July 28, 2016
An era of slowing growth, falling corporate profits, record
debt levels, and currency debauchment has many investors buying gold as a bet
against global central banks.
Holding that gold outside the banking system, and for some,
outside one’s own country, are increasingly popular options. Canada, Switzerland,
and four other countries have particularly attractive characteristics.
Those are the conclusions of a new whitepaper produced by
Sprott Money Ltd.
Canada and Switzerland are obvious choices. The True North
has fabulous natural resources, one of the world’s most stable banking systems
and hasn’t been attacked in more than 200 years (the last two times the
Americans tried to invade - during the Revolutionary War and the War of
1812 - things did not work out so well
Switzerland, which ranked first on the Tax Justice Network’s
Financial Secrecy Index in 2015, has fabulous attractions as an offshore
investment locale. These include a long history of offering investors a safe, discreet
place to store assets. That applies doubly for gold, which has a better
reputation in Switzerland than in almost any other country.
America's shaky credit history
Surprisingly, America, which many in the hard money
community regard as a risky gold storage locale, also made the cut, due to its
strong international reputation as a safe haven. The paper nevertheless
acknowledges some worrying trends. For example, during the Obama presidency
America attacked an average of one country a year, debauched its currency and
Worse, when times are tough, the American government has a
record of defaulting on its obligations.
This includes creation of currencies issued during the
Revolutionary War - and by the Confederacy during the Civil War - both of
which became worthless.
America also defaulted on its international obligations when, in 1971, it reneged on its commitments to back the greenback with gold.
But most importantly for gold investors, the American
government also seized all private holdings when the going got tough during
the Great Depression. The worry is that this could happen again.
A good place – for Americans - to store precious
That said, despite its many faults, America is a great place
for at least one category of investors to store gold: Americans themselves.
Gold’s and other precious metals’ properties as an emergency
reserve to be accessed when times get really tough imply that most investors
will want to keep those assets close – where they can get their hands on them
However in today’s volatile economic conditions, no one can
be really be sure about how things will turn out during the coming years – let
alone the coming decades.
So, for Americans, diversification by asset class and country appears to be the best risk-adjusted wealth preservation strategy. Many experts
increasingly believe that holding some precious metals outside the banking
system and outside of the country is a good bet.
Conversely, the paper acknowledges that based on the
performance of the U.S. dollar during times of tension, international investors
continue to regard America,
which ranked third
on the Tax Justice Network’s Financial Secrecy Index in 2015, as a safe haven.
Singapore, Germany and the Cayman Islands
The Sprott report also identifies Singapore, Germany, and the
Cayman Islands as current good offshore storage jurisdictions.
The paper also acknowledges that many other international
jurisdictions such as Dubai, Australia, and Hong Kong are regarded as good
locales, but acknowledges that changing geopolitical risks requires constant
monitoring of domestic and international investment environments.
For Americans, most of whom have never left the country, the
Cayman Islands, where English is widely spoken and which offers excellent
attributes as a tourist destination, appears to be a particularly attractive
storage locale. After all, there is nothing wrong with combining international
investing with a trip to the beach.
You can access a copy of the Sprott Money Report by clicking
Peter Diekmeyer is a business writer/editor with Sprott Money News, the National Post and Canadian Defence Review. He has studied in MBA, CA and Law programs and filed reports from more than two dozen countries.
The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.