The "safe deposit box for gold storage" debate is as old as the Permanent Portfolio itself. In mining through over a decade of posts on this subject I noticed a strong division of opinion on this subject.Safe deposit vault in Joplin, Missouri after the 2011 Joplin tornado, remaining intact despite the destruction of the bank that housed it.
Roughly 1/3 of PPers are intensely against using safe deposit boxes for even a fraction of their gold allocation. I used to be in that camp, but I am reconsidering my position.
If you opt for zero counter-party exposure then you have to guard your gold yourself. You are simply trading one form of risk for another: counter-party risk is traded for the risk of theft, or even a violent home invasion. It doesn't matter if you have a TL-30 safe, the risk imposed by having a home safe derives from what the robber is willing to do to you to make you open the safe. Think In Cold Blood. All it takes is the faintest rumour of the existence of a safe in your house to paint a target on you, your home, and your gold.
Hiding in plain sight seems superior, in this regard. But this comes with significant risks, as well. Children like to explore. Floods happen, and so do tornadoes, fires, earthquakes, etc. Memory is fickle, and so is life; if you don't tell anyone where the gold is stashed and you die, it may very well be lost forever. If you do tell someone that you have gold, and where it is, you have re-introduced counter-party risk. If you write down the locations of your hiding spots then you have to secure that note as well as the gold itself.
It really is quite remarkable how gold storage is all about trade-offs. There is no possible way to eliminate risk altogether. Risk seems to be inherent to existence, it is just the nature of reality.
However, I have come to view safe deposit boxes as, perhaps, the best method of storing gold. They achieve an optimized balance between counter-party risk and the risk of theft/violence/loss. SDBs eliminate the threats outlined above because security is outsourced to the bank and police; I consider the risk of a robber breaking into a SDB as being zero. This method also mostly avoids the sorts of counter-party risk introduced by hiding your gold in your house or burying it, as the picture above demonstrates. Insurance can cover the very low risk of a bank being wiped off the face of the earth.
SDBs also effectively mitigate many of the problems inherent to outsourcing storage to a third-party. Gold in a safe deposit box isn't equivalent to allocated or segregated storage solutions because you literally hold the key. You can drive to a local location, walk right into the vault, open up your private deposit box and visually inspect the contents. You have physical access to the gold in a way that you do not with, say, the Perth Mint, or Bullionvault, or whatever.
The main criticism of SDBs is that there are lots of horror stories about the boxes being forfeited due to inactivity, lost during a move of the box, or just inexplicably drilled open for no good reason. These stories (usually in the form of news clippings) are true, but how representative are they of the experience of the vast majority of SDB holders? 1 in 10,000? 1 in 100,000? 1 in a million? Furthermore, the vast majority of these stories involve someone failing to pay the bill and/or not checking up on the box for years, even decades. This is, therefore, a risk that is very easy to mitigate. Pay the rent and open the box up once a year.
I also think there is something to be said for opening a SDB with a local credit union. You are much less likely to be "lost in the shuffle" by a community owned bank than a major national bank that views you as just a faceless client number. Customer service is usually much better at local credit unions. They are less likely to just start drilling open SDBs, even if you haven't visited for years or missed a rent payment, without first making a serious effort to contact you.
Anyways, what is the current consensus of using safe deposit boxes for gold storage around here?
