If youve been investing in precious metals then youve likely made a pretty decent profit on your wealth preservation investment over the last several years. With the popularity of precious metals increasing exponentially as the economic crisis and geopolitical climate heats up, investors looking for protection against inflation and instability have been pouring into precious metals ETFs, stocks, contracts, and pool accounts. For many, the physical metal has become the investment vehicle of choice, but a large portion of investors, especially large buyers, choose to store those metals with their brokers/dealers.
When all hell finally breaks loose, and its time to finally sell those assets and trade them in for either paper currency, real estate or other investments, how sure are you that you will be able to take physical delivery of the metals youve purchased?
Bill Cramer of St. Louis was pretty confident everything was on the up-and-up. He purchased 5000 ounces of silver back in 2003 for a spot price of $4.94 and stored them with an east coast broker. When he was discussing his holdings with his coin dealer, the dealer dared him to try and take delivery of the metal.
Bill took him up on that dare and contacted his broker requesting to take delivery of his supposed physical metal holdings, for which he had been paying storage fees for years. As you may have guessed, the broker advised him that physically delivering the metals was not possible:
So, I took his dare, I called them up, it was June of last year. The metal I had purchased in January of 03. I said Id really like to take delivery of my metal the five thousand ounces. They go well, thats not possible. And, I go well, Ive been paying storage fees since January of 03, what do you mean I cant take delivery.
Well, its part of the account. Its called a pool account. And, you dont take delivery, you just participate in the appreciation.
So I immediately sold that 5000 ounces at $18.33 and I had my cell phone in my hand and I immediately purchased 2500 silver eagles at $18.41 and thats how I reconciled the problem of not being able to take delivery of my physical metal from a brokerage account.
If youre holding metals outside of your immediate possession (i.e. in a safe deposit box, with a family member, an off premises safe or a hole in your backyard), then we strongly suggest you understand what your investment is and is not. If its paper, understand that if and when the swindle in paper markets for precious metals is finally understood by mainstream investors, and the paper assets collapse, you will likely be left with nothing.
If you happened to recently purchase $1 billion dollars in gold and have it safely stored in a New York bank several thousand miles away, you may want to think twice about whether or not that metal is actually stored, in physical form, or if its just another paper swap. If theres one group of people who have no scruples whatsoever when it comes to the investments and life savings of individuals for whom they manage funds, its New York firms and brokers.
Be forewarned and forearmed.