How are your Physical Gold and silver insured?

Since early March, the phones here have been ringing off the hook with people looking to buy precious metals to try secure their wealth in these unprecedented times and as a hedge against a very uncertain future.

On top of the precious metal sales, we have also taken on several new clients during the last months, who have come to the realization that their physical assets stored in locations such as Hong Kong, Singapore, and in other locations like Canada and the USA are out of their control and unreachable in an emergency such as this, with many facilities around the world having closed because of Covid-19 restrictions including the US Mint, the Royal Canadian Mint and Dealers in Switzerland and Belgium.

Decoupling of Precious Metal Prices

The world has also witnessed an interesting phenomenon: the complete decoupling from the LBMA spot quoted PAPER prices of metals compared with the actual physical purchasing price of the precious metals due to the huge demand that has driven the premiums up. This is especially noticeable in silver, where the spot (paper) price hovers around the $15 per ounce mark, but the actual (physical) price of American Eagle coins is anywhere between $22 and $30 per ounce at the time of writing this article. Gold is quoted at around $1700.00 but carries a physical premium of up to $300 per ounce.

In our opinion, the difference between the paper and physical markets reflects this discordance. With most commodities, the physical drives the prices, not the paper derivative prices, not so with precious metals. An excellent reason in times of uncertainty to hold physical precious metals outside of the banking system and out of political reach, in your control, and safe from possible government confiscation.

An Insurance Dilemma

This divergence between the spot price of precious metals and the actual purchasing price led to several discussions concerning insurance, which shortly thereafter led to some very interesting discussions with the insurers in London.

Let me explain a little about this. Our Vault has several ways to store your precious metals insured. You can select insurance limits on our safe deposit boxes in the smaller vault, but we also have fully insured storage in our UL3 Allocated and Segregated Vault, and this is where it becomes interesting.

In the very, very unlikely event of a loss occurring, the terms of our insurance policy are to make the client whole again, i.e. if you had one gold eagle you will have one gold eagle replaced and not a physical payout of cash.

The problem arises in the fact that the underwriters of our policy will pay out the value of the precious metal on the day of the loss, which is based on the LBMA spot price. With the current disconnect between the paper spot price and the actual physical price, for example, in the case of silver, the real replacement cost can be up to 100% greater than the actual spot price due to the high premiums.

Once we broached this problem with the brokers in London, they informed us that we were the first client to have raised this issue with them and immediately realized that this now means that many vaults worldwide are possibly in a position where their insurance coverage is woefully inadequate considering this disconnect in pricing.

After working closely on various different ideas with our brokers in London along with the underwriters of our policy, the vault we are using for storage is now one of the first, if not the first and only facility to be able to protect you, our clients, against this shortfall between the paper spot price and the real physical replacement price.

Relations who use the services of our vaults should know that the precious metals stored in the UL3 Vault are still 100% fully insured with a new “Top Up” insurance coverage. This additional “Top Up” insurance will ensure that even in the event of a substantial disconnect between the paper spot price and the real physical replacement price for the precious metals, you are 100% covered at all times for your metals' full physical replacement value.

Despite the substantial additional cost of this “Top Up” insurance, the vault will absorb the cost and not pass it through to the clients in any manner whatsoever as we understand that these are difficult times for everyone, with many people dealing with major economic challenges.

Check With your current facility if they are covering you for the physical replacement price of your precious metals and if their insurance is adequate to deal with these price disconnects; if they cannot answer you or you are worried about it, get in touch with us and move your assets today!

Remember, at all times, that it often doesn't make sense to try to scratch the ultimate cent off a gold purchase and storage. Rather, have a good vault, a decent concierge service, and last but not least, decent insurance that covers the REAL VALUE of your metals.

As always, we are here for you and your peace of mind.

The Goldonomic Team

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