The Benefits of Individual Over Collective Custody
Investors have a choice to make between a share in a general precious metal deposit or a fully owned solution.
Investors who have invested part of their asset wealth into precious metals – such as gold, silver, platinum or palladium – will sooner or later face the question of how to accommodate them. It soon becomes clear that storing such items in hiding places or home safes is too insecure or causes problems when capacity limits are met. The same applies to safe deposit boxes provided by banks, which require a customer account and cause several other downsides. Bonded warehouses or open bonded warehouses in Switzerland or in the Principality of Liechtenstein offer alternative prospects compared to conventional precious metal storage methods, however. Indeed, individual custody with private storage providers has many advantages over collective storage.
What Does Collective Custody Mean?
The term collective custody is not one that is only used in the field of precious metal storage. In principle, goods, raw materials or securities can be stored together in this form of placement if they share the same sort of properties. A customer who has booked a collective custody type of storage basically has no right of ownership over specific items. Instead, his or her share is measured by the number of stored units or by their weight. In a sense, such a customer would have co-ownership rights over the entire portfolio of stored items. For example, if an investor puts 10 kilograms of gold bars into a collective custody deposit, which contains a total of 500 kilograms within the whole of its inventory, he or she would own two per cent of the total goods. Bear in mind that this means not being entitled to own individual bars. The big advantage of collective storage is the comparatively low administrative time that is needed, something which can drive costs down. In this storage system, gold can be bought and sold at any time directly from precious metal dealers. Indeed, silver and other white precious metals can even be traded free from sales tax.
However, with all of the cost savings it affords, collective storage has some disadvantages that are worth mentioning. For example, when stocks no longer exist in real terms, due to speculation or ineffective warehouse management, it can be a problem for investors. Furthermore, investors could lose their entitlement in the event of the warehouse provider becoming insolvent or, at least, it will be made more difficult to exercise property rights. In addition, when a share is sold, the origin of the gold cannot be documented in full, generally speaking. At no time can the customer inspect his or her own inventory. This would only possible if he or she were to take out their share. In the case of silver, sales tax would consequently be payable. In cases such as this, taxation at 7.7 per cent would apply in Switzerland. Surcharges may also be levied for the segregation of the goods or for moving them across borders.
The Alternative: Individual Custody at Swiss Gold Safe Ltd
In order to convert all these disadvantages into advantages, it is recommended to opt for either individual custody or segregated storage. This is offered by Swiss Gold Safe to its customers from Switzerland as well as those from abroad. In stark contrast to collective storage, individual storage provides for an exact catalogue of the goods concerned. The serial numbers of gold and silver bars – as well as any existing seal numbers of coin tubes and master boxes – are recorded. Indeed, the associated goods will be registered in the name of the customer concerned. This also enables bars and coins to be traced, making it easier to sell them later. Depending on the quantity that needs to be stored, the stocks are stowed on pallets or in specialised safe deposit boxes. The physical gold or silver remains the property of the tenant at all times. This is regulated by a custody contract according to the Swiss Code of Obligations OR Art. 472.
This method of storage offers investors the security of always being able to identify their exact stocks. He or she has the opportunity to unquestionably prove the origins of their precious metal, something that represents value preservation in the investment market. In the case of an inventory check, the tenant can prove his or her ownership of the property at any time. This is done using clear warehouse receipts with detailed data that Swiss Gold Safe issues to its customers. In addition, the stocks can be personally inspected at any time.
Further Advantages of Segregated Storage
Individual custody takes place exclusively in private high-security vaults, including those at bonded warehouses (ZFL) or open bonded warehouses (OZL). Among other things, this enables the purchase or sale of white metals via a precious metal dealer, such as our partner Echtgeld Ltd, without the need to pay sales tax. Another advantage of segregated storage at Swiss Gold Safe Ltd is the comprehensive, full-risk insurance available. This covers against theft, fraud and natural disasters. To this end, Swiss Gold Safe works with renowned and internationally prominent insurance companies.
Due to the aforementioned segregated custody, stored goods are never put on to the balance sheet of Swiss Gold Safe Ltd and would not, therefore, come under the estate of the company if bankruptcy were to occur. We operate independently of banks and are not placed under any reporting obligations.
The differences between collective and individual custody storage in overview:
- Collective custody means the joint storage of goods which have the same characteristics.
- With collective custody, investors have no property rights to specific goods. They own a share of the total inventory.
- The physical investment of goods remains invisible to the client under collective custody.
- Individual storage makes up for all the disadvantages of collective custody. The goods are registered in the customer’s name using bar or seal numbers.
- The origins of precious metals can be verified and traced at any time.
- Investors can choose bank-independent storage in high-security vaults, including ZFL / OZL (for silver trading without sales tax). Full-risk insurance is available.
- An inventory is not put at risk by your own bankruptcy or that of the warehouse company. Individually stored items can be taken back into your possession at any time.