FATCA and offshore gold holdings

[bedraggled]

I just reread the thread where the merits of holding PRPFX were discussed. Apparently the fund under performed the 4x25 by a significant amount from 2005-2016.

Would PRPFX, with its higher annual expenses, be a safe way to own and store gold? Would PRPFX be at risk of having its gold confiscated?

And could we consider the higher annual charges to be the insurance that is so strongly recommended when owning gold?

Just asking but asking sincerely.

Thanks.

[Mark Leavy]

Just asking but asking sincerely.

Hey bedraggled. I really can't think of a good reason for holding PRPFX. Especially for someone with your history of understanding the PP and for your penchant for international living. Really - physical gold is SO accessible to you.

You've indicated that you do some European travel and that you might like to make it a regular part of your life. If so, hop over to Austria and buy some philharmonics at a bank with your US debit card. Leave them in your anonymous safety deposit box at Das Safe.

PRPFX is an anachronism and none of the current managers have established enough credibility to make their fees worthwhile.

[bedraggled]

I don't hold PRPFX and don't look to put money there.

I was looking at it as a way to deal with the gold insurance issues.

You are right that an American organization could be pressured.

Thanks for the feedback on the thought.

[Mr Vacuum]

It's been a while since I read the PRPFX prospectus but I don't recall they have the least bit of detail about how they manage their gold. If it's not in there the insurance question is unanswerable with any certainty.

[sophie]

Here is my long-promised report on the mechanics of buying gold through the Perth Mint.

Perth Mint has three options: the depository program (minimum $50K starting investment and requires phone calls and a complicated setup procedure involving notarized documents), the certificate program ($10K minimum and requires going through a US broker), and the new depository online program which allows 100% online transactions, US dollar accounts, and a $50 minimum. I went for option #3.

Depository online is easy to set up. You sign up online and upload a copy of your passport and bank statement for the account you want to tie in. Changing the account you pick is complicated and requires direct contact with the Mint to initiate. It appeared I could have used any account but I chose a commercial bank (Chase) that is capable of international Ach transfers/wires, just in case. This is because the Perth Mint provides a US bank account (also at Chase) for money transfer purposes. I will need to file FATCA once the account balance hits the $10K level, but note that this is not a bank account.

The security at depository online is a bit behind the times...they want a fairly strong password but there is no periodic password change policy or two-factor authentication. They do send an email each time you log in. Also, the fact that you can't link another bank account online is another layer of protection. I decided this is ok as it's similar to the safeguards at Treasury Direct.

The depository online account allows you to set up automated monthly purchases. The usual fee for purchasing or selling gold bullion is 1%, or 0.5% to buy through the automated savings plan. There is NO STORAGE FEE for unallocated bullion, so this ends up being cheaper than an ETF for long-term holdings (e.g. 4 years given PHYS ER of 0.40, or 6 years for IAU). You have to arrange for the money to be in the account by the 25th of the month, and the purchase occurs on the 1st. Getting the money in the account was the tricky part for me, as my bank has no provision to allow for an Ach transfer to a bank account you don't own. The Perth Mint provides you with an account number & bank codes for the Chase account, along with your account/reference number which must be included on the memo field in order for the money to be credited to your account (else they will refuse the transfer). I ended up scheduling monthly wires (free as long as Chase forgets to kick me out of their Private Client program). Other banks may be better at this, and it would be useful if people could post names.

The Perth Mint does not track cost basis per purchase, but you can pull up a statement online that gives you a figure for total deposits. I'm not sure how US taxes will work when I go to sell, but I'll probably just come up with an average (total net deposits divided by oz gold held) and use that for cost basis.

My long-term plan is to convert to allocated bars when the account gets large enough, if that ever happens :-). This will incur a one-time fabrication fee (e.g. $70 for a 10oz bar) plus ongoing storage costs (1%/year). Allocated bars can be delivered to you and visually inspected or picked up at the mint. If you sell an allocated bar, you incur the gold sale fee and you lose the fabrication fee (thus I would not buy coins through the Mint).

So there it is. Definitely a bit more complicated than a US gold account, but the whole point is to add some international diversification. I think this is a pretty convenient way to do it, and about as private as you can get without going the non-bank offshore storage route.

[grapesofwrath]

I am resident here in US and opened an account with Perth Mint in their depository program and have been happy with it. Yes, it initially involved some paperwork and mailing but that is to be expected. Funding into the account is done through a US bank (Chase) which is convenient. All metal transactions are done over the phone quoting ones password. Staff are prompt, courteous and efficient. I get an emailed transaction confirmation within seconds. I like the absence of computer access/trading from a cyber security point of view although the phoning due to the time difference can be a nuisance. I purchase into the unallocated program which has no holding charges and I have the minimum ($250k) account level so also pay zero transaction fees. The unallocated doesn't worry me. All assets ultimately involve trust of the other party. I actually lived in Australia for ~10 years and so maybe have a greater level of confidence in the place/system that some US only persons may. (I guess when the zombies take over the USA I can always go back down under to pick up my gold and beers and head off into the outback and watch the stars....).

[dualstow]

Thanks for that info, grapesofwrath!
Hmm, looks like I won't be able to meet the minimum. Otherwise, it looks like a sweet deal.
I only have enough for unallocated beer storage, I guess.

[grapesofwrath]

I think its a 2%/1% buy/sell fee for account size under $250k. Minimum trade is 5k.

[dualstow]

This is a more appropriate thread than the bars one to continue the Perth stuff.

The final pieces of the puzzle are falling into place now that I'm reading the posts here.

wire transfers:

Getting the money in the account was the tricky part for me, as my bank has no provision to allow for an Ach transfer to a bank account you don't own. The Perth Mint provides you with an account number & bank codes for the Chase account, along with your account/reference number which must be included on the memo field in order for the money to be credited to your account (else they will refuse the transfer). I ended up scheduling monthly wires (free as long as Chase forgets to kick me out of their Private Client program). Other banks may be better at this, and it would be useful if people could post names.

I need to figure out how much the transfer will cost, and then add that to transaction costs. It might still be a good deal cheaper than what I'm used to (buying coins).

Earlier:

. I also liked that the account allows you to convert to allocated storage, e.g. once you've accumulated enough for a 10 oz bar.

I assumed that that was the case, and eventually found fabrication fees and so on. I wish I could get them to stamp my initials or address on it along with the serial number. Seriously, I'd just convert to cash.

The part I like the least is having money sitting around with them waiting to buy gold, which is why I need to learn the cheapest way to do wire transfers (amount, frequency...) But, sitting around here in a bank account, it's earning close to zero interest anyway.

[dualstow]

One thing's for sure. You can visit your gold overseas but it seems like other than having the holder ship it to you (or wire the cash equivalent), it would be a major pain to convey it back home.

Sure, it's the price one pays for geographical diversification and being an International Man of Mystery, but the chances are greater that a loved one will want to claim the gold someday after the death or incapacitation of the original holder (i.e. us). Greater than the chances that we'll need to flee the U.S. someday and start a new life in Australia or Austria.

[Libertarian666]

One thing's for sure. You can visit your gold overseas but it seems like other than having the holder ship it to you (or wire the cash equivalent), it would be a major pain to convey it back home.

Sure, it's the price one pays for geographical diversification and being an International Man of Mystery, but the chances are greater that a loved one will want to claim the gold someday after the death or incapacitation of the original holder (i.e. us). Greater than the chances that we'll need to flee the U.S. someday and start a new life in Australia or Austria.

As long as you leave proper instructions, that shouldn't be a problem to your loved one, any more than it would be for them to receive any other inheritance.

[dualstow]

I'm finally caught up in this thread. Libertarian666, you have a Global Gold account. Did you just authorize your wife to collect the gold from them the way I gave my wife authorization to get into the bank box or..how does that work? You just send them her ID information?

[Libertarian666]

I'm finally caught up in this thread. Libertarian666, you have a Global Gold account. Did you just authorize your wife to collect the gold from them the way I gave my wife authorization to get into the bank box or..how does that work? You just send them her ID information?

I opened it as a joint account, so she can get at it without any special additional authorization.

[sophie]

I don't see the problem, dualstow. The online account is just like any other. If your wife has the login credentials it wouldn't be a problem for her to liquidate the account, if she chooses to do that. The money would simply be transferred to the linked bank account. There is phone & email support if needed also.

Interesting question though, how best to ensure that your accounts are all known to whoever would take over if you were to become disabled (or worse). Definitely a problem we all have is that our financial lives are very complicated compared to the Good Old Days when it was just your local bank and maybe some stock/bond certificates in a safe deposit box. I have seriously too many accounts. A written list of financial accounts & passwords? Probably best to keep this list in your safe deposit box, as it would be really annoying if a house burglar got hold of it. And handwrite it, don't put it on your computer. My mother keeps a book of accounts & passwords, so I can get into anything just by going to her house and picking up the book.

[Libertarian666]

I don't see the problem, dualstow. The online account is just like any other. If your wife has the login credentials it wouldn't be a problem for her to liquidate the account, if she chooses to do that. The money would simply be transferred to the linked bank account. There is phone & email support if needed also.

Interesting question though, how best to ensure that your accounts are all known to whoever would take over if you were to become disabled (or worse). Definitely a problem we all have is that our financial lives are very complicated compared to the Good Old Days when it was just your local bank and maybe some stock/bond certificates in a safe deposit box. I have seriously too many accounts. A written list of financial accounts & passwords? Probably best to keep this list in your safe deposit box, as it would be really annoying if a house burglar got hold of it. And handwrite it, don't put it on your computer. My mother keeps a book of accounts & passwords, so I can get into anything just by going to her house and picking up the book.

I recommend keeping a list of everything that one's spouse (or heir) might need: bank accounts, credit card accounts, mortgages, brokerage accounts, frequent flyer/hotel accounts, life insurance policies, and the like. If possible, run a test once every so often where that other person actually accesses one of the accounts, paying a bill or similar, going just by the written instructions.

The problem with keeping it in a safe-deposit box is that those are supposed to be frozen when any holder dies, so the government can check to see if you owe them money on the contents. This would obviously be VERY inconvenient for the intended recipient.

To answer the problem of burglary, one possibility is to encode the passwords somehow (and of course DON'T explain how they are encoded in the document itself).

[dualstow]

Sophie, my dad keeps a password-locked file that holds the passwords I might need. He has a written file of instructions, too, and it's not something a casual burglar would easily find.

I agree with you that one just needs the log-in credentials to the Australian account. I suppose the problem, or my concern rather, is more on my wife's end than on Perth's. Maybe I should give my brother the info as well, just in case. She would probably ask my family for help, anyway.

The problem with keeping it in a safe-deposit box is that those are supposed to be frozen when any holder dies, so the government can check to see if you owe them money on the contents. This would obviously be VERY inconvenient for the intended recipient.

My wife is a joint holder of the box, so it shouldn't be a problem, but I guess she could wait until the gov't sees there are no debts and the box is unfrozen.

[dualstow]

I have seriously too many accounts.

Are you happy with Ally, by the way? They seem to have a good reputation.
I've been thinking about getting an extra checking account simply because I kind of don't want my regular banker to see all the checks I'm writing for gold coins. Why? Because he handles my bank box. I know it's silly. And the cat is probably out of the bag.

[sophie]

Totally understandable dualstow! There are too many stories about things disappearing from safe deposit boxes. Yes, I can recommend Ally. It doesn't have the highest interest rates on savings that you can get, but their website and smartphone app are very easy to use, and they've been easy to reach and very helpful on the times I called to get help. Ally bank also rates very high on the stress tests - it's the mortgage subsidiary that scores badly, but it's firewalled off from the bank.

The different password issue and the fact that everyone has to keep a list....I hear you. It's a problem. I do use Lastpass, but I worry that family members might not be able to negotiate pulling my passwords from it. The handwritten little black book is still the best option I think. I guess if I'm burgled I'd have to go change all my passwords.

[Xan]

The password services like that scare me too. Talk about a single point of failure. Both in terms of locking me out of everything if the service should go sideways, and in terms of a juicy target for a compromise: if somebody gets into that then they're into EVERYTHING.

[dualstow]

I have a burglar alarm and I don't see most burglars looking through my notebooks. Nor city inspectors or contractors who are casual thieves.
I like ink on paper, too.

I used dashlane for free briefly, and I like that they sent me an email warning about cloudbleed/cloudflare (which did not affect them, but they had a list of websites). I guess I just like to make up my own passwords instead of using keychain software. Stronger for banks, weaker/easier for LL Bean.

[Libertarian666]

The password services like that scare me too. Talk about a single point of failure. Both in terms of locking me out of everything if the service should go sideways, and in terms of a juicy target for a compromise: if somebody gets into that then they're into EVERYTHING.

Exactly my thoughts.

Of course the NSA and CIA have everything anyway, and their hacking methods have been exposed, so...

[sophie]

Of course the NSA and CIA have everything anyway, and their hacking methods have been exposed, so...

Ever the cheerful one, aren't you?

I froze my credit, check all my accounts monthly, and use two-factor authentication when available. It's probably safe to assume passwords are next to useless.

[dualstow]

Despite all the everpresent hacking and cyber-criminal news, I never worry about losing my stocks or cash to hacking or identity theft. I am well aware that it could happen, and I would be devastated if it were to happen, but I feel no angst about it, for whatever reason.

Conversely, there is a nagging voice that is constantly wondering, Are all the coins that I think are in the bank box still in the bank box? Did I count them all last time or just the tubes? Did I lose some when we moved back home from the apartment / will I discover fewer than ten coins in one of the tubes? Didn't I photograph the contents before?
It never ends. Maybe leaving things to Perth is a good fit for me.

[Libertarian666]

Of course the NSA and CIA have everything anyway, and their hacking methods have been exposed, so...

Ever the cheerful one, aren't you?

I froze my credit, check all my accounts monthly, and use two-factor authentication when available. It's probably safe to assume passwords are next to useless.

Yes, that's pretty accurate.

As for my cheerfulness, I don't see any upside to having my head in the sand. But I'm actually pretty cheerful overall.