Buying and storing gold offshore

Buying and storing gold and silver offshore by Mark Nestmann

The perception that America’s debt is a safe investment gave this country the upper hand during the 2008-2009 financial crisis. It made it easier for us to borrow money and for the Federal Reserve to buy bonds to keep interest rates low.

Today, that confidence has all but evaporated as a dithering Congress can’t agree on a balanced long-term budget. Politicians have taken the debt ceiling hostage, stirring up a whirlwind of uncertainty over America’s ability to manage its deficit.

This is driving foreign and domestic investors into “safer” investments that have real value… like precious metals.

Gold, for instance, has unique properties that make it an unmatched medium of exchange. It is the anti-fiat money currency. Silver should continue to perform well, thanks to its dual role as both an industrial metal and currency metal.

Owning physical gold and silver in the form of coins and bullion will help to conserve your purchasing power as paper money loses its value. But where do you store it?

Gold and silver should be held in a diversified way. You can hold it in your home (coins in a safe), with a family member you trust, or in a safety deposit box at a bank.

But for real safety, peace of mind and asset protection, you should really keep at least some of your gold and silver overseas. This is not just for tax reasons, but for insurance.

Here are seven strategies you can use to safely purchase and store your precious metal holdings offshore…

Strategy 1: Buy locally overseas and store in a secure residential location. Do you live or own property overseas? If so, you can buy precious metals locally and then store them at your offshore home, in a secure location. A floor safe is ideal… one capable of deterring a professional thief for at least an hour or two. For that, expect to pay several thousands of dollars or its equivalent in foreign currency. Installing the safe is a job for a pro. If you can’t find a trusted local contractor, you can transport a U.S. contractor to your overseas location to install it for you.

For U.S. persons, this is a completely non-reportable way to buy and hold precious metals… although you must report and pay tax on any profits when you sell.

There are some drawbacks, however. You’ll likely pay full retail price for the metals along with local sales or value-added tax.

Finally, when you sell, depending on the form of the metals you own, you may need to pay to have them assayed. This is most commonly required for bars (less so for coins).

Strategy 2: Buy locally and store in an offshore bank safety deposit box. You don’t need to live offshore to use this method. You merely need to open an account at a foreign bank and rent a safety deposit box there. Make a personal visit and purchase precious metals from the bank or a private dealer and store them in the box.

U.S. persons who use this arrangement must report the foreign account to U.S. authorities if the aggregate value of all foreign accounts exceeds $10,000. However, under current law, you don’t have to report the metals in the safety deposit box as long as only you have access to it. (This may change depending on how final regulations interpreting newly expanded offshore reporting requirements are written.)

Again, you must report and pay tax on any profits when you sell. Thefts from safety deposit boxes are also less common than from residences.

Strategy 3: Buy locally and store in a box in an offshore private vault. This works basically the same as strategy 2, except that there is no need to open a bank account and report it to U.S. authorities.

Strategy 4: Buy locally and store in a secure storage facility offshore. You won’t have exclusive access to your metals this way, so you’ll need to report this arrangement as a foreign account to U.S. authorities. You’ll also need to pay custodial fees on the value of the metals held on your behalf.

In some cases you can arrange for “bonded” storage that avoids the need for an assay when you sell. Plus, theft from a secure storage facility is very uncommon… and it’s likely that if your metals are stolen, the bank or the insurance company will replace them.

Strategy #5: Buy from a foreign bank and have the bank maintain a custodial account for your metals.
Holding your metals this way means that both the account and the value of the gold stored in the vault are reportable. You’ll also need to pay custodial fees. On the other hand, you may obtain a more favorable purchase price and avoid local taxes when you buy. In some cases you can also arrange for “bonded” storage.

Again, theft from a bank vault is very uncommon, and it’s likely that if your metals are stolen, they’ll be replaced.

If you purchase metals directly from the bank, know the differences between “allocated” and “unallocated” storage. Allocated storage means that the bank has specific coins or bars that are set aside for you. Unallocated storage means that you have an ownership interest in precious metals the bank may not necessarily have on hand. Unallocated storage is less expensive, but also may entail greater risk if the bank becomes insolvent and is unable to deliver the metals it has credited to your account.

Strategy 6: Open a precious metals account online. Once again, you’ll have a reportable account and need to pay custodial fees. It’s likely you’ll be able to get a more favorable purchase price and avoid local taxes when you buy your precious metals online.

Selling rarely if ever requires an assay and your holdings are fully insured against loss. If you want to take delivery of your metals, however, you may be required to receive them in a form or denomination you don’t particularly prefer.

Theft is unlikely, as the metals will be held in a secure vault. Your holdings will also likely be insured against theft or other loss.

Strategy 7: Purchase a precious metals certificate.
This is one of the easiest ways to purchase precious metals offshore, although once again, you’ll have a reportable account. You can often make the purchase in the United States and have the metals stored offshore on your behalf. You receive a certificate indicating the quantity of metals you’ve purchased, and (if allocated) a list of your specific holdings.

This purchase method avoids local taxes and often lets you buy at a more favorable price. There’s also no need for an assay when you sell.

If you opt for allocated storage, you can take delivery of your metals anytime, or you can allocate your unallocated metals and take delivery once they’re fabricated.
 
In one certificate program offered by the Perth Mint, unallocated storage is backed by a government guarantee. The government of Western Australia guarantees that the unallocated metals held by purchasers of a Perth Mint Certificate are 100% backed by physical metals