Might your gold become useless to you in a Greek-style
crisis...?
ANCIENT ATHENS hoarded its silver and
gold bullion coins upstairs above the Parthenon, according to one Canadian archaeologist, writes Adrian Ash at
BullionVault.
Where are Greece's poor citizens holding their gold and
silver today?
Certainly not in Zurich, Singapore or anywhere else
via BullionVault.
We saw internet traffic from Greece rise 50% during the first half of this
year from the Jan-June period of 2014. But new accounts? Zero growth...with
just a handful of customers again.
No, the preferred choice for Greeks buying gold has
remained bullion coin. Specifically gold Sovereigns, bought from the UK's
Royal Mint in Wales...and distributed through the central bank in Athens, the
Bank of Greece. At least, that's what Greek law demands.
Incredibly, a rule stated on the central bank's website here has made it the
ONLY legal route for gold bullion sales and purchases in
Greece since at least 1999, with commercial banks invited to apply for
approval if they wished. Word is, small private-sector dealers have long
ignored that rule (Google.gr
suggests likewise). After all, it flew in the face of the European Union's
general directive on free
trade in legal goods, even if it fits with the classic Euro-fudge known
as the principle of subsidiarity, which says national
governments can arrange things domestically pretty much as they like,
provided they don't block cross-border trade and capital flows. Y'know, in
the way that, say, today's capital controls do.
Prior to this banking shutdown, therefore, residents of
Greece could also buy gold coins or small bars from dealers abroad, and get
them posted across the border. Because inside the EU's common market, a
citizen anywhere can buy legal goods such as gold bullion from any other
member state.
That's what the European Union is supposed to be about, at
root. The Bank of Greece's stated monopoly on gold bullion inside the
Hellenic Republic didn't contradict that core EU aim. But with Greece now
stuck in a week-long banking shutdown thanks to the debt crisis, the Bank of
Greece has shut its gold operations. Or so Bloomberg reported Monday.
This news didn't feature in last Sunday's capital controls notice (they're always
imposed on a Sunday). Nor does it appear on the central bank's gold pages online. True or not
however, the broader chaos in Greece already raises the issue of what
freedoms a precious metals owner might expect, both legally and in practice,
during the kind of crisis you might be buying to guard against today.
Bloomberg headlined its story "Bank of Greece stops gold sales". But the central
bank also sets itself out as the only legal BUYER of bullion
in Greece, too. If the gold window is closed, that also means the Bank has
stopped buying.
This is more important, because in a banking
shutdown...after 5 years of economic collapse...people will be rushing to
raise cash, not buy gold. Losing the key insitutional dealer only would only
worsen liquidity, and prices, for would-be sellers. Amid the kind of
confusion now hitting Greece, gold held in-country risks becoming useless to
its owners.
Each household's shortage of Euros worsens every time they
spend money. So who will buy gold from you for Euros? No doubt there's a
thriving black market, however. Gold always finds a way, as India's attempts
to block legal imports have proved time and again. Greece only made giving till receipts mandatory for all businesses in
2012. Foreign-issued credit cards are apparently helping some people get
round Greece's new capital controls today. And in gold, acting legally under
EU rules always made you a criminal anyway under the Bank of Greece's more
controversial claim to a monopoly. The lines have long been blurred.
Now contrast that hassle, risk and lack of willing buyers
with the safety, instant pricing and deep liquidity available to that handful
of Greek citizens who bought and now hold bullion outside the country.
BullionVault users owning gold in Switzerland or Singapore, for instance, can
sit it out, and maintain some wealth away from Greece's collapse for when the crisis finally passes. Or they can sell a
little...and receive funds back to their Greek bank...ready to spend from
their allotted €60 per day ATM withdrawal (if they can find a machine with
any cash). Because there are no blocks on receiving funds from abroad, of
course.
If you're right to buy gold against a Greek-style crisis,
in short, then you'd be right to own it in a safe, secure jurisdiction
abroad. This is rule No.1 on the Gold Buyer's Checklist.
And if things get really bad? No amount of gold, or any
other asset, can guarantee you escape any and all kinds of crisis. But
owning physical bullion outside your own borders means you have a high-value
asset...instantly priced, deeply liquid and sellable for local
currency...ready and waiting should you and your family need to get out. And
be able to.
Everyone hopes it won't come to that. Everyone always
hopes that it won't.
