The Do’s and Don'ts of Selecting a Precious Metals Depository

Key Takeaways

• A bullion depository is a secure facility that stores physical precious metals in a vault.
• Check the depository’s reviews, accreditations, and auditors.
• Don’t base your decision solely on cost.
• Ask a lot of questions and read contracts thoroughly.

What is a bullion depository, and should you open an account with one? You’ve been asking us about storage options for your precious metals, so we’re here with answers.

A bullion depository is a facility that specializes in the secure storage of physical precious metals, like gold, silver, platinum, and palladium. In other words, a precious metals depository is like a bank, but for tangible bullion bars and coins instead of fungible assets like fiat currency.

Depositories typically offer other services, such as insurance, account management, record keeping, and transportation. The metals are usually stored in climate-controlled vaults with robust security measures, including 24/7 surveillance and armed guards.

In this guide, we’re going to highlight best practices and common blunders made when choosing a depository. Let’s get started.

Depository vs. Home Storage

Some precious metals investors prefer to store their holdings in a safe at home. This approach is reminiscent of the old days of burying gold in the backyard, so it’s there as a safe haven during periods of financial uncertainty, like a banking crisis or recession.

Other investors find that a precious metals depository provides more peace of mind, knowing that their wealth is highly unlikely to be stolen, damaged, or lost in a secure, protected facility.

What is a bullion depository able to provide beyond storage? Insurance. Residential insurance policies usually have limited coverage, and premiums for specialized bullion insurance policies tend to be cheaper with depository storage due to the lower risk of loss.

Both approaches have their pros and cons. It comes down to personal preference and the amount of precious metals in your portfolio. As a very general rule, we recommend a depository for holdings worth $10,000+.

Choosing the Right Precious Metals Depository

If you decide to open an account with a depository, proceed with caution. Even if a depository appears to be legitimate, there’s inherent risk involved with handing over your assets to a third party. It’s not something to be taken lightly!

Do: Thoroughly Research the Depository

Just like you should always find a reputable precious metals dealer for the initial investment, you must be proactive when vetting your storage options. Beyond avoiding outright scams, you want to be confident that every interaction and transaction will be smooth moving forward.

Reputation is huge in this industry. Check online reviews to get a feel for how the public feels about each precious metals depository you consider. Fake reviews are abundant online, so dig beneath the surface. If you see a pattern of red flags, don’t assume that you’ll be the exception.

Don’t: Focus on Affordability

Reliable storage is worth its weight in, well, gold. After all, what is a bullion depository if not a direct connection to your wealth? You wouldn’t deposit significant amounts of cash in a fly-by-night bank, right?

It might be tempting to opt for the most cost-effective storage solution, but think about the big picture. Meager savings in storage fees pale in comparison to losses you could incur by partnering with a questionable precious metals depository.

Do: Check Accreditations and Auditors

In addition to checking reviews, research the depository’s accreditations. The big names to look for are the London Bullion Market Association (LBMA) and the Commodity Exchange Inc. (COMEX). If your bullion is part of a precious metals IRA, make sure the depository is IRS-approved.

Reputable depositories will also have their inventory audited regularly by third parties. This ensures that your holdings are, in fact, in place and accounted for. Verify that the independent auditors are also legitimate entities.

Don’t: Overlook the Type of Storage

There are two types of storage: segregated and unsegregated (also known as commingled).

• Segregated: The precious metals depository stores your specific bars and/or coins. They’re stored alone in an independent vault or safety deposit box. This is especially crucial for non-fungible assets like rare numismatic coins.

• Unsegregated: The depository pools your bullion with other holders’ bullion. Rather than owning specific bars or coins, you own their value. If you withdraw your holdings, there’s no guarantee they’ll come back with the same serial numbers.

Do: Understand Liquidity Procedures

What is a bullion depository going to do if you decide to withdraw your holdings? Will they require notice? Will there be a waiting period? Will there be a withdrawal fee? Will someone arrange transport?

Even if you plan to keep your bullion at the precious metals depository for the indefinite future, you never know when circumstances might change. Know what your exit strategy would look like.

Don’t: Assume Anything

Read all contracts thoroughly, ideally with a lawyer by your side. Know exactly what you’re paying for, which services require activation and additional fees, and what the overall protocol looks like. Here are some questions to ask:

• Do you provide insurance, or do I need my own policy?
• Can I leverage my assets as collateral?
• What is your policy for visitors, including myself and others?
• Can I transfer metals between accounts?
• Do you offer in-house buying and selling services?
• Can you provide personalized reports?
• What happens if your precious metals depository files for bankruptcy?
• What happens if my holdings are lost, stolen, or damaged?
• Do you have a plan for natural disasters?

Contact Us for a Free Consultation

Now that you know what a bullion depository is and how to navigate the next steps, don’t hesitate to reach out if you have any questions or if you need a depository recommendation.

As a Tier 1 US Mint precious metals dealer with 50+ years of in-house experience, you can count on our team for expert guidance throughout every step of your investment journey, from the initial acquisition to selecting a precious metals depository. Secure your financial future.