Silver possession vs. silver trust: A safe alternative to direct possession?

Value seeking investors are increasingly returning to the precious metals market. Furthermore, many of them will undoubtedly gravitate toward using the more conveniently traded alternatives to self-storing the metals.

The idea of taking physical possession of gold or silver currently seems almost taboo in the mind of the mainstream precious metals investor, although many alternative minded investors tend to see personal physical possession as the only safe option in the event of a financial collapse scenario.

With that noted, the various widely-traded precious metals funds have taken on the burdensome task of owning and storing physical metal for their investors.

Precious Metals Funds

Several well-known and widely traded precious metals funds currently exist. Some of the more popular include CEF, SLV (and other ETF's), and PSLV.

Eric Sprott is the outspoken portfolio manager behind PSLV and the current CEO and Chairman of Sprott Asset Management.  In essence, Sprott is taking the manipulative precious metal market shorts to task. He is practically the only one doing this, and he seems to be blazing a trail for others to follow.

Nevertheless, some people still worry about confiscation of his funds’ physical precious metals stocks by the government, but one would hope that Mr. Sprott and his well-financed legal team could defend their investors’ interests far better than any individual ever could.

Speaking of Confiscation

The important issue of confiscation is often on the minds of precious metals investors. If this is your primary concern, just ask yourself what would be easier: Confiscation from individuals or stopping redemption?

In the most likely scenario, authorities would go after the low hanging fruit first, such as electronic accounts or perhaps 'convincing' investors to rollover their retirement accounts into annuities.

Meanwhile, the most insidious theft of precious metals confiscation will be widely cheered on by the mainstream financial media who currently clamor hands down for more money printing. Nevertheless, it seems doubtful that authorities will go after the precious metals directly.

Perhaps they will nationalize precious metal miners at some point, but too few individuals currently hold enough metal for the authorities to make a difference by going door to door to collect private stashes. Besides, they do not need precious metals to debase their paper currencies anymore, all they need is a rolling money printing press.

Of course, the backdrop for this situation is that Fort Knox has not been officially audited for decades, and Germany has been engaging in a well-publicized attempt to get its gold back from New York. Every day, the world is slowing turning away from using the U.S. dollar as the world’s primary reserve currency.

The Best Precious Metal CEFs

PSLV and PHYS are most likely the best precious metal Closed-End Funds or CEF's on the market today. The silver fund, PSLV, is fully backed by 97% London Good Delivery Silver Bullion that is fully allocated and stored in the Canadian Mint.

Those funds currently seem preferable as investments to the precious metal Exchange Traded Funds or ETFs, SLV and GLD. These ETFs appear questionable investments to say the least, and they have been wrapped in a controversy that arises over an apparent conflict of interest because their warehouses are run by the same banks that dominate the short position at COMEX. Furthermore, redemption limits apply, and there is a minimum amount and time invested to be eligible.

Another downside, if already vested in the precious metals, is the tax hit associated with the liquidation of a profitable position. Nevertheless, it is easy to rationalize your profits potentially eclipsing that 'fee' when precious metal prices eventually return to their fair values.

About the Author
Dr. Jeffrey Lewis

In addition to running a busy medical practice, Dr. Jeffrey Lewis is the editor and publisher of Silver-Coin-Investor.com, where he provides practical guidance for precious metals investors.

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