What Is A Precious Metals Depository?
For the same reason that pirates once dug a hole in the sand and marked the spot on the map with an X, modern day investors in precious metals and bullion look for places to stash their horde. Simply stated, it’s hard to safely store the physical bulk that a substantial precious metal investment represents, so most look to the secure and safe environment of a precious metals depository.
While the added security comes with a cost, investors can rest easy knowing that their precious metals and bullion is safe from theft or damage. When it comes to a discussion of what exactly is a precious metal depository, it is exactly what the name applies, a third party storage facility offering a secure place to protect and store your precious metals collection. There are two distinct types of precious metals depositories, each with its own set of advantages and disadvantages.
Two Types of Depositories: Segregated and Non-Segregated
To begin with, all precious metals depositories share the same characteristics of being highly secured installations that place the safety and protection of their customer’s precious metals and bullion collection at the heart of their security protocols. Whether choosing a segregated and non-segregated depository, common security measures include:
- 24-hour surveillance
- Armed guards
- Computerized entry and exit logs
- State-of-the-art security equipment
Clearly, with these types of security provisions in place, threat of loss or theft is extremely rare. These measures make these facilities very attractive for investors looking to secure their precious metals.
The primary difference between a segregated and non-segregated depository is how you choose to store your precious metals. In the former situation, segregated storage, your precious metals will be “segregated” out from the collections of other investors and placed in a private reserved storage compartment. Conversely, the non-segregated storage option is an open area of the vault in which your gold is stored on the same shelf as the bullion of other collectors.
As mentioned, each method is extraordinarily safe and the depositor’s preference dictates their selection. Some people simply prefer to know their chunk of gold is sitting all by itself, while other just wants to know that they will receive their value in precious metals upon demand.
Advantages of Using a Precious Metals Depository
In addition to the two sales features already noted—sizable storage space and enhanced security features—utilizing gold depositories offer three additional advantages to the investor looking for a third-party storage partner that they can trust.
First, all reputable depositories offer stringent auditing procedures designed to keep track of each investor’s bullion collection. Periodic accounting reports eliminates instances of internal theft, provides an accurate accounting of the depository’s collection as a whole, but it also gives depositors a detailed breakdown of their individual accounts.
This financial transparency is a boon for precious metal investors looking for clarity in terms of their account’s value. In fact, owing to the fluctuating nature of bullion prices, these reports may well represent the most accurate appraisal of their collection.
Secondly, although financial loss from theft or damage is exceedingly unlikely, all reputable silver depositories offer some form of insurance against damage or loss should one of those audits come up short. Again, it is all about financial transparency, and the certain knowledge that their bullion investment is safer than it would ever be in your garage or the back of your closet.
Finally, by keeping your investment within the close confines of a depository vault, you maintain the value of your collection because they retain their certified status. Gold held in private hands immediately loses some of its value owing to the fact that any reputable bullion dealer would need to go through the recertification process, known as assaying, to guarantee the high purity standards of what’s referred to as “investable gold.”
Disadvantages of Using a Precious Metals Depository
Perhaps two of the biggest disadvantages of using a precious metals depository is the attendant fees and the possible inconvenience of withdrawing your investment in the event of immediate financial need. Customers pay for the security supplied by the depositories, and those fees rise with each added benefit. For instance, segregated accounts invariably cost more than non-segregated to maintain, and depending on the depository account, it might cost additional fees to withdrawal your precious metals from the vault.
Getting to your depository might be difficult depending on what part of the country you live because that location might be hours away from your home. Also, when working with them you must take their business hours into consideration when scheduling, so a quick conversion at a local gold store is unlikely in the event of financial need.