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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 for them).
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
curtailed freedoms.
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
metals
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 fast.
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 download a copy of the Sprott Money Report by clicking here.
Written
by Peter Diekmeyer
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