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PHYSICAL GOLD OWNERSHIP - AN INCREASINGLY CRITICAL ELEMENT OF YOUR WEALTH PRESERVATION PLAN
Dear Mountaineers:
After having been firmly "stamped" a beach bum over the past few weeks, I am now back in the office working desperately to get rid of the backlog on my desk and to regain my former status as the Chairman of this company. It is not easy and I still can´t get used to wearing shoes again.
A few weeks ago, we compared the current deflation-inflationary mix of factors to a dam on the verge of bursting. Ultimately, we said that we expect an inflationary situation to progress and conquer financial markets. Are we going to have rising PRICE INFLATION down the road? Yes, we think so. At some point, the dam will burst and the excess liquidity will hit the streets.
What can you do about it? How can you protect yourself? Frankly, one very straightforward element of your plan should be this: Adjust your portfolio. Be sure to own some physically and safely stored precious metals, best being in the form of gold bullion coins or bars.
"Now you know why I buy more gold and silver every time they drop in value in the current economic environment. What smart investor wouldn´t gladly spend funny money to buy real money?" -- Robert Kiyosaki, author of Rich Dad, Poor Dad
There are plenty of articles and books written on the topic of WHY you should own physical metals. Therefore, in this Update, we will not discuss WHY´s, but instead, we will focus on the HOW´s.
At BFI we have helped our clients own physical metals in a variety of formats and methods for many years. In our portfolio management, the allocation toward physical gold and silver positions has increased over the years and today stands at roughly 25% in our BFI MAP Portfolio. As I look at the governments throughout the world adding more and more liquidity to the markets in an unprecedented frenzy of monetary and fiscal spending, I feel obliged to urge you to consider and act now, and ensure that you OWN AN ADEQUATE AMOUNT OF PHYSICAL METALS IN THE RIGHT FORMAT.
I´ll be touching on a number of considerations in this Update. For more information and advice on various methods to own gold, silver, platinum and palladium, contact our offices.
Sincerely,
Your "Swiss Mountain Guide"
Frank R. Suess |
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PHYSICAL PRECIOUS METALS HELD SAFELY, EFFICIENTLY AND PRIVATELY...IN SWITZERLAND!
BFI Wealth Management Inc. provides its clients with a number of precious metals services and physical storage programs that offer the highest levels of SAFETY and EFFICIENCY. For many years, we have offered the Perth Mint Certificate Program. Lately, a number of new services have been added to the roster, most prominently of which is the Global Gold Program.
Clearly, BFI Wealth Management is first and foremost a portfolio management firm. It is not a precious metals dealer. Thus, you may be wondering why BFI Wealth Management has a complete section on precious metals on their website? Why does BFI offer services related to precious metals and physical storage of gold, silver, platinum and palladium? The answer is straightforward: We offer access to such programs BECAUSE we are portfolio managers. And it is because we are independent and fee-only portfolio managers.
Yes, gold and other precious metals have been shunned as investments by the mainstream financial services arena for years. There is much more money for banks and brokers to be made with stocks, bonds and structured products. Precious metals, particularly gold, are acquired and stored for years. No turnover, no interest.
We take a different position. Based on our Big Picture views, we know that EVERYONE should have a minimum allocation in precious metals. Most of all, we are convinced that in face of intrinsic flaws in fiat currency systems and decades of soft monetary policies, it is a must to keep a nest-egg of physical gold in a secure location. History testifies to the fact that gold is the only true store of value. And, having PHYSICAL gold stored in a safe storage facility within a safe jurisdiction is not an option...it´s a mandatory element of any solid wealth management plan.
Here are a few avenues to consider:
Physical metals held within your managed account: A properly structured portfolio management mandate will allow you to hold physically allocated precious metals in an account with a safe Swiss bank. Based on BFI´s status and business volume with such banks, the fees on acquisition and storage are excellent. However, with the exception of gold, the other precious metals (silver, palladium and platinum) are subject to the Swiss VAT of 7.6%. Furthermore, for accounts with American beneficial owners, most banks no longer offer this service.
The Precious Metals Annuity Certificate: A few years back, BFI created the first Precious Metals Annuity Certificate with one of our partner insurance carriers. It offers an annuity contract that allows for individualized holdings of physical precious metals. In today´s environment, it has become increasingly attractive to investors interested in protecting purchasing power and the value of future annuity payments from inflation. Furthermore, those clients who invested in this annuity certificate when it was first offered, have already made considerable capital gains as gold has appreciated substantially over the years.
The Precious Metals Annuity Certificate, continuously monitored and professionally managed, also has several advantages over the direct managed account approach. In particular, they offer very cost and time efficient purchasing and selling, tax benefits in most jurisdictions, solid asset protection, and very effective inheritance planning.
The Global Gold Physical Metals Storage Program: At a low minimum of only USD 20,000, this program allows you to buy, sell and store physical bullion gold, silver, platinum and palladium bars and coins in a safe storage facility in Zurich, Switzerland. No Swiss taxes whatsoever apply on any of the metals offered. The Global Gold program offers a new and excellent, if not considerably improved, alternative to the renowned Perth Mint Certificate Program.
Give us a call at our offices in Switzerland or send us a note if you would like to know more about the different programs we can help you access. Or, for a personal meeting, join us at one of our upcoming Inner Circle Briefings. |
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KEY CONSIDERATIONS OF GOLD OWNERSHIP
For centuries, gold has attracted investors seeking to protect their wealth and provide a ´safe haven´ in troubled or uncertain times. This remains a reality for modern investors too, although there are also a number of other reasons that underpin the widespread renewal of investor interest in gold. Gold can add an element of potentially outstanding capital gains to your safety-oriented portfolio. And, if structured adequately, gold will entail a minimal downside risk.
We consider buying gold "the right way" to be a HOT topic and unique opportunity in achieving the following benefits:
• Diversification out of continuously devaluing paper currencies, thereby protecting one´s assets against a loss of purchasing power AND, at the same time, setting it up for capital gains.
• Retaining liquidity and purchasing power for the next upturn in business cycles (which in our view has NOT arrived yet), thereby securing the opportunity of taking part and benefiting from it. It is important that the gold format one chooses is supported by a liquid market, i.e. you want to be able to buy and sell rapidly if need be.
• Safe haven: In volatile and uncertain times, there is typically a "flight to quality" as investors seek to protect their capital by moving it into assets considered to be safer stores of value. Gold is among a handful of financial assets that do not rely on an issuer´s promise to pay, offering refuge from default risk. It provides insurance against extreme movements that often occur in the value of traditional asset classes in unsettled times.
• Paper Currency Hedge: Gold is often used as an effective hedge against fluctuations in fiat currencies. In particular, a close relationship tends to exist with the U.S. dollar. When it appreciates, the dollar gold price falls, while a fall in the dollar relative to the other main currencies produces a rise in the gold price. While this may also be true of other assets, gold has consistently proved among the most effective in protecting against dollar weakness.
• Added asset protection and privacy: Structuring your strategy appropriately can provide a considerable level of privacy. Depending on the format gold is bought in, there are considerable privacy and safety related differences. More specifically, buying gold "the right way" can mean avoiding reportability and minimizing confiscation risks.
• Portfolio diversification: Most investment portfolios are invested primarily in traditional financial assets such as stocks and bonds. The reason for holding diverse investments is to protect the portfolio against fluctuations in the value of any single asset or group of assets that react in a common fashion. Portfolios containing gold are generally more robust and less volatile than those that do not.
• Physical or virtual ownership: You can buy gold in its physical form and store the coins, gold bars or jewelry that you have acquired. However, storage fees must be considered. And, one must consider a lower level of liquidity compared to a gold certificate or metal account (also referred to as a claim account). |
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BUYING AND STORING PRECIOUS METALS "AT HOME" OR OVERSEAS?
A key issue that needs to be addressed is whether an investor should buy gold offshore or "at home". The answer will not be the same for everyone. Depending on your specific objectives and situation, you may be better off keeping your assets in your home country and storing physical gold in your local bank´s deposit box. You might, however, be well advised to buy and store physical gold offshore. Or, maybe, you should consider a mix of both.
Buying Gold "At Home"
Obviously, this is (a bit) more convenient, simply for the fact that you are not dealing with time and language differences. Furthermore, you can have the gold delivered to your home or directly to the local bank or storage facility of your choice with more direct control over your assets. However, a key issue arises -- and this applies to U.S. investors in particular - in regards to the risk of government confiscation when buying and storing gold "at home"!!!
How might a gold confiscation be possible nearly 70 years after the last one occurred? This question is best answered with a series of other questions: Firstly, how will the massive U.S. federal debt (nearly $6 trillion and growing) and the outstanding international dollar float (resulting from the U.S. trade and budget deficits) be reconciled?
Currently, the U.S. dollar (still) enjoys a special status around the world as the primary reserve currency. This status encourages central banks and individual investors around the world to hold it. Leaving the various circumstances and potential scenarios aside, what would be the outcome if the stilts that propped it up were kicked out from underneath this built-in dollar market?
How might the U.S.government react to an economic emergency in which individuals, beset by either a devastating domestic inflation or a deflationary nightmare -- or both -- were fleeing the banks and equity markets for gold as a means of preserving their personal capital?
Historically, confiscation has all too often been the option taken by governments beset by an economic breakdown. Just as gold is the asset of last resort for the individual portfolio doing service in the most financially threatening times, it is often times the asset of last resort for troubled governments as well. As recently as 1998, during the Asian Contagion, both South Korea and Thailand implemented "voluntary" gold call-ins. The temptation presented by its citizens´ gold holdings was simply too facile to resist.
No matter how you look at it, investors must beware of government confiscation risks that rise exponentially in times of a severe economic crisis (as seen under U.S. President Franklin D. Roosevelt in 1933).
Buying Gold Offshore
The advantages of buying and storing gold offshore are primarily related to PRIVACY and ASSET PROTECTION. However, what is required to reap these benefits is a structure that allows you to re-allocate your precious metals rapidly and store them safely. Ideally, this is done in an efficient and low-cost mode despite any geographic distance issues.
 
A 20-franc Vreneli, a Swiss gold coin, fine gold content 0.1867 troy ounces, 900 fine, with a portrait of a girl on the face, which first appeared in 1897 and was minted until 1949. In all, 58.6 million of these coins were struck.
Some clients may prefer buying and storing physical gold over a "virtual" gold account or certificate. They perceive a higher degree of safety in this strategy because of the fact that they are allocated a specific and tangible lot of gold. However, storing physical gold is obviously more costly. And, it is generally less liquid than its "virtual sisters".
Despite higher holding fees, in today´s environment, BFI ultimately recommends holding physically allocated precious metals, preferably in bullion coin or bar format.
Conclusion
Both options, buying gold offshore or "at home" have their advantages over the other. The offshore option is more complex in execution and requires a larger investment. This is not a "do-it-yourself" commodity, unless you have lots of time and like to travel. Therefore, we recommend taking advantage of a full service program as offered by BFI Consulting and some other firms.
When going the offshore route, beware of strategies that sound too simple. Think the process through. And consider the hefty fees and taxes (VAT) you will pay in some European countries.
The "at home" solution is more convenient and efficient. The key risk, in case of a severe crisis, is government confiscation. It appears, however, that if approached cleverly, these risks can be minimized.
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NEWS BRIEFS
Catching the Gold Bug - How Small and BIG Investors are Hoarding Physical Gold
We mentioned these articles a few weeks ago, but because of today´s topic, felt it might be important to include it again. The Wall Street Journal reports that small investors have caught the gold bug. They are starting to hoard phycical gold in large and increasing amounts. However, it is not just the small investors. According to a Reuters article, China has bought 450 tons of gold in the past 6 years. And, according to unofficial announcements, they are prepared to buy a lot more as it becomes available.
Critical here is that central bank annoncements of selling large gold amounts has apparently had a much lesser effect on gold prices than if the market knows that a BIG buyer stands ready to buy.
Go to Story 1
Go to Story 2
Money Funds Are Ripe for ‘Radical Surgery´
This is a timely article by Jane Quinn of Bloomberg. Where can you find safety today? Some will still respond in the manner they have been accustomed to for the past few decades: money market funds, treasury bills, municipal bonds and the like. Well, times have changed. All of these formerly "safe" investments need to be questioned today. In our opinions, for instance, US Treasury paper is far from anything we would call safe, AAA-rated or not.
Go to Story
Consumer Bankruptcies May Hit 1.4 Million
Contrary to all of the good news planted in the mainstream over the past few weeks, the facts are telling another story. Bankruptcies are up. Unemployment is rising. The rise in stocks is driven mostly by a small number of institutional investors, not the broad masses.
Go to Story
Latest News on UBS from Reuters
It appears that the US and UBS have reached an initial agreement in their legal dispute. According to the article the U.S. government will drop its case against UBS once a final settlement is in place. So, although there appears to be progress, the ultimate outcome is still not known. And, the questions after the agreement is signed is how many names will UBS be required to turnover to Washington, and will the Swiss government confiscate the UBS bank records after the settlement in order to safeguard Swiss confidentiality and effectively win the battle? We will watch this further.
Go to Story
A Swiss Lesson in How to Solve the Banking Identity Crisis
Financial Times, by Henny Sender, published on August 8 2009
Good news on the two big Swiss banks, Credit Suisse and UBS, have been rare of late. Thus, the following article is welcome. It also highlights the fact that the serious but very UBS-specific issues should not be put on Swiss banks in general. The largest number of Swiss banks is made up of small- to medium-sized private banks with a very different business model and very little exposure to the issues UBS has run into in their subprime derivatives losses or its current dealings with the U.S. Justice Department and the IRS.
Go to Story
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| © Copyright 2009, by BFI Capital Group AG, Bahnhofstrasse 29, 6300 Zug, Switzerland, website: www.bficapital.com. The MOUNTAIN VISION UPDATE is published by BFI Capital Group (‘BFI’). Quotation is allowed if credit is given. Although every care has been taken in the preparation of Mountain Vision, BFI does not guarantee and cannot be held responsible for the accuracy of any statistic, statement or representation made. We recommend that you consult qualified professional advisors to determine the applicability of this information and opinion. The publisher is not a registered investment advisor. Readers should not view MOUNTAIN VISION as offering personalized legal or investment advice. |
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