As more and more people wake up to the perilous state of our economy, sales of physical precious metals such as gold, silver, palladium and platinum are rocketing. Last month the US mint suspended sales of silver Eagles after selling more than 5 million in the first two weeks of January 2013 alone, and running out of the popular investor coin.

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With incredibly low savings interest rates currently being paid by banks, and the cost of living rising across the board, small investors are wisely turning to precious metals as a store of value. It’s very easy to buy physical coins or bars from reputable bullion dealers, both online and off, and in precarious financial times the physical possession of valuable assets like silver bars or gold coins is very sensible.

Storing your precious metals at home

For the small investor, storing bullion coins and bars at home is a very attractive option – though an option that obviously does not come without risk.
A great advantage of keeping your investment safely hidden in your own home is that you have full control over it, giving a greater sense of security. As the gold or silver is close to hand, accessing it is easy and means that you can quickly sell it should you need to raise cash in a hurry.

Storing metals in your home clearly carries some risk. The biggest threat is obviously that your metals could be stolen by an intruder – as you are unlikely to secure insurance on a precious metals collection stored at home, in the event of theft you potentially face losing the entirety of your wealth.

Taking sensible precautions can cut the risks. Do not tell anyone, other than those you trust implicitly, about your precious metals. Find the most secure and discrete hiding place you possibly can – a wall cavity covered by a securely attached mirror for example, or perhaps beneath concealed floorboards. Investing in a sturdy home safe is a very sensible idea – especially if the safe can be bolted to a wall, or even better, set in concrete in the floor and further disguised by carpets or furniture.

Many investors dig deep holes in their garden in which to bury their metals. This can be a great idea, though one that’s clearly only practical for those who do not need regular access to their assets.

Storage in a bank’s safety deposit box

Another option is to store your metals in a safety deposit box at a bank. While this would seem a more secure method of storage than stashing valuables at home, you should be aware of the potential risks involved.

Accessibility can be a problem. You will only be able to reach your metals during bank opening hours, which could cause issues if you need to raise cash quickly.

Of concern to those who think the government could confiscate gold in a future time of severe economic crisis, as the Roosevelt administration did in the US in 1933, physical metals stored in a bank would be much more vulnerable to appropriation by the state.

Even if you think government confiscation extremely unlikely, your deposit box-stored valuables could still be at risk if caught up in a police sweep of suspected criminal assets. This happened in the UK in 2008, when police searched thousands of security boxes at three London storage centers, seizing millions in alleged criminal cash and valuables. If you were unable to prove beyond doubt where your precious metals had come from, there’s a risk they could be declared illegitimate and held by the authorities.

Storage at a third party depository

A third option is to store the metals at a third party depository, meaning a private storage company rather than a bank. An advantage of this method could be that your precious metals are arguably safer than when held at a bank – as seasoned investor James Turk notes, “When you store with a bank, you are never sure whether your gold is there or not. Banks are in the business of lending. In contrast, non-bank vaults are in the business of storing.” Considering the financial recklessness of banking institutions over the last few years, Turk has a valid point.

If you are very concerned about a severe economic crisis in your home country, one advantage of using a depository company with global storage facilities is that you can spread your assets over several countries – including traditionally financially stable nations such as Switzerland. This scenario is obviously only applicable to those with a large holding of precious metals.

If you decide to use a depository, it’s very important to establish whether your investment is being held on or off the holding company’s balance sheet. If your metals are being held on the company’s balance sheet your investments are co-mingled with the assets of that company – which means that you’ll become a general creditor in the unfortunate event that the company went bankrupt.

In summary, for those with a large holding of metals, a strategy of diversification would be sensible – hide a portion of your physical metals at home, store a percentage in a safety deposit box, and place some with a reputable depository. By doing this you’ll spread the risk and will not lose everything should the worst happen to one part of your metals portfolio.

For those with smaller amounts of gold and silver, secure storage at home perhaps offers the greatest peace of mind – providing, of course, that you have found a great hiding place, or have purchased a secure and concealed home safe.

Brit Peacock is a metals investor blogging on home security issues for The Safe Shop, which provide secure home storage and high capacity post boxes, heavy-duty lockers, and home safes.

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