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Humans have a tendency to forget history. One prime example of this is how much trust currently rests in financial institutions. People have forgotten how this can backfire, but it’s one of the many reasons you should store gold outside of the banking system.
With Americans trusting banks at higher levels than ever, many will wonder why they shouldn’t keep their precious metals with financial institutions. After all, they handle most people’s money pretty effectively. And with secure vaults and deposit boxes, what disadvantages could there possibly be?
Unfortunately, the answer to this question is “many.” Once you’ve finished this guide, you’ll understand exactly why so many people have chosen to store gold outside the banking system. And while there’s no guarantee bank storage will backfire, the potential risks are always there.
The Danger of Storing Gold in the Banking System
You need to know who is running things before you can recognize the genuine dangers of bank precious metals storage. The Federal Reserve System regulates bank holding companies, foreign branches of American banks, state-chartered member banks and even foreign banks within the U.S.
This means the government oversees most financial institutions in America. Since consumers currently trust banks more than they do the government, it’s a safe assumption that few citizens know of this relationship. Of course, this doesn’t necessarily mean your gold is in any danger.
In fact, most people will discover that storing gold in their banks causes no ill effects. The potential exists for localized issues, but general problems with gold storage in the banking system are few. Unfortunately, the following instances prove they are possible:
- 1933: The American government passes laws allowing the seizure of nearly all gold bullion and a significant amount of silver. The idea was to have more backing to print paper currency.
- 1959: Australia approves legislation that allows for gold confiscation from private citizens whenever it’s “expedient to do so.”
- 1966: The United Kingdom passes laws restricting gold and silver coin ownership to just four pieces. Private citizens could also no longer import gold.
The Great Depression certainly seems like the distant past. Of course, some folks who lived through it are still alive to this day. Additionally, we can’t ignore the more recent examples of governments interfering with private gold ownership.
Imagine making a significant investment by buying gold bullion bars and storing them in the bank. Then imagine the government confiscates all gold. Even if you ignore such an order, do you know who won’t? The banking system — the same one regulated by the government.
While this is a real danger of not storing gold outside the banking system, the likelihood of confiscation occurring is miniscule. Of course, they probably thought the same thing before the Great Depression. No matter how improbable this event may seem, the risk is always there.
Other Reasons to Store Gold Outside Banking Systems
If you’ve convinced yourself that federal confiscation of gold will not happen, you’re not alone. This is a common belief among most gold investors, and in reality, this belief is likely to hold true. Unfortunately, this still doesn’t mean precious metals are safe in the banking system.
One of the gold storage offerings people view as most safe is bank vaulted storage. Wealthy private institutions typically provide this service. Unfortunately, this seemingly secure option for safekeeping can run into issues other than confiscation. Consider the following:
Governments Can Close Banks
From the Great Depression to the recent economic collapse of Greece, national governments are no stranger to shutting down banks. They often do this in an attempt to prevent bank runs — where people rush to withdraw all their money from financial institutions.
Even if the government doesn’t target gold, though, a closed bank is still a closed bank. Whether it’s a federal action or simply a banking holiday, getting inside a financial institution to access your gold will prove impossible. When storing gold outside the banking system, this isn’t a concern.
Banks Aren’t Always Too Big to Fail
Recently, around four banking institutions have closed their doors permanently every year in America. If you stored your precious metals at one of these banks, it’s unlikely that you would lose your investment forever. After all, someone would have some serious explaining to do.
Unfortunately, banks going out of business can make it more difficult for you to access your investment. Business hours may become erratic, staffing shortages could cause delays and you may even need to fill out paperwork to access what was once readily available.
Storing your gold outside the banking system just seems easier. And since bank shutdowns increase during poor economies (e.g., exceeding 150 closures in 2010), your precious metals also seem safer outside the system.
What About Safety Deposit Boxes for Gold?
Each of the issues we’ve discussed also apply to storing gold in bank safety deposit boxes. If precious metal confiscation occurs, the government regulates the institution that has your box. If a bank’s doors close temporarily or permanently, you still won’t have access to your items.
Unfortunately, there’s an even bigger problem when you use safety deposit boxes rather than storing gold outside the banking system. That problem is insurance. Federal laws do not govern these compact storage units. This is one situation where a lack of government influence could be bad.
To put it simply, financial institutions do not have to replace anything lost, stolen or destroyed from a safe deposit box. You’ll have to research and purchase your own precious metals insurance if you want any guarantee of safeguarding at all.
Alternatives to Storing Gold in the Banking System
Fortunately, storing gold outside the banking system does not mean you can’t store your items safely. While wealthy banks may have once offered the only gold storage option, this has changed in recent years. There are now several bullion storage companies that aren’t within the banking system.
Silver Gold Bull is one of these companies. You can ship all your gold bullion to its secured facilities, and if you buy precious metals directly from us, we can even place them straight to storage so your gold is never in danger. We offer many other benefits as well:
- Audited and insured facilities.
- Low rates.
- Safe, secure and private storage.
- Zero counterparty risk.
- Allocated and segregated storage.
- Locations inside and outside of America.
After reading this guide, though, a certain advantage will probably stand out the most. Our third-party facilities are outside the banking system. This means you’ll avoid many of the inherent risks of storing gold in banks.
Additionally, gold items stored outside of America do not fall under U.S. jurisdiction. We have facilities in Canada and Singapore. What’s the likelihood that our government will knock on these countries’ doors and start demanding access to bullion vaults on foreign soil?
We can’t guarantee anything in this life, but the term “insanely unlikely” comes to mind. Storing gold outside the banking system may not be completely risk free, but it certainly has a variety of advantages.
You Don’t Have to Store Gold in the Banking System
Unless someone has massive reserves of precious metals, they often view storage concerns as nonsensical. Armed with some historical context, though, you likely have a better understanding of why this is important. Just because your gold is in a bank doesn’t mean it’s safe.
Fortunately, there are no major hurdles to storing gold outside of the banking system. It doesn’t matter whether you’ve yet to make a purchase or already have stacks of bullion. In fact, you don’t even have to take physical possession of the precious metal to own it.
Visit our Precious Metals Storage Page at Silver Gold Bull. We can store your gold within America’s borders or in foreign countries to safeguard it further. Regardless of your decision, your bullion will be in a much safer spot than the banking system.
