Perth Mint

[AdamA]

The discussion on geographic diversification in the "permanent portfolio discussion" section got me to start wondering about various foreign investment options.

Can anyone explain to me what the difference would be between holding gold bullion in a Swiss bank and holding gold using one of the Perth Mint programs?

[WildAboutHarry]

I looked into the Perth Mint a while back, so this may be a bit foggy...

They offer both segregated and co-mingled storage.  You pay an annual fee for the former, the latter is free.  Segregated storage means there is a bag or box with your name and your goods in it in their vault.  Co-mingled is basically a book entry against the Mint's overall holdings.  You can take physical delivery from either account.

For amounts less than 50K (I think) you need to go through an authorized dealer and pay a markup.  I think there is a 5 or 10K minimum.

The Swiss have a long history of banking secrecy and security, Australia not so much.  My impression when I reviewed the information was that the Perth Mint was an OK alternative for offshore gold holdings.  Not sure about IRS reporting requirements.  Presumably there would be none since it is simply property, but I'll leave that to the tax experts.

Given that the US was able to arm-twist the Swiss into basically nullifying the ability for US folk to utilize their banking services, I'm not sure any desirable (i.e. reasonably secure) overseas banking system is really equivalent to what Harry Browne was looking for.

[AdamA]

Wild About Harry--

Here's something Craig posted elsewhere on the board.  Do you think the Perth Mint could serve in this manner?

If the government starts confiscating gold or freezing financial assets in brokerage accounts, or whatever, how does having gold in a foreign account help me?  

Other reasons:

Natural disasters that shut down large parts of the financial sector.
Manmade disasters that do the same.
Massive cyber attack that affects your electronic records at a domestic brokerage.
Etc.

To answer your question though: "If the government starts confiscating gold or freezing financial assets in brokerage accounts, or whatever, how does having gold in a foreign account help me?"

It helps you because you have options other people do not. One of those options may be simply to leave and start over.

Another option is to drag your feet for as long as possible. During a currency crisis time is your friend. The longer you can keep your money out of the domestic currency the better chance you have of surviving it. This is because currency problems happen rapidly and government responses will be knee jerk and immediate. They won't wait around to take major action because some small percent of the populace is refusing to repatriate assets and ties things up with an attorney. Even being able to stall 30-60 days could be enough time to come out OK.

Another option is if you suspect disaster and capital controls are coming, to go to the country where the assets are stored and remove them and use them to buy real estate in that country or other real assets in that country. It is easy for the government to order repatriation of liquid assets, but I'm not sure they'd have as much luck demanding people sell real property overseas. Even if they did do this, you again get a useful delay in complying because getting rid of real property is harder. Plus you can rent out that property and get an income stream and this slows things down further because now you have local tenant laws to deal with.

Lastly, when you put money overseas you are now entangling another legal jurisdiction into the process and that jurisdiction may not comply. So instead of you vs. the govt. it would be the govt. vs. another govt. For instance I find it hard to believe that a country like Switzerland would allow a blanket repatriation of assets to happen. They might, but I suspect so many people would file suit in Swiss court that the process would be delayed for quite a while. The govt. of Switzerland may even freeze the accounts until it was all resolved therefore providing a defense to account holders against forced repatriation. The account holders could simply say that they'd love to comply but the Swiss govt. is refusing all requests to shut down accounts and bring the money back.

Who knows?

But the main thing is you have options. Instead of keeping it all in the US and waking up one day to find out an executive order was signed overnight freezing all US banking assets, etc. You will have the ability to respond to defend yourself against extraordinary acts that are happening where you reside.

[WildAboutHarry]

Sure.  But to be clear, I do not have an account with the Perth Mint, I only did some research many months ago.

Australia ranks well (better than the U.S.) on the corruption chart linked by CraigR.  They respect property rights, etc.  I don't think they can match the Swiss tradition in banking secrecy, but it seems like a reasonable alternative for locating assets off shore.  But in a crisis could you 1) get to Australia, 2) buy real estate there, etc.?

Aside from cash and physical gold in your possession there are counter-party risks to some degree everywhere, and of course this applies to the Perth Mint.  There have been numerous threads on this board about counter-party risk recently.

And if you have ever seen the movie The Princess Bride you will not want to locate assets in Australia

[Wonk]

I think I read somewhere in the Perth material packet that the gold you purchase is not available for export beyond Australian borders.  So, say the whole world blows up and gold is priced at $20,000 USD.  You show up in Perth expecting to take your gold coins and fly to Dubai.  Not happening.  They keep the gold but you can receive a check for $20,000 USD if you so choose.

I may be wrong, but that's my recollection. The bright side is that there are worse places to be stuck and starting over than Perth, Australia.  I wouldn't mind honing my surfing skills.

[murphy_p_t]

i seem to recall rumors floating around the net to the effect that there were delays in getting un-allocated metal shipped to owners, implying that the metal wasn't really in storage...i think this was for silver

be sure to conduct due diligence

[Reub]

They have 3 methods of storage: allocated, unallocated, or pool allocated. Which do you think is best?

Also, I believe there is a $50,000 minimum.

[Indices]

PMGOLD is Perth Mint's Australian ETF. It is backed by the Western Government of Australia so it is basically the only paper gold out there that is backed by an actual government rather than a private company (though I think the Canadians are introducing a Canadian one that is unavailable to Americans).

More info:

http://www.perthmint.com.au/investment_gold_asx.aspx

The problem is that you have to buy the shares on the Australian stock exchange. So you have to find a broker who can do that if you live overseas.

[Hal]

Some information on the Perth Mint from someone who lives in Australia....

There is a Perth Mint Depository Scheme (PMDS) and a Perth Mint coin shop. With the silver shortage a few months ago, you had to wait to get an order from the coin shop, but orders placed with the PMDS were filled immediately.

Last year you could open a PMDS account with $5000 AUD and all transactions had a 5k minimum. The minimum opening amount may have changed, however as of 3 weeks ago, it was still a minimum of 5K for any transaction.

As for whether to use allocated or unallocated holdings. I use allocated holdings as I can have the mint send my coins directly to me. From memory there is a one day processing delay. Alternatively you can just go there and pick up your holdings across the counter.

If you use unallocated holdings , if I remember correctly, there was a weeks delay to convert them to allocated. The request for change from unallocated to allocated took less than a minute over the phone.

Personally I would not use any gold certificates. Prefer the holdings to be there waiting to be picked up at a minutes notice, rather than paper promises.

All my dealings with them have been good and the staff were friendly and helpful.

If you come to Australia to pick up your gold, watch out for the dropbears!

http://australianmuseum.net.au/Drop-Bear

Hope this helps,
Hal

[MediumTex]

Some information on the Perth Mint from someone who lives in Australia....

There is a Perth Mint Depository Scheme (PMDS) and a Perth Mint coin shop. With the silver shortage a few months ago, you had to wait to get an order from the coin shop, but orders placed with the PMDS were filled immediately.

Last year you could open a PMDS account with $5000 AUD and all transactions had a 5k minimum. The minimum opening amount may have changed, however as of 3 weeks ago, it was still a minimum of 5K for any transaction.

As for whether to use allocated or unallocated holdings. I use allocated holdings as I can have the mint send my coins directly to me. From memory there is a one day processing delay. Alternatively you can just go there and pick up your holdings across the counter.

If you use unallocated holdings , if I remember correctly, there was a weeks delay to convert them to allocated. The request for change from unallocated to allocated took less than a minute over the phone.

Personally I would not use any gold certificates. Prefer the holdings to be there waiting to be picked up at a minutes notice, rather than paper promises.

All my dealings with them have been good and the staff were friendly and helpful.

If you come to Australia to pick up your gold, watch out for the dropbears!

http://australianmuseum.net.au/Drop-Bear

Hope this helps,
Hal

Hal,

Thanks for the information.

I have two more questions:

1. Do you have an extra bedroom?

and

2. Do you live near the beach?

[AdamA]

What's the difference between the "depository program" and the "certificate program?"

[Hal]

Hi Adam,

The link to the Perth Mint below explains the different options.

http://www.perthmint.com.au/investment_ ... etals.aspx

MT; Sure, plenty of room. Don't know if you will like the view 

http://www.stayz.com.au/15738  (I wish......)

Hal

[smurff]

Personally I would not use any gold certificates. Prefer the holdings to be there waiting to be picked up at a minutes notice, rather than paper promises.

All my dealings with them have been good and the staff were friendly and helpful.

If you come to Australia to pick up your gold, watch out for the dropbears!

Especially the ones who like Vegemite! 

[ahhrunforthehills]

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[AdamA]

Hi Adam,

The link to the Perth Mint below explains the different options.

http://www.perthmint.com.au/investment_ ... etals.aspx

So the main difference is the markup as explained by Wild About Harry.

For amounts less than 50K (I think) you need to go through an authorized dealer and pay a markup.  I think there is a 5 or 10K minimum.

[AdamA]

Another thing to keep in mind is whether to claim it as an FBAR with the IRS.  There are no clear guidelines.  But "unallocated" could easily be considered to be a foreign bank account (especially if you buy and sell frequently).  If it is considered FBAR and you do not disclose it, get ready for pain.  "Allocated" could easily be considered not to be FBAR, but then you have to pay that storage fee.

I hate that there are not clear guidelines.  

What is the downside to reporting it as an FBAR?

You'd have to report a Swiss bank account, right?

What is the downside of reporting?

Informative post, by the way.  Thanks.

[ahhrunforthehills]

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[ahhrunforthehills]

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[stone]

I think when the Ugandan Asians were expelled from Uganda, their gold jewelry was confiscated at the airport.

http://en.wikipedia.org/wiki/Expulsion_ ... rom_Uganda

[bronsuchecki]

Hi Guys. Thanks for the positive comments, the Depository staff do try to make it easy and efficient as possible.

"I think I read somewhere in the Perth material packet that the gold you purchase is not available for export beyond Australian borders."

Not so. There are no import/export restrictions in Australia on precious metal. The ability to take delivery of physical metal is something we are very strong on and Depository clients are prioritised in this regard internally within the Mint.

On the FBAR issue, I've spoken to many of our clients and there are many different interpretations. I think it is pretty firm that unallocated accounts are a reportable account, but with allocated different clients have been given different advice. Some have been advised that as it is off balance sheet and clear direct title that it is not an "account", other have been told that for it not to be an account it has to be more of a safety deposit box type arrangement where the client holds the keys.

Whilst Australia does not have swiss bank secrecy laws, the Perth Mint itself operates under a very strong privacy rule in the Gold Corporation Act, Section 74 where staff will go to jail if they disclose information about clients' accounts. In the past when we've been approached by law enforcement from other countries we've told them we can't tell them anything and if they want info they need to apply to an Australian court. Rarely does it go any further.

[AdamA]

ahhrunforthehills and bronsuchecki--

Thanks for two very informative posts.

Do either of you have opinions as to how US investors could best use the Perth Mint to diversify their gold holdings?

[craigr]

It depends (disclaimer: I am not an accountant).  But from my understanding, you would need to report a swiss bank account.  But if it was a safety deposit box that had an asset in it... maybe not.

This is very tricky now. According to statements from the IRS in Q&A on the FBAR an account holding gold metal is a reportable account.

The question is this: Do you want to be the test case?

If not, then file the FBAR.

Keep in mind that if you are an American, you are not really eligible to open a swiss bank account.  Those banks no longer want your business.  You will likely find that they will turn you away b/c they do not want to deal with the US State Department b/c of you.  Times have changed.

They will do it, but you need to use a registered intermediary now. The intermediary will be the qualified reporting agent to the IRS for the transactions you conduct. So in essence the bank is insulated from you by having the intermediary handle the paperwork. But other than that, they probably don't want you.

The problem with FBAR is that if there is ever another executive order that makes private gold ownership illegal... they definitely know who you are.  Another possible scenario could be if currency controls are in place from a seriously bad economy. If you attempted to leave the country they could consider you a tax dodger and force you to pay exit taxes on your global net worth.  They could also impose a 90% capital gain tax on foreign investments since you are "unamerican" or "unpatriotic"

Of course these are all possible. But the other option is to leave all of your assets in the country which in other places in history has proven to be a bad idea. With some money outside the country you have options. With all of assets in country you can have your wealth frozen very quickly in any blanket action.

Who cares if they label it "unpatriotic". Just stall as long as you can and let the situation play out. With any luck, you'll miss the fall of the axe.

It is pretty impossible to export your wealth, at a later time leave the country, pick up your wealth, and go to another country.  Unless you are talking $50, I am pretty sure you will break at least 2 laws in there somewhere.  Personally, I think you are better off hiding it under a tree in your backyard.

It is hard to export your wealth during an emergency. It is not hard to export your wealth when there is no emergency. Just like other supplies, you don't want to implement your plan when the hurricane is raging. You want the food, water and generator well before then. Likewise, putting money overseas is not that hard. It will however be very hard if the government is making a grab for domestic assets as they have done in places like Argentina as recently as 2008 and other countries in history.

Swiss Bank accounts (or more strategically foreign trusts, foreign life insurance policies, etc.) will drain away all of your profits.  You have to understand that you will ultimately still be responsible for your tax obligations, but your expense ratios will be astronomical (and so will be the expenses to keep the structure set up).  You don't get "admiral shares" in an account in Liechtenstein.  You get 2% expense ratios.

Sadly, Zurcher Kantonal Bank use to offer allocated gold storage for well under 1% a year (0.55% if I recall). Which was very affordable. They no longer do this for Americans, but will for other nationalities. Swiss banks are not expensive if you use the most basic products and do not go in trading your account or use money managers.

Consider then that a Gold ETF is around 0.5% a year expense ratio. Anything you pay over this then is additional insurance costs. So someone charging 1% a year for overseas allocated storage is basically charging you the basic rate an ETF would charge, plus additional for the added protection of geographic diversification. How much you want to pay over the base 0.5% a year ETF fee is dependent on what you want.

The easiest way is unallocated gold with the Perth and not to move it around a lot.  That way you MIGHT be able to argue with the IRS that you considered it an asset and not a Financial Account.  But that is a big MIGHT.  I talked to several CPAs.  They are all pretty split on it.

If it is an account you have signature authority over to trade and access the assets it almost certainly is reportable. An account where you shoved a bunch of gold into a safe deposit box is gray area. Again though, it's about being the test case in tax court where you are guilty until proven innocent. Be careful.

Here is a final thing to think about when it comes to keeping your money overseas.  Let's say that you do manage to have a reunion with your foreign money after America is in shambles.  Would you dare come back?  Obviously Uncle Sam would want a pretty big chunk of that cash at that point.  But that fact remains, as a US Citizen you are required to pay taxes on the worldwide wealth. 

Again having money overseas protects against localized disasters to the banking system here that could be natural or manmade. Also there is a benefit to being able to drag your feet during a financial emergency here and tie things up with cross jurisdiction legal challenges. In any currency crisis I've seen it has been a huge advantage simply to stall as long as possible before repatriating assets into the home currency. Even getting as much as 30 days could be the difference it takes.

So how about if you renounce that citizenship?  It is my understanding that if you are determined to have expatriated for financial reasons, the US will not grant you a visa to re-enter.  Not even to visit your family for Christmas.  You are basically disowned. 

There is a difference between having assets overseas and dodging taxes. If the government is making it illegal to move any money outside of the country then I humbly submit it's probably time to get the hell out of dodge because that kind of thing usually ends very badly.

But the above is all the extreme. I submit that there are very good reasons for geographic diversification that fall outside of the end of the world. Simple earthquakes that take down the financial sector, massive terrorist incidents, wide scale cyber attacks, etc. These are all serious reasons to not keep all your money in one place on the planet in addition to simple government attempts at theft.

[craigr]

Hi Guys. Thanks for the positive comments, the Depository staff do try to make it easy and efficient as possible.

"I think I read somewhere in the Perth material packet that the gold you purchase is not available for export beyond Australian borders."

Not so. There are no import/export restrictions in Australia on precious metal. The ability to take delivery of physical metal is something we are very strong on and Depository clients are prioritised in this regard internally within the Mint.

On the FBAR issue, I've spoken to many of our clients and there are many different interpretations. I think it is pretty firm that unallocated accounts are a reportable account, but with allocated different clients have been given different advice. Some have been advised that as it is off balance sheet and clear direct title that it is not an "account", other have been told that for it not to be an account it has to be more of a safety deposit box type arrangement where the client holds the keys.

Whilst Australia does not have swiss bank secrecy laws, the Perth Mint itself operates under a very strong privacy rule in the Gold Corporation Act, Section 74 where staff will go to jail if they disclose information about clients' accounts. In the past when we've been approached by law enforcement from other countries we've told them we can't tell them anything and if they want info they need to apply to an Australian court. Rarely does it go any further.

Thanks for the note. Storage at Perth Mint is a very viable alternative with a lot of positive attributes.

BTW. I recommend your blog to people that want to read about gold without gold buggery. I've posted about it before:

https://web.archive.org/web/20160324133 ... ldbuggery/

http://goldchat.blogspot.com/

Thanks for visiting.

[bronsuchecki]

Do either of you have opinions as to how US investors could best use the Perth Mint to diversify their gold holdings?

50% of Perth Mint Depository clients are Americans. Many of those also hold metal in other locations and I think this is a good idea - if you have enough wealth that international diversification is an option, then Perth should just be part of that strategy. Holding some GoldMoney should also be considered as that facility offers the ability to spend/transfer your metal.

As to how to use the Mint, this is really a question of which way to store. It is very much a personal decision and the best advice I can give is what I wrote on this page http://www.perthmint.com.au/investment_ ... tions.aspx many many years ago:

Clients worried about potential delays in collecting [unallocated] metal in extreme circumstances, but with concerns about the cost of allocated storage, usually take a staged approach:

1.      While the world environment is benign, they hold unallocated.  They do not incur ongoing storage costs and fabrication charges. 
2.      When the environment becomes uncertain and risky, they convert to allocated. 
3.      When the world is at a crisis point, they take delivery of their physical metal.

This approach can save clients significant amounts of money as it may be some time between stage 1 and 2.  Clients who do not feel they can judge the shift from stage 1 to 2, or feel it may be sudden and unpredictable, opt for allocated as they are using precious metals as "insurance" and see the storage fees as the cost of that insurance.

[ahhrunforthehills]

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