Offshore Wealth Storage

Face to face
Each classic case
We shadow box and double cross
Yet need to chase
--Sade

An earlier post discussed the pending establishment of a bullion depository in Texas. Here is an interesting discussion about offshore precious metals storage. One of the discussants operates Strategic Wealth Preservation (SWP) in the Cayman Islands.

Some noteworthy points:

Confidence in bank storage options, particularly domestic ones, is declining as escalating legislation and regulation increase risk of control or outright confiscation of stored property.

Laws may make it legal for banks to confiscate precious metals, but it is isn't legal for wealth storage facilities to do so.

The original concept of banks was that they owned a secure facility and people would pay them a fee to keep their valuables safe. They served as money warehouses. Subsequently realizing that chances of all depositors demanding to withdraw their property at the same time were relatively low (but not zero of course in the case of bank runs), bankers began lending deposits and making money on the interest. That practice in and of itself is not unfair unless depositors do not want their money lent out, and are willing to accept the risk of loss in the event that bankers trade poorly. Of course, the configuration of banks into centrally managed syndicates coupled with the notion of deposit insurance paid by non-depositors have completely distorted the original entrepreneurial concept of leveraged banking.

A wealth storage facility provides what banks originally did--safe storage.

Although US regulations have intensified regarding reporting requirements financial institutions, gold and silver held at a storage facility rather than a bank is not legally reportable (at least for now). Quantities, trades, locations remain anonymous.

A checklist for selecting an offshore wealth storage facility should include selection of an ideal jurisdiction based on proximity, stability, security, history of investor friendliness, freedom from taxes and tariffs, and available of world class storage facilities. The message: finding the right jurisdiction comes first.

Jurisdictions within easy reach are usually attractive. While being perhaps the most ideal jurisdication according to the checklist factors enumerated above, Singapore is half way around the world, which makes quick access to stored property difficult (and more costly).

Not only does SWP appear to be a well thought out class storage facility that is located in an attractive, nearby jurisdiction (Cayman Islands), but some of the world's most prominent precious metals dealers store with them as well. As such, there is opportunity for buying and selling bullion on site which should reduce transaction time and costs.

Diversification across jurisdictions is desirable as size of wealth to be preserved increases.

positions in gold and silver