Hard assets make soft targets?

Storing precious metals in safe deposit boxes is a common practice. In general, valuables in safe deposit storage are much safer from theft than if they were stored at home or work.

However, there are drawbacks.

1. Safe deposit boxes can only be accessed when the institution is open. If there is a widespread power outage or a bank holiday, you may not be able to access whatever is stored in safe deposit boxes.

2. Contents of safe deposit boxes are not covered by the Federal Deposit Insurance Corporation. In the rare event that something is stolen from such storage, there is no insurance coverage unless the box owner has obtained specific coverage.

3. You have less privacy than if you store items on your own premises. If you have a safe deposit box, the institution knows you may have valuable items in it even though they may not know the actual contents. In any government investigation of someone, expect the agents to contact financial institutions in the area to ask if that person has rented a box. It is standard practice that, when a person dies, the bank or credit union where they may have a safe deposit box will seal that box until it can be opened under inspection of parties who will compile an inventory of the box’s contents.

4. There is some risk of environmental damage from the chemicals used to clean that part of the building. Safe deposit boxes are not air-tight. What that means is that any harmful ingredients in the cleaning solutions, such as bleach, may leave vapors in the air which work their way onto the surfaces of whatever is in a safe deposit box. Having said this, however, it is true that we see environmental damage much more frequently to coins and paper money that were stored in damp basements or in attics than with items stored in a safe deposit box.

5. Assets in safe deposit boxes are at a greater risk of seizure by the government in a civil asset forfeiture proceeding. Do you really want to run the risk that some judge may decide that the valuables in your safe deposit box were obtained by money laundering and subject to seizure by the government?

6. In some instances, some kinds of precious metals storage in safe deposit boxes violates the rental agreement for that box. For example, on April 1, 2015, JPMorgan Chase Bank altered its safe deposit box rental agreements by adding this clause, “Contents of box: You agree not to store any cash or coins other than those found to have a collectible value.” In the case of this bank, using a safe deposit box to store bullion bars or bullion-priced coins may lead to closure of this bank’s service.

Unfortunately, there is no perfect solution for storing your precious metals when you factor in convenience, cost, security and safety, privacy and availability of insurance coverage. Let me quickly review some of the pluses and minuses of other storage alternatives.

Hidden storage on your property. Advantages – low cost, privacy and immediate accessibility. Disadvantages – high insurance premiums, higher risk of theft by outsiders and friends and family (crooks know lots of places to look for valuables that the owners thought were well-hidden), risk of forgetting where you put them, greater risk of environmental damage, risk of the existence of your stash becoming known by more people than you realize (spouses, children, other relatives, neighbors and friends tend to have loose lips).

Storage in safe or strong box on your property. Advantages – relatively low cost, privacy, immediate accessibility, less prone to theft by friends or family than for assets that are simply hidden. Disadvantages – high insurance premiums, if the safe or strong box is lighter than a hundred pounds or so and not securely attached to the premises, burglars can just steal the entire container to pry open at another location, when encountered these units draw major attention from burglars, and there is the risk that the existence of such storage is known by more people than you realize.

Precious metals vault storage. Advantages – lower cost per unit than safe deposit box storage, highest physical security, lowest relative insurance premiums and relatively safe physical environment. Disadvantages – probably stored in a remote location, which makes quick accessibility in an emergency unlikely (there were significant gold and silver valuables stored in vaults in the sub-basements underneath the World Trade Centers when they collapsed on Sept. 11, 2001. While most of these valuables were recovered within three months, some took longer and some were never rescued.), risk of loss if the assets are considered “unallocated” and therefore subject to multiple ownership claims, and unallocated assets are considered assets of the storage facility and thus subject to third -party claims against the owners of the vault. Allocated or segregated storage provides greater protection but costs significantly more.

When you consider the strengths and negatives with each option, I have advocated considering storing part of your holdings in multiple locations, including storage at home or work, in safe deposit boxes at one or multiple institutions and precious metals storage vaults. There are risks of loss when choosing any of these storage options. But, by splitting up your holdings, you would minimize the total loss if any one of them were gone.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He was also honored by the Numismatic Literary Guild in 2016 for the Best Dealer-Published Magazine/Newspaper and for Best Radio Report. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).

More Collecting Resources

• The 1800s were a time of change for many, including in coin production. See how coin designs grew during the time period in the Standard Catalog of World Coins, 1801-1900 .

• Start becoming a coin collector today with this popular course, Coin Collecting 101.