GoldMoney.com

[AdamA]

Do you guys think that goldmoney.com would have fit Harry Browne's criteria for holding gold in an overseas account?

[craigr]

Probably not. But when Browne was alive opening overseas accounts was still relatively easy and cheap. Now it's very expensive and many Swiss banks won't accept any US citizen customers regardless of wealth. A lot has changed in the past five years. Today people just have to work with what is available even if it is not perfect.

I don't know much about goldmoney.com to offer comment though. If I were to do it, I'd split the money between these various services just to be safer. Perth Mint may be another option with its own plusses and minuses.

[6 Iron]

I have a small allocation in BullionVault. I have not decided what percentage I will ultimately use (probably no more than 10% of my gold holdings), but I view it as another safety deposit box. Thus far, I have been pleased with their service.

[AdamA]

But when Browne was alive opening overseas accounts was still relatively easy and cheap. Now it's very expensive and many Swiss banks won't accept any US citizen customers regardless of wealth. A lot has changed in the past five years.

This is one of the only valid things-have-changed-since-Harry-Browne-died concerns that I have heard.  The restrictions on Swiss Bank accounts occurred rapidly, and make it so difficult (practically and financially) to open an account that's it's just not worth it. 

Do you think that this is just the "camel's nose under the tent?"

[TBV]

But when Browne was alive opening overseas accounts was still relatively easy and cheap. Now it's very expensive and many Swiss banks won't accept any US citizen customers regardless of wealth. A lot has changed in the past five years.

This is one of the only valid things-have-changed-since-Harry-Browne-died concerns that I have heard.  The restrictions on Swiss Bank accounts occurred rapidly, and make it so difficult (practically and financially) to open an account that's it's just not worth it.  

Do you think that this is just the "camel's nose under the tent?"

Could be. The U.S. government's requirement that owners report annually any accounts they have at foreign financial institutions does not inspire confidence.  The stated reason is this is an anti-money laundering/anti-corruption measure.  However, the threshold (a total of $10,000 at any time during the year) is hardly the level one would expect for drug dealers, corrupt heads of state, or economic criminals.  The result is that small investors will get placed in the government's database, even if they earn no interest on foreign holdings.  If the government should ever seek to confiscate gold like it did in the 30's, that database sure would come in handy.

As I try to figure out why the government chose the $10K threshold, it occurred to me that it might be done for administrative convenience.  Currently, individual transactions in excess of $10,000 are all reported to the government anyway.  So, it's easier to match foreign account holders with the data the feds already have.  Also, it's low enough to capture just about anyone who might dabble in overseas holdings. Overall, it appears the government is increasing the hassle level for those who might be considering holding assets overseas.

BUT...for those who want to hold direct title to their gold and buy/sell at near-spot market prices with a high level of security (vault security + insurance included), GoldMoney and BullionVault sure do look interesting.  GoldMoney's use of the gold gram as a currency unit conforms to Murray Rothbard's suggestion that we eliminate intermediary terms like "dollar" so as to reduce the chances for monetary debasement.  Interesting.

[dualstow]

Could be. The U.S. government's requirement that owners report annually any accounts they have at foreign financial institutions does not inspire confidence.

There was an article in the Wall Street Journal today about ex-pats green card holders who are renouncing U.S. citizenship for that very reason. Not something I would do, but I know a few non-U.S.-born citizens who are giving up citizenship just to be free of the IRS. Like 4 people.

[rickb]

Would goldmoney.com fit Harry Browne's criteria for holding gold in an overseas account?

Hell no.

Harry Browne's idea of gold is gold you can hold in your hand.  Wherever it is, you can go there and HOLD IT IN YOUR HAND.  You may not have immediate physical possession of it, but you know for sure it exists, and that you own it, and that if all hell breaks loose (even in a biblical sense) you, and no one else, can put your hands on it.

Compare the ownership chain.  With gold you can hold in your hand it's

you -> gold

Very direct.  Very simple.

With goldmoney.com it's (at least theoretically)

you -> goldmoney.com -> gold

How many intermediaries do you have to trust with gold you can hold in your hand?  0

How many intermediaries do you have to trust with gold at goldmoney.com?  at least 1

The difference between 0 and 1 intermediaries is HUGE.  With 0 intermediaries there's no chance whatsoever that any intermediary will rip you off.  With even 1 intermediary the chance goes from 0 to something that's not 0 (infinitely greater).

Assuming you trust goldmoney.com (and remember, this creates an infinitely greater chance that you'll be ripped off), then you need to think about costs.

You can buy gold you can hold in your hand for a 1-3% premium.  Goldmoney.com charges (see http://www.goldmoney.com/fees.html) between 1% and 2.5% to "buy" gold and then 0.18% (or 0.15%, depending on how much gold) per year.  The yearly fee pays storage costs and "insurance".  I don't know about you, but I can easily fit at least $100,000 of gold coins in a $20/yr safety deposit box so my storage costs scale out to way less than .18% per year. (more like .02%)  Insurance is another matter, but what exactly does goldmoney.com's insurance cover?  If a nuclear bomb blew up their vaults would you get your money back?  If an invading army confiscated goldmoney.com's gold, would you get your money back?  If you were an invading army looking for gold, would you go to where you know goldmoney.com keeps lots and lots of gold, or to some random bank in Podunk, Nowhere?

Another thing to consider is the possibility of fraud.  A goldmoney.com account is inherently accessible over the internet.  If they get an order to transfer your funds to another account, they'll do it and even if this was fraud (someone stole your login credentials or was able to break into your account by whatever means) I believe their stance is "tough luck".

BTW I am not in any sense knocking goldmoney.com.  I sincerely believe they are exactly what they claim to be.  However, they are infinitely far from "gold you can hold in your hand".

[AdamA]

Would goldmoney.com fit Harry Browne's criteria for holding gold in an overseas account?

Hell no.

Harry Browne's idea of gold is gold you can hold in your hand.  Wherever it is, you can go there and HOLD IT IN YOUR HAND.  You may not have immediate physical possession of it, but you know for sure it exists, and that you own it, and that if all hell breaks loose (even in a biblical sense) you, and no one else, can put your hands on it.

Compare the ownership chain.  With gold you can hold in your hand it's

you -> gold

Very direct.  Very simple.

With goldmoney.com it's (at least theoretically)

you -> goldmoney.com -> gold

How many intermediaries do you have to trust with gold you can hold in your hand?  0

How many intermediaries do you have to trust with gold at goldmoney.com?  at least 1

The difference between 0 and 1 intermediaries is HUGE.  With 0 intermediaries there's no chance whatsoever that any intermediary will rip you off.  With even 1 intermediary the chance goes from 0 to something that's not 0 (infinitely greater).

Assuming you trust goldmoney.com (and remember, this creates an infinitely greater chance that you'll be ripped off), then you need to think about costs.

You can buy gold you can hold in your hand for a 1-3% premium.  Goldmoney.com charges (see http://www.goldmoney.com/fees.html) between 1% and 2.5% to "buy" gold and then 0.18% (or 0.15%, depending on how much gold) per year.  The yearly fee pays storage costs and "insurance".  I don't know about you, but I can easily fit at least $100,000 of gold coins in a $20/yr safety deposit box so my storage costs scale out to way less than .18% per year. (more like .02%)  Insurance is another matter, but what exactly does goldmoney.com's insurance cover?  If a nuclear bomb blew up their vaults would you get your money back?  If an invading army confiscated goldmoney.com's gold, would you get your money back?  If you were an invading army looking for gold, would you go to where you know goldmoney.com keeps lots and lots of gold, or to some random bank in Podunk, Nowhere?

Another thing to consider is the possibility of fraud.  A goldmoney.com account is inherently accessible over the internet.  If they get an order to transfer your funds to another account, they'll do it and even if this was fraud (someone stole your login credentials or was able to break into your account by whatever means) I believe their stance is "tough luck".

BTW I am not in any sense knocking goldmoney.com.  I sincerely believe they are exactly what they claim to be.  However, they are infinitely far from "gold you can hold in your hand".

Right, but these issues would occur with any overseas gold holding.  I believe Brown thought that holding some gold in an overseas account was a good idea, and I wonder if he goldmoney.com would have met his criteria for an offshore holding.

[6 Iron]

There is no risk free way of owning gold. The majority of my holdings are bullion, but I like the diversification of risk and the liquidity BullionVault provides. It is also has a lower cost structure than gold money.com. By no means perfect, but I think a reasonable option to the ETF's.

[TBV]

Would goldmoney.com fit Harry Browne's criteria for holding gold in an overseas account?

Hell no.

Harry Browne's criteria for holding gold overseas does not call for a total absence of intermediary risks or risks arising from marauding armies or nuclear war.  So those considerations really don't fit into a discussion of his PP strategy.  He did suggest that a portion of one's assets be held overseas, so a decision NOT to do so clearly fails to meet HB's criteria as well.

Hiding coins or bars close by, or trusting that one's safety deposit box won't get robbed, or that one's insurance carrier won't default, may work just fine.  But it seems no more preferable than other available options, of which GoldMoney is one. 

[rickb]

Harry Browne's criteria for holding gold overseas does not call for a total absence of intermediary risks or risks arising from marauding armies or nuclear war.  So those considerations really don't fit into a discussion of his PP strategy.  He did suggest that a portion of one's assets be held overseas, so a decision NOT to do so clearly fails to meet HB's criteria as well.

Hiding coins or bars close by, or trusting that one's safety deposit box won't get robbed, or that one's insurance carrier won't default, may work just fine.  But it seems no more preferable than other available options, of which GoldMoney is one. 

I disagree, especially about total absence of intermediary risks.  From "Why the Best Laid Plans" (chapter 25):

Since gold is the last line of defense for you portfolio, you have to be sure to handle it properly.

Don't throw away the benefits of gold by treating it too casually.  Don't put too many pieces of paper between you and your gold.  Buy gold that you can hold in your hand.
...
Gold coins and gold bullion are the only two gold investments appropriate to the Permanent Portfolio.  Each gives you possession of the metal itself, rather than someone's promise to deliver it later.
...
I believe the following storage arrangements are the only ones to consider:
1. Gold coins in your own possession;
2. Gold bullion or coins stored in a Swiss bank;
3. Gold coins stored in a safe deposit box;
4. Gold bullion or coins stored with a U.S. bank acting as a custodian or trustee.

In the chapter on Swiss Banks he specifically mentions Switzerland's long-standing policy of neutrality, and that storing some gold there would protect you from losing everything in the advent of war, civil disorder, or natural catastrophes in the US.  My takeaway is that these are things he absolutely worried about.

[TBV]

Harry Browne's criteria for holding gold overseas does not call for a total absence of intermediary risks or risks arising from marauding armies or nuclear war.  So those considerations really don't fit into a discussion of his PP strategy.  He did suggest that a portion of one's assets be held overseas, so a decision NOT to do so clearly fails to meet HB's criteria as well.

Hiding coins or bars close by, or trusting that one's safety deposit box won't get robbed, or that one's insurance carrier won't default, may work just fine.  But it seems no more preferable than other available options, of which GoldMoney is one.  

I disagree, especially about total absence of intermediary risks.  From "Why the Best Laid Plans" (chapter 25):

Since gold is the last line of defense for you portfolio, you have to be sure to handle it properly.

Don't throw away the benefits of gold by treating it too casually.  Don't put too many pieces of paper between you and your gold.  Buy gold that you can hold in your hand.
...
Gold coins and gold bullion are the only two gold investments appropriate to the Permanent Portfolio.  Each gives you possession of the metal itself, rather than someone's promise to deliver it later.
...
I believe the following storage arrangements are the only ones to consider:
1. Gold coins in your own possession;
2. Gold bullion or coins stored in a Swiss bank;
3. Gold coins stored in a safe deposit box;
4. Gold bullion or coins stored with a U.S. bank acting as a custodian or trustee.

In the chapter on Swiss Banks he specifically mentions Switzerland's long-standing policy of neutrality, and that storing some gold there would protect you from losing everything in the advent of war, civil disorder, or natural catastrophes in the US.  My takeaway is that these are things he absolutely worried about.

In his later radio shows, HB emphasized the need to place some assets beyond the control of the US government.  So, choices #1, #3 and #4 don't meet that criteria, and #2 is no longer a realistic option. So, we're left with making the most of what we have.  Your earlier post glossed over the issue of insurance.  Placing $100,000 in a $20 deposit box exposes you to considerable risk.  I dare say that whatever insurance you might obtain will not be free nor will it protect you against the calamities you criticized GoldMoney for not covering.  So, that means the insurance argument is off the table.

The truth is that placing one's possessions in the hands of an agent is risky.  That risk is mitigated by the bailment arrangement that is the basis for Swiss bank gold storage, GoldMoney storage, and BullionVault storage alike.  It is not the same as a promise to deliver later.  And if Swiss banks eliminate all risk, then how do we explain their history of failing to deliver assets to the heirs of victims of the Holocaust?  There are risks in everything. A physical gold devotee may become incapacitated and unable to retrieve his/her stash.  One who shares this information with others may become the victim of fraud or home invasion.  One who places it in a safety deposit box faces the risk of robbery. If he/she fails to visit the box regularly, there's the risk of having it declared abandoned and the contents sold at auction.  One who fails to insure can lose everything to the first thug or looter who comes along.  One who does everything else right may be unable to cash in if the government outlaws personal ownership.  One who tries to leave the country with gold may be unable to cross the border undetected.  The list goes on and on.

Holding gold in the hand has certain advantages/risks.  Holding title to gold in an overseas storage account has different advantage/risks.  Neither is risk free and neither protects against Armageddon.  

BTW: Economist Murray Rothbard of the Austrian school fled Switzerland in 1940 because he feared a Nazi takeover of that neutral country akin to the invasion of neutral Netherlands, Belgium, Norway and Luxembourg. So, though it's wise to hedge our bets, nowhere is 100% safe.  Not even Switzerland.

[AdamA]

Great post, TBV.  

I find gold the toughest of the four assets to figure out how to hold b/c of all these options.  

Gold tends to do well during tough economic times, so the chances of a black swan type of event are a bit higher, and this would be exactly when you would want your gold to come through for you.

I think it's worth spreading the risk amongst the various options so that you have less of a chance of taking a big hit if something strange happens.

[AdamA]

One thing about goldmoney.com vs. bullionvault.com is that goldmoney holds your cash in a British bank whereas goldmoney uses Bank America.  Theoretically, this only matters when you're transitioning from cash to gold...

[rickb]

In his later radio shows, HB emphasized the need to place some assets beyond the control of the US government.  So, choices #1, #3 and #4 don't meet that criteria, and #2 is no longer a realistic option. So, we're left with making the most of what we have.  Your earlier post glossed over the issue of insurance.  Placing $100,000 in a $20 deposit box exposes you to considerable risk.  I dare say that whatever insurance you might obtain will not be free nor will it protect you against the calamities you criticized GoldMoney for not covering.  So, that means the insurance argument is off the table.

The truth is that placing one's possessions in the hands of an agent is risky.  
(snip)

Let's back up a bit.  The original question was whether goldmoney.com would meet Harry Browne's criteria for holding gold in an overseas account.  I think the answer is unquestionably no.  On the other hand I definitely agree that placing one's possessions in the hands of any agent, including a Swiss bank, is risky.  If we want to speculate about what Harry Browne would recommend given today's options, I'd bet any alternative where the foreign agent is not simply holding coins or bullion that are unquestionably owned by you wouldn't be on his list.

Again, I'm not knocking goldmoney.com (or bullionvault).  I just think it's reasonably obvious Harry Browne would not have recommended either of them.

[TBV]

Let's back up a bit.  The original question was whether goldmoney.com would meet Harry Browne's criteria for holding gold in an overseas account.  I think the answer is unquestionably no.  On the other hand I definitely agree that placing one's possessions in the hands of any agent, including a Swiss bank, is risky.  If we want to speculate about what Harry Browne would recommend given today's options, I'd bet any alternative where the foreign agent is not simply holding coins or bullion that are unquestionably owned by you wouldn't be on his list.

Again, I'm not knocking goldmoney.com (or bullionvault).  I just think it's reasonably obvious Harry Browne would not have recommended either of them.

I agree that HB preferred overseas assets to be held in coins or bullion held in named, segregated bank storage.  However, this is an option that strictly speaking is not available anymore. Just one question: Given that BullionVault and GoldMoney.com both advertise that all the gold is fully allocated, owned outright by their customers, and stored as a bailment rather than a bank asset, what is it about their operation that causes you to question the ownership of the gold being held in storage?

[AdamA]

I'd bet any alternative where the foreign agent is not simply holding coins or bullion that are unquestionably owned by you wouldn't be on his list.

Isn't that what goldmoney does?

[fnord123]

I'd bet any alternative where the foreign agent is not simply holding coins or bullion that are unquestionably owned by you wouldn't be on his list.

Isn't that what goldmoney does?

My impression is goldmoney has a pool of gold, to which you, as an account holder, have a claim of a certain portion of it, measured in grams.  Contrast this to a safe deposit box somewhere overseas - the bank owns the box, but the actual coins inside are yours.

Put another way - if GoldMoney goes bankrupt, you are but one creditor among many, and may be junior to some creditors.  On the other hand, if the overseas bank goes bankrupt, the contents of the safe deposit box have nobody with a claim to them except you.

[AdamA]

My impression is goldmoney has a pool of gold, to which you, as an account holder, have a claim of a certain portion of it, measured in grams.  Contrast this to a safe deposit box somewhere overseas - the bank owns the box, but the actual coins inside are yours.

I think you own the actual gold.  They will deliver to you, if you request it. 

Also, from the website:

If for any reason GoldMoney stops operating, you may receive your precious metals balance in form of any of the gold, silver, platinum and palladium bars we offer, provided you have a sufficient Holding balance. This includes the London Good Delivery Bars, as well as the GoldMoney 100 gram and 1 kilogram gold bars. Alternatively, you may receive the equivalent value of your metal in one of the national currencies we offer. A court appointed Liquidator would complete this winding-up process.

[murphy_p_t]

fnord, you may wish to look at this site:  http://www.goldmoney.com/complete-ownership.html

[fnord123]

fnord, you may wish to look at this site:  http://www.goldmoney.com/complete-ownership.html

I've seen their stuff, including calling customer accounts "holdings" rather than accounts.

They don't make available their audit forms (SAS 70 Type 2) to non-customers.  Furthermore, I cannot find anywhere an audited 10-K like form (they are private, so it isn't legally required).  In the absence of a 10-K or an externally audited equivalent, it is impossible to see their balance sheet to see if they list the gold holdings on the balance sheet or not.  I know their website says they do not, but stuff on a website doesn't impress me much without legal documents to go with it.  At the minimum I would want to read the SAS 70 Type 2 to verify the procedures being audited are specifically the ones that the website claims ensure individual ownership / no pooling.

[TBV]

fnord, you may wish to look at this site:  http://www.goldmoney.com/complete-ownership.html

I've seen their stuff, including calling customer accounts "holdings" rather than accounts.

They don't make available their audit forms (SAS 70 Type 2) to non-customers.  Furthermore, I cannot find anywhere an audited 10-K like form (they are private, so it isn't legally required).  In the absence of a 10-K or an externally audited equivalent, it is impossible to see their balance sheet to see if they list the gold holdings on the balance sheet or not.  I know their website says they do not, but stuff on a website doesn't impress me much without legal documents to go with it.  At the minimum I would want to read the SAS 70 Type 2 to verify the procedures being audited are specifically the ones that the website claims ensure individual ownership / no pooling.

Link: http://www.goldmoney.com/control-reports.html

I understand your concern.  However, isn't it better to open an account and read the SAS-70 report than to spread FUD?  Better still, how about some GoldMoney customers chiming in to clarify the situation?

One issue that remains should GoldMoney go bust is this one: all but the very biggest customers will get paid in cash rather than gold. That differentiates it from gold held in-the-hand.  However, it also makes it no worse than any other traded security.

[fnord123]

Link: http://www.goldmoney.com/control-reports.html

I understand your concern.  However, isn't it better to open an account and read the SAS-70 report than to spread FUD?  Better still, how about some GoldMoney customers chiming in to clarify the situation?

Err, no.  This thread didn't ask, "what are the opinions of Goldmoney.com account holders", it asked for opinions in general.  I'm skeptical of goldmoney.com, you can call that FUD if you want,  I call it being careful with my PP .  That being said, I agree that it would be great if someone did read their SAS 70 Type II and report what it says about the gold being owned by customers or not.

One issue that remains should GoldMoney go bust is this one: all but the very biggest customers will get paid in cash rather than gold. That differentiates it from gold held in-the-hand.  However, it also makes it no worse than any other traded security.

Hmm, to me that is another strike - I don't want forced liquidation into cash, I want my gold to remain as metal.  Although hopefully goldmoney.com going bust is a low probability scenario.

[AdamA]

One issue that remains should GoldMoney go bust is this one: all but the very biggest customers will get paid in cash rather than gold.

How do you know it's only the very biggest customers?  How do they decide who gets gold and who gets cash?

[TBV]

One issue that remains should GoldMoney go bust is this one: all but the very biggest customers will get paid in cash rather than gold.

How do you know it's only the very biggest customers?  How do they decide who gets gold and who gets cash?

Because of this: http://www.goldmoney.com/registered-bars.html and this http://www.goldmoney.com/100-gram-1-kilo-gold-bars.html.

All of GoldMoney's gold is held as 400 oz. bars. Since only the bigge$t customers will be able to register 400 oz. gold bars in their name, it stands to reason that, in case of bankruptcy, they will receive the bars registered in their name. For smaller holdings, customers normally can request one kilo or 100 gram gold bars be delivered to them in exchange for their holdings.  They have to have at least 100 gold grams (approx. 3.5 ounces) in their account to do this. GoldMoney has to ask another firm to produce these smaller bars.  Everyone else has to redeem for cash. If GoldMoney went out of business, I don't know who would arrange for the production of the smaller bars by the third party mint. Therefore, it seems that the largest stake holders have a greater chance of receiving gold than the smallest.