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Precious metal ownership requires a planned approach. It is never a good idea buying precious metals without having a proper storage plan in mind. Precious metal depositories exist to help investors right at this point.
A precious metals depository stores investors’ assets in their third party storage facility. They are particularly good for individuals who make substantial investments in precious metals.
Is a depository better than other storage options?
Why pay a depository to store your bullion while you could simply keep them in your house, right? That wouldn’t be the smartest idea to follow.
Let’s have a look at what are the other storage options for precious metals.
Home storage option
You can definitely store your bullions in your home if your investment is not that big. I can hear the question rising in your mind. How much of an investment is considered as not a big amount?
The answer is it depends. The amount you believe you can protect safely, and wouldn’t beat yourself your entire life if you have lost them all.
If you are like me as someone who cannot afford any part of his stored assets, then home storage is not for you.
Here are a few reasons why home storage is not a good option to choose.
Home storage is not free.
It may sound like home storage is free, but it is not. You cannot dump your bullions in your wardrobe. You need to have a safe that can protect your assets from burglars at the minimum. In fact, theft is not the only risk when you keep your precious metals at home.
No disaster protection.
There are disasters like fire, flood, and earthquakes that you should also take into consideration. What that means you need to invest in a safe that is fireproof, waterproof, etc. You will probably need a home surveillance system that can protect your assets from potential break-ins by burglars.
It is never safe enough.
The truth is, you can never truly rely on any home safety system. Because home systems are not designed to keep gold bullions safely at home. They only provide the basic protection for your basic items in your home.
I wouldn’t recommend keeping any amount of precious metal investment at home.
Bank’s safety deposit boxes
You may wonder if the safety deposit boxes in banks can be a storage option for your precious metals. No, they cannot. Safety deposit boxes are also not a good storage solution.
Banks don’t allow storing precious metal at safety boxes.
Nowadays, most banks do not allow customers to keep their precious metal assets in these boxes. Even if they would allow that, you should still better avoid that. Also, banks don’t know and don’t care what you’re holding in their safety deposit boxes.
There is only basic insurance coverage.
Assets in those boxes are generally insured with basic coverage. What that means, if your assets are somehow lost, your loss will be recouped only to an extent the insurance company is willing to pay. Trust me, insurance companies do their best not to pay for their clients’ insured items.
Once you decide to store your precious metal investment in a depository, there are still a few points you need to decide. This leads us to our next question.
What type of depository storage options available?
There are two types of depositories to store precious metal assets. They are segregated and non-segregated types of depositories. Segregated depositories store investors’ assets in private storage space while non-segregated depositories offer shared storage space with the other investor assets.
The key difference between a segregated and non-segregated depository is how you choose your precious metals to be stored. In the former situation of segregated storage, your precious metals will be “segregated” out of other investor assets and put in reserved private storage space.
Instead, the non-segregated storage option is an open vault area where your gold is stored on the same shelf as other collectors’ bullion.
Is segregated depository storage safer than a non-segregated depository storage?
Both segregated and non-segregated depository storages are extremely safe. Choosing which option to use entirely depends on the individual choice of the depositor.
Some individuals feel better knowing their metals are privately held isolated from the other investor assets. Others may think a shared storage area may be more aggressively protected.
What are the minimum security features to expect from a depository?
First of all, all precious metal depositories possess very similar characteristics of highly protected facilities. These facilities bring protection and security of their customers’ assets at the core of their safety protocols.
Both segregated and non-segregated depository options offer important security measures listed below at the minimum:
- 7/24 constant surveillance
- Armed guards
- Access control
- Highly secured storage areas
- Protection from disasters
Obviously the threat of loss or theft is highly improbable with these kinds of protection measures in place. Measures listed above make these facilities very appealing for investors who want their assets to be fully protected.
Advantages of Using a Precious Metals Depository
Abundant of Space
The main factor customers turn to the depository for their storage needs is the lack of room at their home. Although smaller bullion collections can be easily covered up in a cabinet or container, customers have a harder time hiding larger amounts of precious metals.
Home storage may cause individuals to lose track of all their hiding spots or hide them in a manner that could seriously risk their bullion. Depositors bring a viable solution to this issue offering the customers abundant space for their large amount of assets.
Storing precious metals at home can be a real challenge. If the existence of the bullion is known the metal owner can become a potential target for theft and maybe even worse.
Home-stored assets are only secure while they stay concealed and/or someone is constantly monitoring them. However, if someone knows their whereabouts, nothing will help them avoid being stolen. In contrast, depositories utilize high-level protection both internal & external to guarantee the customer’s assets are continuously secured.
Storing assets at depositories metal owners don’t have to worry about this issue. Depositories provide armed protection and constant monitoring for your assets. This alone is enough to give a feeling of security to the metal owner.
By handing your assets over to a third-party company that is prepared to prevent these crimes, individuals are freed from the dangers and stresses of having to protect their hard-earned assets by themselves.
Regulation & auditing
Precious metals depositories run stringent regulatory processes. Scheduled auditing and strict accounting procedures are the routines most depositories run. It is very unlikely items in depositories get misplaced or lost. Regular reporting of audit results to the accounting divisions helps depositories stay informed of their inventory all the time.
The periodic audits are done not only to detect human error or theft but also to help depositories to keep metal products intact and secure. The transparency is critical for establishing trust between the customer and the depository.
Robbery, loss, or damage are generally rare incidents for the depositories. However, most depositories provide some sort of insurance to cover these incidents. In fact, insurance is the #1 reason why people would choose depositories instead of storing their gold at home.
However, you should be aware that some insurance plans have limits on how much coverage a customer is entitled to, and how much of their asset is available for coverage. Therefore it is important to negotiate this with the depository before working with them.
Climate controlled facilities
Facilities engaging in the handling of precious metals are extra cautious in maintaining careful management of temperature and humidity. Nothing is more harmful to the precious metals than extreme climate conditions.
Disadvantages of Using a Precious Metals Depository
Although precious metal depositories offer many advantages, there are some drawbacks as well. Here are the most important ones to know before working with a depository.
If a company is securely protecting your physical assets, there will be a cost of it. The storage costs are the amount that depositories charge to investors usually on a yearly basis. Needless to say, a segregated storage option is going to be more expensive than non-segregated ones.
Associated fees & difficulty at withdrawing
The processing or withdrawal of precious metals from the depository is also likely to be the subject of additional fees.
The associated fees and the potential difficulty of withdrawing your assets in the event of an urgent financial need are probably two of the greatest drawbacks of working with a precious metals depository.
Customers pay for the protection provided by the depositories, and with each additional benefit, those fees increase.
Also, it may be hard to get to your depository depending on what part of the country you reside.
Aside from the logistical barriers, people would only have access to their assets during the business hours of the depository, not including federal holidays. These constraints may cause difficulties in case of financial emergencies.
The other major drawback is restricted access. Customers usually have to go to the depository to create any type of process with them. Knowing that depositories are frequently positioned far from the customer’s location, it is not easy to deal with.
Depositories provide a level of security you cannot achieve storing your assets at home. Storing your assets at a depository vault you know your assets are in secure hands. You can invite other people to your home or go on vacation without worrying.
Always take pictures and videos of your physical assets with a timestamp on them before delivering them to a depository. If you buy gold from a custodian they can also send your assets to the depository of your choice. Alternatively, they can offer you (or pitch you) the depository they work with.
Depositories always check fineness and the quality of the products received either from an individual or a gold investment company.
We have discussed the good and bad about the depositories. If you still cannot make a decision about that let me wrap it up this way.
Search for and find a reputable depository, and decide which location options do they offer. The next thing is to check the insurance coverage the depository offers. If your assets get lost or damaged to what extent they would recoup your loss.
Store your metals that you don’t intend to exchange in a year or so in a depository. Again, always leave an emergency fund considering the worst-case scenario. I have mentioned depositories are not the practical option of storing your assets. You may not access your assets right away once you need them immediately.
Finally, the benefits of working with depository storage outperform its drawbacks. I would recommend working with a reputable depository not to experience unpleasant surprises in the future.