WHere Should You StorE your gold?
Gold isn’t exactly the kind of thing that you can stuff under your pillow or your mattress. It is, by its very nature, something which needs to be guarded carefully and treated with a degree of confidentiality and respect. Telling all and sundry about the gold that you keep in your basement can never be a good idea. In this section of our website we explain the ins and outs of storing gold and other precious metals and the ways in which this can be done.
Ever since the days of tomb robbers in ancient Egypt, stripping the pharaohs resting places of their treasures, thieves have always wanted to steal gold and other valuable items from people who have them. Throughout history this has been an ongoing problem. From the Romans invading and sacking other countries and stealing their caches, through the British pirates intercepting and sinking the Spanish Armada on their way from their new territories in South America laden with gold doubloons and other hoards of precious metal. The modern day bank robber with the sawn off shotgun, or tunnelling through the basement of the bank to gain access to the vaults is nothing new. If you are going to hold precious metals in any form, security has to be a major concern.
In these days of 24-hour protection companies, closed-circuit television systems, biometric entry and exit points, reinforced concrete, computerised passwords, and other security, such as laser and sonar alarms – the safeguarding of your gold and silver has never been easier – or more secure. Of course, this comes at a cost. All such security is expensive to build and maintain. The point of vulnerability remains the same as it always has – and that is in the transportation of the precious metals. For this reason it is good to have a variety of locations to choose from – and insurance is absolutely essential.
The basics of storage
The first thing to say about storing your gold or silver is that unless you are doing an IRA or 401(k) rollover there is absolutely no legal requirement for you to store your gold in any kind of vault, depository, or repository. The risk is entirely yours. You are free to keep your gold anywhere you wish. Commercial safes are available for home use and range in price from a couple of hundred dollars to thousands. Most can be buried in floors or walls or any other suitable location. The entry systems for these safes can range from simple key through combination locks and electronic keypads – even biometric or fingerprint sensing devices. Of course, buying one of the latter devices may well cost as much as the precious metals that you are storing! If you are looking to insure such precious metals, you will need to buy an approved make of safe and have it inspected by the insurance company for suitability and security. A surveyor will check the location and the siting of the safe and assess the risks involved in order to reach a price for your policy.
Ultimately, it may be cheaper, and safer to keep your gold and silver at a commercial depository, where there is a constant security presence, and issues of kidnapping or robbery are negated. Such depositories lease space, and the cost is usually based on a percentage of the value of the gold or silver that you are holding in storage. There are special arrangements for depositing and withdrawing your precious metals, and these vary from company to company.
Why IRAs are different
With an IRA or 401(k) rollover there is a legal requirement under IRC 408 (m) for your precious metals to be held at arm’s-length by a third party in an approved and secure depository – sometimes called a gold repository. The aim of this is simply to prevent you from having access to the metals until you are legally entitled to. This is obviously to stop you spending it in advance of your retirement!
Because of the way in which the legislation has been written there are lots of grey areas regarding the storage requirements of approved bullion and coins by any “IRA LLC.” An IRA LLC is the usual vehicle by which a separate entity is created to own your IRA. It is like a small company which just owns your precious metals.
The main to tripping points are the definitions of specifically approved coins and bullion. For example,
Coins that are specifically approved by IRC 408 would be gold American Eagle coins that are made and distributed by the United States mint, silver American Eagle coins made and distributed by the United States mint and any platinum and proof platinum coins made and distributed by the United States mint, and any coins issued under state law.
Bullion is defined as metal that meets the following fineness requirements:
Gold must be 995 parts per thousand, silver must be 999 parts per thousand, platinum must be 999.5 parts per thousand, and palladium must be 999.5 parts per thousand. Common examples of bullion coins would be the Canadian maple leaf gold coin, the American gold buffalo coin, and the Austrian Philharmonic coin.
The grey area we mentioned arises because the storage requirement for bullion coins is clear, but the storage requirement for specifically approved coins is unclear.
What is clear is that any precious metals must be stored in a “bank” – this means any trust company, credit union, bank, or similar institution.
IRS private letter ruling 200217059 makes it clear that any company which is not licensed as a bank, third-party administrator, broker-dealer, trust company, or credit union, cannot store precious metals that are owned by an IRA.
Here is an excerpt from Chapter 12: The Self Directed IRA Handbook by Mat Sorensen which explains the situation in more detail:
“There has been much confusion about owning precious metals with an IRA and there is confusion over some “loophole” that allows you to store them in your home. Our advice is against home storage, for tax code reasons and for security reasons. We’ve outlined the tax reasons more fully in a prior blog article you can check out here. In general though, our advice is that if your self-directed account owns metals directly through your custodian account then those metals will be stored with the custodian or with a “bank” whom the custodian uses for customers.
If the metals are bought with an IRA owned LLC, then the metals of the LLC are subject to the storage rules and this can be satisfied by the LLC opening up a safe deposit box with a bank and by physically storing the metals there.
If an IRA purchases precious metals that do not meet the specific requirements of IRC § 408(m)(3), then the precious metals are deemed collectible items. As a result, they are considered distributed from the IRA at the time of purchase. IRC § 408(m)(1).
Similarly, if the storage requirement is violated, then the precious metals are also deemed distributed as of the date of the storage violation. IRS Private Letter Ruling 20021705. The consequence of distribution is that the value of the amount involved is deemed distributed and is subject to the applicable taxes and penalty.
Go for the gold, or silver, or the other approved metals with your IRA. – but make sure the metals meet the code requirements and that they are properly stored.”
Keep it safe …
So – having decided that you really need to keep your precious metals in a safe environment how do you make sure that the facility you choose is one that will do the job?
The first thing to look for is a COMEX/CME/LBMA/ICE approved establishment. These bodies certify, regulate, and approve, the industry standards which are applicable to precious metal IRA depository facilities.
COMEX is a merger between Commodity Exchange Inc and the New York Mercantile Exchange. CME is the world’s largest options and futures exchange. LBMA is the London Bullion Market Association. ICE is Intercontinental Exchange.
Facilities like these, which are fully approved, are few and far between. Luckily through Noble Gold, goldirarollovers.com are able to offer access to the very best of these depositories in three locations; two in the United States – and one offshore.
These are operated through IDS (International Depository Services) a renowned, and well-respected security group who specialise in such facilities.
IDSs repositories are fully approved by the IRS, and they provide up to $1 billion of all risk insurance cover, including up to $100,000 coverage for mail or express carrier shipments. Most of their business is done with brokers, commodity, trading houses, retailers, coin dealers, IRA custodians, refiners, and manufacturers – in short – they know what they are doing and your precious metals will be in safe hands.
The company started in Delaware because of the state’s beneficial business tax advantages but opened and up its offshore operation in Ontario, Canada, to cater for clients who wanted to keep their precious metals at arm’s-length from the US government.
In the spring of 2017, IDS opened a brand-new, state-of-the-art depository in Dallas, Texas. Noble Gold have the exclusive contract to use this facility for their IRA clients. No other gold company out there can offer this …
Precious metals investors, traders, manufacturers, and brokers, have been crying out for a facility in the south for decades. Various schemes have been put forward to open a state facility, but the parties involved in this have never been able to reach agreement as to how the depository would be run, who would be responsible for it, who would operate it and so on. It left a gap in the market which IDS was quick to fill.
The problem is that the Delaware facility was felt, by many investors, to be too close to New York – and – to not put too fine a point on it, they did not entirely trust the “cosy collection” of depositories available in the area. With the opening of the Texas storage a whole new world of possibilities has opened up for anybody who wants to keep their gold outside of the Wall Street crowd.
Texas has always been a fiercely independent state since its foundation. In 1845, when it joined the union, it did so reluctantly, and broke away again during the American Civil War when it joined the Confederate States of America. Once again it was dragged, kicking and screaming, into the arms of the union – but the relationship has always been uneasy, and to this day there is little love lost between the two.
This is why, for those so minded, this is a perfect solution to their gold storage.
If you are somebody who prefers to have their precious metals offshore completely then the IDS facility in Ontario, Canada, will be ideal for you. Like the depositories in Delaware and Dallas this is a fully compliant facility and has all of the security and safety features that you would expect back across-the-border.
For all of these facilities, privacy and confidentiality is paramount. Measures are in place to ensure that your deposits remain private – and any records are kept securely on encrypted systems and only divulged on a “need to know” basis. This ensures that your precious metals ownership remains known to only a small group of vetted individuals. No records or information about holdings are distributed beyond the depository you choose, your third-party custodian (In the case of IRAs or 401(k) rollovers) and, of course, your broker or gold dealer.
Whether stored separately, in segregated areas, or commingled with other depositors assets, your metals are fully insured As part of the ongoing fee that you pay for the storage.
One final touch that marks Noble Gold out from the crowd is their offer to take a photograph of your metals when they arrive at the depository. They call this their “POP service.” POP is “proof of purchase,” and the idea is to authenticate the delivery of your metals and verify to you that they do, in fact, exist. This is important – it has been known for companies to sell gold, silver, and other precious metals that are non-existent in the past – with the client ending up with just a piece of paper years later.
Ultimately, what depository storage facilities do, is give you peace of mind. You can sleep safe in the knowledge that your precious metals are in good hands, being looked after properly, and will be available for you when you come to draw them down.