
That is, the bank could confiscate some or all of your holdings in order to meet its own liquidity obligations. You would have no recourse: Regulators would actually require it.
The Risk of Bank Bail-ins
A true ‘bail-in’ is very unusual. But it’s happened before, most notably during the Cypriot financial crisis of 2013. Depositors at Laiki Bank had 3.4 billion euros of their savings - money they thought was secure and risk-free - outright confiscated overnight.
At the Bank of Cypress, government banking regulators confiscated deposits above 100,000 euro per depositor, and transferred them to the bank to shore up their failing capital structure. Instead, depositors got some shares of Bank of Cypress stock. Anyone who lost more than 3 million euro was eligible for Cypriot citizenship.
Bail-ins are a possibility here in the United States – especially with taxpayer-funded bailouts of large banks to rescue wealthier depositors are a political non-starter since the 2008-2010 Mortgage Crisis.
From a bank's point of view, depositors are unsecured creditors. That is, the first bunch of creditors to get thrown overboard in a crisis. Cash assets are directly at risk. But bullion held as an investment in a safe deposit box or other form of storage with a bank may be treated the same as a deposit by financial regulators. In the event of another severe banking, derivatives, or liquidity crisis, you could lose some or all of your deposits over $250,000 – which, presumably, FDIC would cover. If it has the assets.
This is a key advantage of non-bank vault companies: Assets in the vault are strictly separated from the assets of the company itself. Non-bank vault companies hold your assets in trust for you. Holding your assets in a non-bank vault company does not make you an unsecured creditor of the bank vault company. There is still a formal separation between your assets and those of the vault company.
Learn more about silver storage options and make the right choice for you – read Goldco’s free Gold Investor Guide
Safety Deposit Boxes
Safety deposit boxes are also convenient bank-owned solutions for the secure storage of silver and gold Storing gold in a safe deposit box is usually more practical than storing silver, since you can store much more value in gold in a small space than you can with silver.
Before you store silver, gold, or anything else in a safety deposit box or bank vault, check the fine print, and determine what may happen if the bank should fail. Bank customers with assets in safety deposit boxes could be treated as an unsecured creditor, and their assets subject to a bail-in confiscation to rescue a failing bank, as above.
Even if there is no formal bail-in or confiscation, there is also a risk that any given branch could be shut down in a crisis. It could be a global financial crisis that causes banks to cease operations entirely. It could be a natural or man-made disaster such as an earthquake, tsunami, or power outage due to an electromagnetic pulse. But whatever the reason, you could find it impossible to access your safety deposit box for days, weeks, or months at a time. Possibly permanently.
FinCEN and PATRIOT Act rules require banks to keep records on you and your assets held with the bank. You cannot assume your assets in a bank safety deposit box are entirely confidential.
If you do choose the convenience of a safety deposit box, make sure you make arrangements for a trusted attorney or family member to access the assets in the event you become incapacitated.
Note: Bank safety deposit boxes are subject to the claims of creditors, including the IRS. The IRS could seize or levy your assets in a safety deposit box, while other creditors could possibly obtain a court authorization to seize your assets after winning a judgment against you.
Assets held in trust on your behalf, such as assets held by a custodian in an IRA or solo 401(k), may have less exposure to creditor claims.
Another option is to store your precious metals at home. This is not a viable option for assets held in IRAs and 401(k)s, which cannot come into the direct possession of the account owner, or they will violate IRA prohibited transaction rules.
Your home storage is only as secure as your home, your home security system, your physical safe, and your ability to conceal your valuables.
Most high-quality home safes come with some level of guarantees against theft – if you buy them new.
The best form of security for home storage of precious metals is discretion: Don’t tell anyone you’re holding any kind of gold or precious metal, or you could become a target.
Many silver investors choose a hybrid solution. Physical silver and gold in IRAs are almost always held with an approved custodian vault company.
Outside of IRAs, larger bars may still be held in a specialized vault company. However, many people hold coins, rounds, and smaller bars not held within IRA accounts at home in a safe. That way, the investor gets the benefit of high levels of security and insurance on the bulk of their precious metal holdings, while still enjoying ready access to coins and small bars that are readily suited to bartering for goods and services in the event of an economic collapse.