There are many storage options available to precious metals investors. Information on using a precious metals depository is critical. This type of specialized facility is widely considered to be the most secure location for storing and safeguarding physical precious metals. Many investors may not realize how different storage options protect their investments nor do they know the questions they should ask a potential storage facility. Choosing the best option is a personal decision based on many factors. We walk you through a few of these below.
What Is A Precious Metals Depository?
A precious metals depository is a third-party storage facility for investment-grade gold, silver, platinum, and palladium. Precious metals depositories provide customers with optimal security, insurance, and reporting for their physical investments. Most precious metals depositories are privately owned and serve bullion and numismatic market participants and investors.
What Is Stored In A Precious Metals Depository?
Precious metals depositories store different metal types and forms of physical precious metals. Gold, silver, platinum, and palladium, for example, are all stored in a precious metals depository as well as rare coins and numismatics. Gold, silver, platinum, and palladium are typically stored in the form of coins, bars, or ingots. Additionally, self-directed IRA precious metals are required to be stored in a third-party precious metals depository such as the depositories found within the International Depository Services Group.
Who Uses A Precious Metals Depository?
Private investors, public entities, industrial companies, and international bullion banks use precious metals depositories. These can include a 401k provider, custodian, self-directed IRA trustee or administrator, precious metals distributor, precious metals dealer, gold investors, and silver investors to name a few.
Alternatives To A Depository
There are many alternatives for investors to store their precious metals. Safety deposit boxes and bank-owned vaults (storage vaults owned and operated by a banking facility) have advantages, including convenience and security. However, physical precious metals are not considered deposits of the bank and are, therefore, not insured by the Federal Deposit Insurance Corporation (FDIC). If an investor’s precious metals are stolen, lost, or destroyed, the bank is under no obligation to compensate the investor. In addition, bank-owned vaults usually have higher storage fees than other storage facilities.
Home storage of precious metals is rarely recommended as it poses one of the greatest risks to investors. When precious metals are stored at home, they are susceptible to theft, natural disasters, expensive personal property insurance, and the possibility of an investor simply forgetting where it is. Although investors have 24/7 access to their precious metals investment, the risks are too high.
While every precious metals storage option has advantages and disadvantages, bullion depositories statistically have the highest level of security available to safeguard the precious metals they are storing. Most precious metals depositories properly insure all assets to protect their stored metals. Some precious metals depositories offer additional services such as bullion inventory fulfillment and distribution, online account access, reporting, and logistics.
How Much Does It Cost To Store Gold In A Depository?
The costs for storing precious metals can vary significantly based on the type of storage the investor requires. A bank-owned vault charges an average of 0.72 percent of the total value of the investment per year before insurance. A bank-owned vault, for example, could charge an investor $720 on $100,000 worth of stored precious metals—an amount that excludes the cost of insurance.
While bank safety deposit boxes are often too small for most silver investors, however, some gold investors chose this option. The average bank charges roughly $60 annually for a 3x5x24-inch sized metal box (and up to $173 for the larger 10x10x24-inch). The cost of insurance is excluded from this fee.
While precious metals depositories have different storage sizes, service fees, and minimums, the International Depository Services Group charges anywhere between 0.3 to .65 percent of the total value, including insurance.
Depository All-Risk Insurance and Security
While some precious metals depositories only carry general liability coverage, some precious metals depositories such as International Depository Services carry an all-risk insurance policy underwritten by Lloyd’s of London, the world’s leading provider of specialized asset insurance. Investors should never settle for less than all-risk insurance. Most all-risk policies include protection against natural disasters, theft, damage, and destruction by an outside source. Investors are encouraged to specifically ask their precious metals depository about the types of insurance they offer at their facility.
Not all precious metals depositories have state-of-the-art security features nor are they equipped with UL-rated, multi-redundant security systems that are monitored 24/7 in real-time by offsite security specialists. Investors should expect their precious metals depository to have a protocol of control measures, including the implementation of stringent “dual control,” perpetual audits (internal and external) on inventory, and “separation of duties” methodologies.
It is also important for a precious metals depository to have a superior physical vault. Underwriters Laboratories (UL) created a burglary-resistant rating of vault doors and modular panels to rank a vault’s security. The ratings are based on how long it would take a criminal to break into a vault: Class M (15 minutes), Class I (30 minutes), Class II (1 hour) and Class III (2 hours). Class III vaults typically have reinforced doors and walls, multiple locks, and additional alarms. The Class III Vaults, like those with International Depository Services, are the industry-preferred vaults of precious metals depositories.
Another safety mechanism for a precious metals depository is their internal and external audits. Investors should look for a depository that offers daily transaction reports, monthly internal audits, and annual external audits. As an added layer of protection, precious metals depositories should also have a proprietary inventory control system and offer account notifications that electronically transmit detailed transaction updates and periodic account statements to their clients.
The use of employees versus contract labor can have significant implications on the security of your investments. A secure precious metals storage facility will have employees and avoid utilizing contract workers or temporary staffing.
A depository should have global distribution and fulfillment services. Investors need to ensure that their investment assets can be efficiently shipped to any allowable destination worldwide. The depository staff should have extensive international shipping capabilities and the requisite knowledge and experience regarding fees. Always remember: All precious metals shipments should be insured.
With today’s ever-changing geopolitical climate, choosing a depository with more than one location (preferably one inside the United States and one abroad) is advisable.
Precious Metals Depository Financial Requirements
Investors need to verify that their assets are held in “custody”—meaning they are stored in client-specific accounts as a bailment as opposed to a deposit consignment. The precious metals depository should maintain the account but in no circumstance have the authority to transact any business without the client’s permission or direction. Investors, therefore, will want their account designated and set up in their name to ensure that no other party can transact business without the named account holder’s explicit consent.
24/7 Investor Access
Investors will want 24/7 online access to their precious metals depository assets in custody data including access to transaction activities, account statements, itemized reports, shipment tracking, and other logistical activities.
Precious metals depositories should supply daily account transaction confirmation reports as well as real-time management and reporting tools.
A precious metals depository should be able to supply investors with the following:
- Detailed transaction information
- Ability to download account statements
- Comprehensive shipping summaries and tracking information
- Itemized inventory reports
Some precious metals investors want to remain confidential and discreet. Bullion depositories should take every precaution to protect each client’s personal information with the appropriate physical and technological safeguards. Under no circumstance should investor information provided to the depository be sold, exchanged, loaned, or made available to a third party except as required to fulfill the services according to the account agent’s direction or as required by law.
If confidentiality is a significant concern, investors will want to select a private or independent (without government oversight) precious metals depository.
Investors should require all assets held in the precious metals depository are kept in segregated storage. Segregated storage ensures that individual customers’ metals are kept in an area or container intended solely for their metals and separated from the assets of other account holders, thereby ensuring that the exact inventory received is the exact inventory delivered back to the client. Conversely, allocated or commingled storage options mean the client’s metals are stored together.
Precious Metals Depository Designations/Accreditations
Designations and accreditations provide a depository with credibility. Many of these designations and accreditations are quite difficult to achieve. Here is a list of International Depository Services Group designations and accreditations:
- Licensed by CME/COMEX for gold, silver and platinum
- Intercontinental Exchange Futures U.S. (ICE), the parent company of NYSE (New York Stock Exchange)
- London Bullion Market Association (LBMA)
- Investment Industry Regulatory Organization of Canada (IIROC)
- National Coin and Bullion Association (NCBA)
Deciding where to store your precious metals investment takes careful diligence and homework but knowing what to look for in a storage facility can make this decision an easier and more pleasant experience. The best thing investors can do is shop around. Call a few different companies and ask about their services, policies, and fees. Understanding the processes, policies, and storage options each location offers can help you make an informed decision. To guide individual investors, the International Depository Services Group has a Precious Metals Depository Checklist <link> to help in their depository search.
The International Depository Services Group is available to assist individual investors. Feel free to contact us here. We look forward to serving you.