GEOGRAPHICAL DIVERSIFICATION AND OFFSHORE STORAGE

 

If history is any guide, gold has been the object of confiscation because it represents an obvious concentration of wealth. Such confiscation can take the form of theft if done by private individuals, or public policy if done by governments. Governments can unfortunately reach out to the safest private storage facilities and insurance does not cover government confiscation.

When choosing a jurisdiction in which to store a large amount of wealth, it is crucial that:

  • It is governed under the rule of law and has an efficient legal system.
  • It has a low motivation to expropriate assets (which is usually an inverse function of its solvency).
  • It has balanced finances.

Unfortunately, these criteria rule out most of the Western world as viable options. Investors are very concerned about the Western banking system and the risks of bail-ins, deposit confiscations and capital controls.

As a result, the world’s growing middle classes and the wealthy are moving their gold away from increasing financial repression in the Western world to the Asian capitals of Hong Kong and Asia’s emerging precious metals trade hub, Singapore. Switzerland remains a favorite destination for many western and international investors, both retail and institutional. Let us review the jurisdictions that are considered the safest.

SWITZERLAND

Switzerland is in our opinion one of the safest countries for gold storage and is said to concentrate the greatest amount of art and valuables of any storage location in the world. Since Switzerland gained independence in 1648, it has remained neutral and has not been engaged in any foreign conflicts. The country has a long tradition of safekeeping wealth.

However, the country is locked by European countries and increasingly submitting to the regulatory pressure by the European Union. Switzerland is still a safe option and certainly the most viable historically, but investors should stay informed of the potential future changes that might affect their holdings held in Switzerland.

HONG KONG

Hong Kong is one of the most stable, vibrant, and economically free regions of the world. It has maintained a business friendly and low-tax environment which inspires confidence with global investors. Its legal system is based on British law with which most investors are familiar and comfortable and a robust financial infrastructure has been put in place over the years.

Hong Kong is also a logistics hub for bullion that contains the whole ecosystem required for trading and storing metals. It is home to two refineries accredited by the LBMA and the most reputable logistics companies are all present. It is the import gateway for precious metals into China, which have soared in recent years. Goods can move freely in and out of the city with minimal government interference.

SINGAPORE

Singapore is well positioned to accommodate the growing demand for physical precious metals because of its well-earned reputation as a financial and wealth management hub. The island-state is well positioned to develop a flourishing precious metals hub because it combines all the necessary ingredients:

  • Political and economic stability: Singapore is a young nation but it has seen impressive economic growth due to its efficient legal system, absence of corruption, and a business friendly government
  • A favorable tax treatment of precious metals: Singapore abolished VAT/GST on investment grade precious metals in 2012.
  • A Freeport dedicated to the storage of precious metals and valuables. It was launched in 2010, is located next to the airport, and has 25,000 square meters of space. It is operated as a high security, state-of-the-art, duty-free zone facility and offers a highly confidential and attractive international free trade zone that makes for ideal storage premises for precious metals.
  • Government support and sponsorship: The Singapore government and its major partners like the Singapore Economic Development Board (EDB), International Enterprise Singapore (IE), and the Singapore Bullion Market Association (SBMA) are contributing to and supporting a bid to rival London, New York, and Zurich as a hub for the trading and storage of physical gold, silver, platinum, and palladium.
  • Refining capacity: Swiss refinery Metalor recently has completed the setup of a refinery in Singapore and is now able to supply bullion to the local market and to provide refining services.
  • The precious metal ecosystem is growing fast with several of the top logistics companies already present and bullion dealers setting up shop in the country to satisfy the growing demand for bullion to be stored locally.
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