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Today is another AMA Episode (Ask Me Anything).
\\nPaul asks:
\\n"I have been acquiring gold/silver since December of last year. Outside of a small physical holdings possession what do you recommend for storage for a larger portion of your holdings? I have heard Russel Gray talk about holding gold/silver and then borrowing against it to buy real estate. I love the idea but my search hasn\\u2019t found a trusted institution to do this? I believe you have mentioned in your Podcast you have bought from your bank. Would you be open to sharing your thought on how to find a custodian to store and borrow from your own precious collateral?"
\\nPaul, this is a great question. In fact there are a couple of questions wrapped up in this question.
\\nLet\\u2019s take a step back and talk about the purpose of holding physical gold. Of course, the amount of gold that you hold will ultimately influence your decision on where to store it. Gold is a store of wealth. It\\u2019s money, one of the only true forms of money. Although the government would like to have you believe that it\\u2019s not. It used to be of course.
\\nWhen you buy gold, there are many forms you can buy gold.
\\nMost people buy gold certificates. We don\\u2019t recommend it. Just because most people do it, doesn\\u2019t mean it\\u2019s the best thing to do. When you buy gold certificates, you\\u2019re buying a futures contract on gold at the spot price for gold. But the biggest problem with certificates is that you\\u2019re only holding a piece of paper. The piece of paper is essentially an IOU. This is not different than holding US dollars which are an IOU. It is subject to counterparty risk. The IOU is only as good as the company providing the IOU. The 2008 financial crisis showed us how even a legendary name like Lehman Brothers with over 150 years of history could leave an investor exposed.
\\nI\\u2019m personally a fan of holding the real metal.
\\nSo when you buy gold, the question is where to buy it from? There have been a few isolated cases of counterfeit gold being sold on the open market. So you need to buy from a reputable dealer. Generally, these dealers buy directly from the mint, or from a distributor who buys from the mint.
\\nI like holding gold at private security companies where the records of who holds the safe deposit box is kept private.
\\nYour second question is where to store gold that his being held as collateral? You have a few choices.
\\nLet\\u2019s say that you want to invest in real estate. You might have some gold and you don\\u2019t want to sell the gold. Clearly you\\u2019re going to pay a higher interest rate to borrow funds with no security. You can use the real estate as collateral for a portion of the loan. But the remainder, the equity is the more expensive money to find. What if you could borrow money against your gold to fund the equity portion of the purchase?
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