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
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Silver Paper Certificates and Physical Silver Holdings

Commodities / Gold & Silver Nov 14, 2008 - 06:26 AM GMT

By: David_Morgan

Commodities The following excerpt is from the November issue of The Morgan Report. Many in the precious metals community have been leery of holding paper silver. Interestingly the people I interviewed began to ask similar questions and began their own holding company. Part of the interview from the November issue follows…


Morgan :  Did you foresee when you started that there were some issues with any of the certificate programs? Or maybe a holding facility that was on a non-segregated basis? In other words, was there any impetus to get you to move into the format that you have? 

AFE :  Precisely. We set up bullion accounts with some refiners and bullion banks. We started accumulating some metal positions. We wanted to try to get a definition of how that metal was being held. I'm talking about the years of 1995 and 1996. At that time, at least on the Internet, there wasn't a lot of information in the public domain about non-segregated versus segregated, unallocated versus allocated accounts.

So we started to ask some questions. “What does it really mean when the fine print says that you may use the precious metals on our account, you're the owner and you may trade with it and deal with it as you want? And yet, it is ours? Where is the risk? How is that physical bullion actually being held? Is it refinery inventory or what is it, actually?”

In this process we started to come up with answers that we were NOT looking for. In fact many times the very specific questions we were asking simply weren't being answered at all. By around 1997, it was becoming clearer within the public domain that there were these physical short positions that existed on the balance sheets of some of these larger bullion banks. At that time we had really managed to prove to ourselves that we'd taken the right direction in doing something that was independent and separate all together from the larger industry service providers.

Morgan :  What is your perspective on someone wishing to participate in buying physical and storing with your company?

AFE :  We are providing a facility for international clients. I must say at this point, David, that we are very, very thorough in the due diligence of our clients. However, we're not providing information about our clients. We have a very strict internal policy in terms of the kind of information we require, the true identification of our clients, their source and origin of funds, and so on. So we do have a high internal policy in terms of maintaining these records.

Morgan :  So if anybody from basically around the world wants to open an account, they're free to do so as far as you're concerned?

AFE :  Providing they supply us with the information that is required to satisfy us in terms of whom we're really dealing with. So, you'd be familiar with the normal financial institutional requirements in terms of understanding that the actual account party is—who is opening that account. Typically we are looking for forms of ID that would be issued by a government, such as a passport, or a license issued by a government, and so on.

Morgan :  I understand. So I would just advise any of the readers of The Morgan Report to do their own due diligence. We've got readers in 72 countries around the globe. Roughly 50 percent are in the United States and approximately 38 percent are in Canada. And then it's sprinkled around the world.

In several jurisdictions, there's a value added tax problem, you might call it, through most of Europe. And it varies as high as, I think, 17½ percent on silver in the United Kingdom. I believe it's 7 or 8 percent in some of the Eastern European countries. How does that affect a client of yours?

AFE :  Because the bullion is held within a custodial arrangement within a bonded facility, at this point there is no VAT paid on the transaction. We do charge front fees, of course, which include insurance and the bailment process. However, VAT doesn't apply until such time as someone wants to take physical possession or physical delivery. Then there will be a VAT applied. Typically if that release into safe custody of a client happens within Switzerland, I think it's about a 7½ percent VAT. But, if not, if it's being shipped, it's shipped less VAT into the jurisdiction where that person is going to take delivery. The client will also pay local VAT within that jurisdiction as it applies to their local area.

Morgan :  Can you give me an example of a typical client?

AFE :  This facility was originally set up to provide a means for the higher net worth, more sophisticated individual, along with clients of a forward-thinking mindset. It was very important to have liquidity within our system. So on a typical day, we can have quite a large client want to liquidate back into cash, or cash into metal. We have the facility to do that.

That was a very important consideration. Because where we came from, we were actually providing physical bullion and shipping it to people. Again, we were starting to sense a real need for something that provided a greater liquidity and less hassle in terms of a large quantity of bullion. So, I guess it's very much like a trading or a brokerage account in the sense that while you may have allocated bars on account, the client may decide to liquidate several of those allocated bars on a given day. And we have the facility and the liquidity within our system to do that within a 24-hour period. Of course, there are transaction fees that apply.

The advantage is, while you've got an allocated account, liquidity is there. This is a very important consideration for many people. 

Morgan : There is a problem throughout the world in actually getting physical silver and gold at this time. One of the few places that you seem to be able to get industrial-sized bars is of course through the COMEX. The retail market for rounds or silver eagles or anything else is extremely difficult. The same conditions apply to gold as well. Are you going to have any problems getting industrial-grade bars for your clients?

AFE :  We don't see that in the foreseeable future. Part of this reflects back to the history of the company. We have relationships now that are over a decade old. These are well established relationships. Also, this is within central Europe, which has been a warehouse, a producer, and a refiner of physical bullion for hundreds of years. I'm referring to Switzerland.

We've seen Switzerland survive several market disruptions. The collapse of the London gold pool in 1968 would be one example where the international bullion markets shut down, yet Switzerland kept their doors open for trade and continued to trade internationally, buy and sell. Switzerland is a refiner for a lot of African production. It's certainly a refiner of industrial bullion into good delivery bars for parts of Eastern Europe, Uzbekistan, Kazakhstan—large producers particularly of silver as a byproduct to base metals.

So we see that there is still a strong supply from that part of the world. Compare this to North America, where, although the domestic market is potentially quite large and the investor market can grow very quickly, the production side of it is quite small. So therefore, we don't have that same domestic liquidity within North America in terms of refining of mine production that we would see in parts of Europe and Switzerland. Parts of Asia and probably even Australia are large producers. It's important to note that these markets, while having a large production capacity, may have much smaller demand markets.

To answer your question specifically, we don't see supply disruptions coming from industrial production into good delivery bars of either gold or silver. We are doing substantial business at this time.

Morgan :  It seems as if this may be one of the best places under the current conditions of the marketplace to obtain physical silver and gold then place it in a secure jurisdiction outside perhaps the jurisdiction you're currently domiciled in. So I see a lot of positives here.

It is an honor to be,

By David Morgan,
Silver-Investor.com

Mr. Morgan has followed the silver market daily for more than 30 years. Much of his Web site, www.silver-investor.com , is devoted to education about the precious metals . David Morgan believes NOW is the time for baby boomers who want to retire comfortably and without fear to start investing in precious metals. Now you can discover his Ten Rules of Silver Investing for Baby Boomers, when you sign up for his free newsletter here .

Contact information: silverguru22@hotmail.com

Disclaimer: The opinions expressed above are not intended to be taken as investment advice. It is to be taken as opinion only and I encourage you to complete your own due diligence when making an investment decision.

David Morgan Archive

© 2005-2019 http://www.MarketOracle.co.uk - 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