Asset protection with gold – importance and benefits
Asset preservation is a high priority amid talk of inflation and recession. At such moments, investors naturally turn to sought-after assets like real estate, shares or commodities, but precious metals are also recommended for this purpose. Especially gold, whose high value-density offers many advantages over other asset classes. However, using gold for asset protection demands appropriate security measures.
Please note Swiss Gold Safe cannot offer investment recommendations. This article should not be considered a substitute for comprehensive investment advice.
A look back over the last few decades illustrates that, unlike many listed securities, gold has never suffered a total loss of value. Generally considered a “safe haven”, especially in times of crisis, it was, and remains, in increasingly high demand. This is understandable given that popular gold coins and gold bars can always be exchanged for fiat money at short notice and with worldwide acceptance – unlike real estate, for example. In addition, gold tends to experience a lower volatility than other assets like the US Dow Jones index, Bitcoin, and European corporate bonds.
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The high value density of gold distinguishes it from other precious metals. Its price is negotiated daily on the international exchanges and depends primarily on supply and demand. Furthermore, unlike silver, platinum or palladium, gold is not an industrial metal. It is mainly used in jewellery production, but is also a feature of dentistry, aerospace and sophisticated electrical engineering. In addition, investment gold is used to preserve wealth and to act as a hedge against inflation. Gold bars and coins are universally traded, and accepted as a popular means of payment all around the world.
And gold has another special feature: It is imperishable, and thus can always be melted down and processed into new products. This is important because, although our planet’s gold deposits are not particularly scarce, sustainable, eco-friendly extraction is still considered expensive. Using gold for asset preservation is thus a future-oriented investment.
Asset diversification to minimize risk
However, this is not to imply that investing in gold alone is enough to secure a sound asset portfolio. On the contrary, financial advisors usually recommend diversifying assets. Thus, a portfolio should contain a variety of different elements, such as exchange-traded shares, funds, bonds, real estate, money market instruments, commodities and precious metals. Your asset mix should thus contain a balance of high-risk (yet high-yielding) investments plus low-risk investments (with more limited returns). The advantage of this multi-asset strategy is that the gains can offset the losses. Your personal risk-return profile is thus considered to be in balance. Please note that Swiss Gold Safe never makes investment recommendations. The above statements simply reflect widely held orthodox opinions.
Gold pays neither interest nor dividends, so investment experts recommend a long-term investment, and to diversify the risk, only a portion of any investable capital should be converted into gold bars or gold coins. Even so, and like no other capital investment, gold can be rapidly converted back into cash in an emergency. Another advantage is that precious metal assets require comparatively little investment knowledge: In short, buying gold is easy.
Geographical diversification: Asset spread and storage
In addition to minimizing investment risks, various experts also advise the geographical diversification of investment products. This primarily means the diversification of investments across different countries rather than simply arranging separate accommodation for your assets. The internationalization of your portfolio can minimize risks associated with exclusively domestic investments. This mainly applies to the real estate market, whose performance naturally varies in different countries.
Yet the world’s stock markets also vary. Geo-diversification protects against losses which could occur if all your securities were based in one country with a poorly performing stock market. Yet a global financial crash like the one in 2008 would most likely result in the reciprocal crash of all indexed markets.
In addition, it is a definite advantage if various investment products are stored at different locations. And here, non-EU countries such as Switzerland or the Principality of Liechtenstein are often recommended. These two independent countries at the heart of Europe offer many advantages, especially as regards secure, bank-independent gold storage outside the EU. Your freedom and property rights are protected. Yet when diversifying assets and choosing a location, you should also be mindful of other possible challenges such as expropriation and emergency laws.
Asset protection in Switzerland: no mandatory disclosure
In addition to the broader geographical security it provides, Switzerland is a secure location for gold. Its globally respected reputation is based on the country’s unique history. After the Second World War, Switzerland took a leading role in physical gold trading, and its resultant close links with large gold refineries such as Argor-Heraeus, Metalor, PAMP and Valcambi remain strong to this day.
Another historic legacy of equal importance is Switzerland’s traditional advocacy of personal property rights, which benefits foreign visitors and clients too. This advantage alone makes Switzerland the ideal place to store all kinds of assets. In addition, unlike most other countries, this jurisdiction is a direct democracy with a high degree of co-determination by its own people. This avoids the risk of politicians embarking on personal crusades and also ensures a high level of social and political cohesion. Furthermore, Switzerland is politically independent with its own laws and its own currency. This has brought the nation high economic stability aligned with low government debt. Switzerland is not a member of the European Union (EU), nor does it belong to the European Economic Area (EEA). Nevertheless, the country still maintains bilateral relations with the EU.
Among other things, Swiss freedoms mean the simple storage of precious metals is not subject to state regulation, and there is no obligation to disclose personal information. This arrangement ensures the storage of precious metals and other valuables remains highly secure, and also facilitates different types of storage – such as the allocated and segregated storage of gold bars and gold coinage, as well as storage in bank-independent safe deposit boxes.
Asset protection in Liechtenstein: an aristocratic location
The Principality of Liechtenstein is very close to Switzerland. It was created in 1719 from the unification of the regions of Vaduz and Schellenberg. The House of Liechtenstein itself is reputed to be one of the oldest branches of the Austrian nobility. As the result of a 1923 Customs Treaty, this landlocked country formed a customs union with Switzerland, and adopted the Swiss franc as its national currency. While Liechtenstein does not belong to the EU, it is a member of the European Economic Area. It is governed as a constitutional monarchy with the Prince of Liechtenstein as head of state. The House of Liechtenstein’s dynastic mindset allows an element of continuity and long-term planning to flow into the nation’s day-to-day politics.
The 6th smallest country in the world is a prestigious location for securing assets. Liechtenstein’s respect for private property is on par with its sister state, and because of its political and economic stability and high regard for the rule of law, the country also plays an important role in the European financial services sector.
Safe deposit boxes which are independent of banks and dealers are recommended to secure precious metals and other assets in Liechtenstein. Companies offering purely storage and warehousing facilities are exempt from banking rules, and thus are not obliged to grant third parties direct access to their customer data. Individual safe deposit boxes are therefore particularly suitable for private investors, as well as for all trustees, foundations and private banks who value privacy and discretion.
Overview: Using gold for asset protection
- Gold has never completely lost its value in the past. It is always in high demand during times of crisis.
- Gold tends to have a lower volatility than securities and other assets.
- This precious metal can be used for asset protection and as a hedge against inflation. Unlike real estate, it can be rapidly monetized when required.
- As an element of an investment portfolio, gold can be used for diversification and risk reduction.
- Geographical diversification, both as regards the selection of investment products and their storage location, can also prove advantageous.
- Specialist depositories in Switzerland and Liechtenstein are not required to report client data to government agencies, which makes them particularly suitable for bank-independent safekeeping.
- These non-EU countries offer high levels of political and economic stability. They respect the property rights and privacy of domestic and foreign clients alike.
Frequently Asked Questions about using gold for wealth preservation
Gold has a high value density and is always in high demand in times of crisis – for instance, it has never suffered a total loss of value. Gold bars and gold coins enjoy international acceptance and can be easily sold anywhere in the world.
Investment experts advise their clients to invest part of their investable assets in gold. Gold is therefore suitable for wealth accumulation as part of a diversification strategy alongside other investment products such as shares, funds or real estate.
Gold bars in standard sizes of 100 or 250 grams are ideal, as are popular gold coins such as the Krugerrand, Maple Leaf, or Vienna Philharmonic, in denominations of one troy ounce. These are always in high demand and are accepted all around the world.
Investors can buy gold via the precious metal trade, but specialist retailers and online shops are equally suitable for this purpose. For instance, Echtgeld AG from Switzerland will deliver orders and purchased gold bars and coins direct to a storage facility.
You can store gold coins and gold bars in individual custody as well as in safe deposit boxes in high-security facilities in Switzerland and Liechtenstein. All stored goods can be insured as wished by the client and property rights are fully respected.