Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Where a Nation's Gold and Your Gold Should Be Held: Part II

Commodities / Gold and Silver 2012 Feb 12, 2012 - 06:05 AM GMT

By: Julian_DW_Phillips


Best Financial Markets Analysis ArticleIn Part I of this article we looked at the growing trend of governments moving their gold into their own home vaults to remove the influence and potential seizure of their gold when political policies clash with the country where the holding central bank was situated. We covered the dangers of holding gold at home and the difference in attitude individual's should have towards the problem of where and how to hold gold.

We also highlighted that a law in China that makes it illegal to export gold allowing the nation's total stock of gold to rise. Should the day come when the People's Bank of China believes that it should harness the nation's gold, then it will be in a position to confiscate its citizen's gold. It appears difficult to reach any other conclusion to that law. With this policy it appears that the importance to gold in a nation's stocks will be of rising importance in the years to come. It follows then that other nations, including those in the developed world, may follow suit if the global financial scene deteriorates or if a change in the monetary system warrants it. Such a move would place all gold investors in danger of having their gold appropriated in the national interests. When U.S. citizens had gold ownership returned to them in 1974 after 40 years, they were informed by government that gold ownership was a privilege, not a right! What does this imply to you?

Even when an investor holds his gold at home he remains vulnerable to the will of the government of the country he lives in. It's this danger an investor must prepare for if he is to get the full benefit of owning gold, long-term. We look at this here, the second part of the article.

U.S. and U.K. Citizens Holding Their Gold in Foreign Vaults

Because of the potential for gold confiscation, investors often decide that the simplest and best way to hold their gold is outside the country they live in. The belief is that their nation will not reach out to another country and try to persuade them to impose such controls on foreign soil. But does holding their gold outside their country keep it out of reach of their own government and central bank?

Many investors believe in buying the gold overseas to hold it in their own name in a bank or foreign gold Exchange Traded Fund or even a private vault. For instance a U.S. citizen may hold his gold in the London Gold Bullion Securities ETF. In each case, whether private or public, the gold is owned directly by that owner in his name. So let's look at the vulnerability of this method of owning gold overseas.

Inter-governmental Alliances

A look around the world shows a tremendous trade interrelationship between nations. In the Eurozone there are 17 nations using the euro as their currency under the European Central Bank. As the Greek, Irish, Portuguese, Spanish and Italian debt crises are amply demonstrating, the financial dependence on these countries is very great. Members are pushing for 'more Europe, not less Europe' and fiscal union is being favored more and more. The only way out of this osmotic pressure will be to leave the E.U. at which point a nation will need to harness and hold inside the country all the mobile assets it can whether it be capital or gold. Both are money when push comes to shove.

As Germany has demonstrated - gold is an important national asset to their central bank, the Bundesbank, so much so that after being allotted 600 tonnes of the potential Central Bank Gold Agreement sales potential, it declined them, only selling enough from its reserves to maintain a supply of gold coins [5 tonnes a year at best]. As the Central Gold Bank Agreement stated, "Gold remains an important reserve asset". The Bundesbank President at the time, said, "Gold is a useful counter to the swings of the dollar". In fact it is a useful counter to any currency! So as their failure to sell central bank gold demonstrates, gold will remain firmly in European central bank coffers. So expect, in a time of currency crisis, that the E.C.B. will encourage inter-E.U. member's adherence to any dictates on privately held gold from either members or the E.C.B. itself.

If the U.S. decides to act against the privately held gold of its citizens then it does not take much of a stretch of the imagination to expect the U.S. to ask for the cooperation of the U.K. to any imposition it may wish to impose on U.S.-owned but U.K.-held gold. Even though it may not do so at individual level, within its borders (not wishing to be seen as cow-towing to the U.S.) it may press U.K. institutions too cooperate with U.S. dictates on the matter and encourage the U.K. courts to support such actions. The easiest targets in this case would be the institutions holding the gold of U.S. citizens, particularly the gold Exchange Traded Funds or banks. Here, at a collection point, the bulk of physical gold owned by individuals is held. Then it would simply take an order from government, approved by the courts, and that institution would be compelled to hand over the gold to the government for delivery to the ownership of the Fed, with or without the compliance of the real owners. The real owners would then be paid in currency for their gold, as was the case in 1933, or more imaginatively, in low interest, government bonds.

But there is a government with a remarkable history of protecting individual wealth, provided the owner is not a known criminal. That is Switzerland!


For more than 300 years, Switzerland has been a neutral nation, well-equipped to go to war to protect its neutrality. Its terrain is nigh on impossible for a 'normal' army to traverse in the hopes of conquering the nation. In the last two world wars and in the face of many others, it has provided a safe haven for individually-and institutionally-owned gold. Such is the size of its banking and asset protection business that it forms a very significant part of its GDP. To ensure the protection of individuals and others privacy, it has bank secrecy laws that cannot be breached. Any breach of such confidentiality will lead to imprisonment in Switzerland.


You may say: "but look at the UBS debacle, where the U.S. IRS decided to tackle the bank's U.S. client base in the hope of getting the names of 45,000 of its U.S. clients". What was UBS to do? As an international bank with branches throughout the world, but with a particularly large on in the U.S., it was bound to comply with U.S. laws. But then the Swiss government stepped in and said that if it did disclose these names it would be breaking Swiss law and so would its Swiss executives, giving them an unpleasant homecoming if they complied with U.S. government requests. The two governments talked to each other with the U.S. pointing out that some of the clients were criminals insofar as they were evading U.S. taxes. Eventually, and with other countries too, Switzerland has added tax evasion to its list of crimes that would prevent people from becoming Swiss bank clients. The result was that UUBS was permitted by the Swiss government to reveal 4,500 of the 45,000 client names to the U.S. government.

That left 40,500 U.S. citizens with UBS bank accounts in Switzerland that are not in danger of being revealed. This has left the Swiss banking Secrecy laws intact and Switzerland still the safe haven for wealth that it was before the debacle. But many safe situations have changed as a result of this action. The U.S. is still chasing other Swiss banks in the U.S. so are Swiss banks the safe place we thought they were previously?

Gold held in a Swiss bank

Inside the borders of Switzerland, institutions and individuals remain outside the reach of other governments. But where a financial institution has a branch or branches overseas, that bank or company comes into the jurisdiction of other governments and its laws. UBS was so large in the States that it faced devastating action and the possible loss of its banking license inside the U.S. if it did not do what the U.S. said. The same applies to all Swiss companies outside the safe borders of Switzerland. So any foreign clients of Swiss banks with accounts there may bring unwarranted and unwelcome attention to the institution. Their ability to retain the assets of their foreign clients could then be compromised making Swiss banks and financial institutions not the safe haven the country itself is.

As the U.S. is now in the process of bringing a new law onto the books called the Foreign Account Tax Compliance Act (FATCA), which has expanded offshore asset disclosure requirements, the dangers to Swiss institutions with foreign branches has risen. A new form "8938" will then need filling in by U.S. citizens that requires them to disclose the bulk of foreign held assets. As a result, Swiss banks in particular do not want new U.S. clients and have rejected attempts by U.S. citizens to become clients.

Let's be clear on this - this has nothing to do with law-abiding clients, but with the relations between the bank and the United States IRS and the future dangers that may arise on this front.

While gold held in Switzerland in its owner's name is currently quite secure, should the day come when the U.S. or any other government wants to confiscate its citizen's gold or any other assets, the heavy application of pressure on the Swiss institutions may force them to cooperate, no matter what the Swiss government says, provided the secrecy laws are still obeyed. And where will the pressure be applied? Inside the nation where the confiscation or repatriation orders has been imposed!

Switzerland would never allow the U.S. to impose such a law on Switzerland itself. Indeed, in the past a Bank of England detective tried to get access to British citizen's bank accounts in Swiss banks inside Switzerland and was promptly locked up there. The same would apply to any other countries authorities if they tried to invade Swiss sovereignty.

Swiss banks are, therefore, not Swiss!

Gold held in a Private Vault in Switzerland

The same applies to Swiss Vaults. Where there is, for instance, a Swiss branch of a foreign Security or vaulting company, there is a danger that pressure will be applied to them, outside Switzerland. The company will then have to decide where its own interests, and not the client's, lie.

However, there are reputable Vault companies in Switzerland that are entirely Swiss-based and so can offer the sort of security that its clients want. This is where foreign gold investors are the most secure.

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2012 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules