While we're convinced that our gold and silver
investments will pay off, they don't come without risk. What do you suppose
is the biggest risk we face? Another 2008-style selloff? Gold stocks never breaking
out of their funk? Maybe a depression that slams our standard of living?
Though those things are possible, we at Casey
Research don't see that as your greatest threat:
"Your
biggest risk is not that gold or silver may fall in price. Nor is it that
gold stocks could take longer to catch fire than we think. Not even the
prospect of the Greater Depression. No, your biggest risk is political. As
bankrupt governments get increasingly desperate for revenue, any monetary
asset held domestically could be a target. It is absolutely essential that
every investor diversify themselves politically. In fact, at this point, it
is the one action that should be taken before anything else." –
Doug Casey, September 2011
I know many reading this are prudent investors. You
own gold and silver as solid protection against currency debasement,
inflation, and faltering economies. You set aside cash for emergencies. You
have strong exposure to gold stocks, both producers and juniors, positioned
ahead of what is likely the next-favored asset class. You feel protected and
poised to profit.
Yet, despite all this preparation, you remain
exposed to one of the biggest risks.
Similar to holding a diversified portfolio at a bank
without checking the institution's solvency, many investors keep their
entire stash of precious metals inside one political system without
considering the potential trap they've set for themselves. While
storing some of your gold outside your home country is not a panacea, it does
offer one important thing: another layer of protection.
Consider the exposure of the typical US investor: 1)
systemic risk, because both the bank and broker are US domiciled; 2) currency
risk, as virtually every transaction is made in US dollars; 3) political risk,
because they are left totally exposed to the whims of a single government;
and, 4) economic risk, by being vulnerable to the breakdown of a single
economy.
Viewed in this context, the average US investor has
minimal diversification.
The remedy is to internationalize the storage of
some of your precious metals. This act reduces four primary risks:
Confiscation: We don't know the likelihood of another gold
confiscation. But we do know that things are working against us –
particularly for US citizens. With $14.7 trillion of debt and $115 trillion
of unfunded liabilities, the US government will likely pursue heavy-handed
solutions. Under the 1933 FDR "gold confiscation" in the US (the
executive order was actually a forced delivery of citizens' gold in exchange
for cash), foreign-held gold was exempted.
Capital Controls: Many Casey editors think some form of capital
controls lie ahead, limiting or eliminating a citizen's ability to
carry or send money abroad. If enacted, all your capital would be trapped
inside the US and at the mercy of whatever taxing and regulating schemes the
government might concoct. Although you might be able to leave the
country, your assets could not travel with you.
Administrative Action: There are plenty of horror stories of asset seizure
by a government agency without any notice or due process, possibly leaving
the victim without the means to mount a legal defense. Having some gold or
silver stored elsewhere provides what could be your only available source of
funds in such a scenario.
Lack of Personal Control: Having gold and silver stored elsewhere adds to your
options. You will have a source of funds available for business,
entrepreneurial pursuits, investment, or pleasure.
Notice above we said these risks can be reduced,
not eliminated. There is no perfect solution; US persons could, for example,
be compelled to pay a "wealth tax" on assets held worldwide, or
even repatriate them in a worst-case scenario. Absent a crystal ball, the
political diversity of asset location is an essential strategy against an
uncertain future.
Foreign-held assets also require greater awareness
and planning:
- Access to your metal or sale proceeds may not
be quick. Therefore, this option is for those with some gold and silver
stored at or near home. We do not recommend storing all your precious
metals overseas; that defeats one of its purposes, to have it handy for
an emergency.
- While we think the US poses the greatest
threat, a foreign government could move to control certain assets as
well. The risk varies by country and is generally greater within the
banking system than with private vaulting facilities.
- Understanding and complying with reporting
requirements is essential.
The bottom line, though, is that foreign-held
precious metals can mitigate risk and give you more options. And as your
metal holdings grows, diversification becomes more
crucial.
Given our current rapacious climate, it's
likely that simply buying gold won't be enough. We strongly suggest
every investor diversify one's bullion storage outside their current
political regime. The option may not be available someday, leaving you
vulnerable without a secondary source of bullion.
We advise taking advantage of the opportunity before
it is gone.
[One way
to internationalize your bullion is to use a safe deposit box in a second
country; however, this requires traveling to the institution to handle the
paperwork and organizing the transport of your bullion… and the
contents of a safe deposit box arent
insured. Other programs will store gold; but the metal is often held in the
form of fractional ownership in a 400-oz. bar and not specific coins and bars
held in your name. A better solution is to store your bullion in a non-bank
depository, outside your home country, without shared ownership, and do it
for a reasonable fee. We found a program that provides all those things; and
it offers BIG GOLD readers six months free gold and silver storage in a Canadian vault. A
risk-free, three-month trial subscription to BIG GOLD will
qualify you for that deal… plus all the expert analysis and actionable
investment advice packed into each issue.]
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