By now, I’m pretty sure that all of my clients and regular readers fully understand why allocating a part of their wealth to physical precious metals is not just the smart move, but an increasingly essential one. Owing real, tangible gold and silver is the only way to protect yourself from both monetary and fiscal excesses and from government overreach. However, it is equally important to know what to do with it once you bought it. Preparing for worst-case scenarios includes storage strategy as well, and it requires thinking and planning ahead to counter any potential threats and challenges.
It goes without saying that merely storing your metals at a bank is the poorest possible choice, since it burdens you with the same counterparty risk and potential threats to your private property rights that you were trying to avoid by investing in physical gold in the first place. One might as well buy an ETF in that case and hope for the best. For seasoned metals investors, private storage is a no-brainer, but there are some valid questions that still remain. Does it make sense to store everything in one place? And which place should that be, at home or abroad? Or is it wiser to keep the gold at home for easy access in case of emergency?
Well, as is usually the case with making sound financial planning decisions, it depends on what your specific circumstances are and what you wish to accomplish. It also depends on your own jurisdiction too: for instance, if you live in a highly volatile or particularly legally and politically unstable country, it could be advisable to allocate the majority of your wealth and savings to physical precious metals and store all of it in a more predictable and safe jurisdiction. In most cases that I see with clients and friends, however, the best approach is to err on the side of caution, while also ensuring liquidity and flexibility at home too.
For example, one of my oldest clients who lives in the US has adopted a hybrid approach, which I also recommend to others in similar circumstances. Keeping a small amount in self-storage at home is always wise, for everyone, since it will be essential in the event of a harsh crisis. In a worst-case scenario where banks close, or other normal services are disrupted, fiat money would quickly become worthless – cards will be denied for payment first and then eventually cash too. We saw a glimpse of this a few months ago, when a massive power outage struck Spain. Citizens had no idea what was happening, or how long it was going to last, and the very few gas stations and grocery stores that remained open didn’t accept card payments by the people who rushed to stockpile supplies.
That outage lasted nearly 18 hours, which was already horrifying enough for those who had to endure it, but thankfully power was fully restored. If it went on for just another day or two, we can be sure that mass panic would set in and violence and chaos would break out. That would ensure that trust in the meaningless pieces of paper people carry in their wallets would soon disappear, leaving gold and silver as the only reliable means of payment. In a situation like this, having direct access to your metals would be essential – ideally having them readily accessible at home, or perhaps stored at a trusted, private facility (not a bank), that can credibly guarantee business continuity.
However, it doesn’t take a real crisis, like the one I just described, to demonstrate why it’s important to keep the bulk of one’s metals outside their own country and in a jurisdiction that has a solid track record of legal certainty, political stability and respect for individual property rights. Some “experts” argue that so called advanced economies such as those in the EU or the US have a strong enough record of stability that renders them reliable and that those who reside there have no reason to fear about the safety of their assets.
To the contrary though, it is precisely these jurisdictions that I find the most dangerous. This is because they are advanced enough technologically to ensure that the State knows exactly how much each citizen has saved and where they keep their savings and they are also advanced enough in regulatory and legislative trickery that they can dress up their authoritarianism and thievery as legitimate policy. Just because there is no civil disorder or a coup breaking out every year doesn’t mean that you and your property are safe. If the Executive Order on gold in the US, or the covid crisis worldwide, but especially in the EU, taught us anything is that those that make the rules also can change the rules anytime they please, under any “emergency” context.
This is why it is essential to keep the majority of one’s metals in a country that has proven it can resist these base power-grabbing urges and that has demonstrably never attempted to expropriate its citizens. Switzerland remains the last place on earth that can make such a boast. Of course, there is no guarantee that the next Swiss government will not try to do that. But there is a guarantee that they will not succeed, because the people have the power to stop them, through their vote and their direct democratic system.
The reason why I am so confident that Switzerland is the safest place on earth for physical metals investors is not merely grounded in my personal bias as a Swiss myself. These aforementioned guarantees are not theoretical promises, they are actually engraved in our Constitution, in our law and in our history. Switzerland has never confiscated or banned gold. Gold ownership is a longstanding tradition within the country itself, and private ownership and storage have been common for a very long time.
Both Swiss and international investors have trusted the country with their wealth for so long, because the Swiss legal framework guarantees strong property rights. There are no procedures, laws, or mechanisms of any kind in place for gold confiscation in Switzerland today. Even if the next government decided that is something they’d be interested in doing, they simply don’t have the tools. They would have to create them, which would be another dead end for them.
They would need to introduce entirely new legislation, which involves parliamentary debate, a Federal Council decision, and most importantly a public referendum, which is typical for significant legal changes in the nation. That means that even if their political or establishment peers decided to go along with it, the Swiss citizens themselves would be the last, but strongest, line of defense. The political elite would basically be asking the people they are supposed to be serving, if they would be ok with stealing their gold. Call me a hopeless optimist, but I don’t see that going down well with the Swiss people.
Even in a state of “emergency”, the kind of thing that leaders all over the world like to declare when they want to violate people’s rights with impunity, the Swiss system would still hold. In a national crisis, the Federal Council can issue emergency ordinances that last up to six months without a full legislative procedure. However, permanent confiscation of property would still require a full legal process, with democratic oversight. Thus, the Swiss people would once again be the ultimate backstop to any and all attempts at government overreach, or outright theft, as is the case with confiscation. Furthermore, even in the theoretical and extremely unrealistic scenario in which any political action of this kind is somehow successful, it would still take at least 18 months for it to be actually enforced, which would give investors and savers ample time to relocate their property and make every arrangement needed in order to protect themselves.
Like I always like to say: Sure, Switzerland is not perfect, but compared to the rest of the world, it is as good as it gets.
Claudio Grass, Hünenberg See, Switzerland. www.claudiograss.ch
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