Pool Allocated, Allocated or Unallocated Silver

T

Trowsa

Member
Hi, I'm wondering if there are some ideas and opinions out there on what is better to own. I've heard that owning unallocated silver can be a risk as it is not backed up by physical silver. I'm unsure whether it would be better to have a mix of the three or any one type in particular. The idea of having some physical silver on hand is quite appealing. Pool allocated I've been told is safer as it is stored and insured on your behalf.
Thanks for any feedback
 
Allocated or un-allocated, you are still holding a paper promise for silver.
The issue in any situation other than actual physical possession is trust in the person or company you are dealing with.
I personally advocate the majority to be physical holding of the asset, however this is not always possible or wise for all.
It depends on individual circumstances and reasons for holding.
 
Unallocated is no different to holding you money in a savings account. Some people prefer their money under the mattress. I use unallocated very successfully for over 3 years now for SMSF and personal and have never had an issue when needing to capitalise.
 
It is important not to get caught up in the words used by the person selling you their service. Words like "allocated" are used loosely at times. In a bankruptcy, how the business segregated the metal becomes important. Having bar numbers helps in arguing that the metal was not the general stock of the business, but there have been cases where dealers did not physically segregate unnumbered bars held as allocated and the court ruled that the metal was thus part of working stock of the business.

When you get into any pooling situation, be it allocated or unallocated, then the legal wording and operational process become even more crucial. Unless pool allocated is held in some explicit trust type structure it is likely to be deemed an asset of the business and you just a creditor.

It does ultimately come down to whether you trust your dealer - even full allocated doesn't stop a dodgy dealer using your gold to get themselves out of a "temporary" problem or just outright stealing it. Unallocated used to just be something the Perth Mint did, but now many dealers offer it and it is a convenient way to accumulate. You can minimise your risk by only dealing with established dealers who are busy - an owner of a profitable business isn't going to throw away ongoing profits for a quick gain. A dealer who's store hardly has anyone in it is probably a red flag.
 
I guess my personal bias against others holding my assets comes from the story of German gold in the Federal reserve vaults.
 
hiho said:
Unallocated is no different to holding you money in a savings account. Some people prefer their money under the mattress. I use unallocated very successfully for over 3 years now for SMSF and personal and have never had an issue when needing to capitalise.
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I agree with you and thank you and I understand that as long as things are good economically there will b no issue with unallocated. And if the world economy turns to shite? I'm concerned all those paper promises may simply disappear. I don't have enough to worry about anyway but was simply wondering how others here felt about this.
 
Silver bullitt said:
I guess my personal bias against others holding my assets comes from the story of German gold in the Federal reserve vaults.
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I don't know that story but taking a wild guess they didn't return it? Can you elaborate?
 
Trowsa said:
Silver bullitt said:
I guess my personal bias against others holding my assets comes from the story of German gold in the Federal reserve vaults.
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I don't know that story but taking a wild guess they didn't return it? Can you elaborate?
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Bullion Direct is another good example. Happened recently...
 
Trowsa said:
I don't know that story but taking a wild guess they didn't return it? Can you elaborate?
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I took this from https://en.wikipedia.org/wiki/Gold_repatriation#Germany

Germany planned to ship home 300 tonnes of gold from the US and 374 tonnes from France by 2020, in order to have half (1695.3 tonnes) of its official gold reserves stored in Frankfurt. The German central bank (Die Bundesbank, or BuBa) has been trying to repatriate 300 tonnes from New York since 2012 but officially got back a mere 5 tonnes in 2013. The plan halted as German politicians decided their gold "is safe in American hands".[6][7][8] Germany has 45 per cent of the country's 3,391 tons of gold bars stored in the strongroom deep beneath the Federal Reserve Bank of New York in Manhattan.

West Germany earned this gold through trade surpluses in the 1950s and 1960s and never moved it out of the United States to ensure that it did not lose the lot in the event of invasion by the Soviet Union. The 300 tons of gold that Germany is bringing home from New York is being transported little by little and will take until 2020 to complete.The German central bank, or Bundesbank, claimed there were mysterious delays in the repatriation programme.The bank said 5 tons were repatriated from New York last year, along with 32 tons brought home from Paris. Germany aims to ultimately keep only 37 per cent of its gold at the Federal Reserve in New York, where most countries of the world store gold. Multi-billion-dollar transfers are easily done by simply carting the gold from one country's cubicle to another inside the vault.[9]
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It's important to note that after requesting their gold to be repatriated (returned), and being told it would take quite some years to do this (one can begin to think up reasons why), the Germans politely asked the US Fed if they could inspect their gold. Interestingly, they were told that this too was not possible.

On the basis of all this, one has to apply pure logic to the situation which begs the belief that the gold no longer is in US hands.
 
It takes years to get it a little bit of it back, deemed "safe' by politicians and you can't audit it... It's not there. Oh well at least the evil Russian's didn't get it, ha ha...
 
Very interesting and thank you very much. I find it incredible that Germany would accept that they are not allowed to inspect their gold.
 
bron suchecki said:
It is important not to get caught up in the words used by the person selling you their service. Words like "allocated" are used loosely at times. In a bankruptcy, how the business segregated the metal becomes important. Having bar numbers helps in arguing that the metal was not the general stock of the business, but there have been cases where dealers did not physically segregate unnumbered bars held as allocated and the court ruled that the metal was thus part of working stock of the business.

When you get into any pooling situation, be it allocated or unallocated, then the legal wording and operational process become even more crucial. Unless pool allocated is held in some explicit trust type structure it is likely to be deemed an asset of the business and you just a creditor.

It does ultimately come down to whether you trust your dealer - even full allocated doesn't stop a dodgy dealer using your gold to get themselves out of a "temporary" problem or just outright stealing it. Unallocated used to just be something the Perth Mint did, but now many dealers offer it and it is a convenient way to accumulate. You can minimise your risk by only dealing with established dealers who are busy - an owner of a profitable business isn't going to throw away ongoing profits for a quick gain. A dealer who's store hardly has anyone in it is probably a red flag.
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Hi Bron with regards the Perth Mint - the main selling point is that the deposits/unallocated are backed up by the State Government. In past years when the WA government was in surplus and had the capacity to borrow are long gone. The WA state has been downgraded and is in debt up to its proverbial eye balls. Surely this must impact your (PM) guarantee which based on the Stare finances ain't worth much?
 
Ronnie 666 said:
bron suchecki said:
It is important not to get caught up in the words used by the person selling you their service. Words like "allocated" are used loosely at times. In a bankruptcy, how the business segregated the metal becomes important. Having bar numbers helps in arguing that the metal was not the general stock of the business, but there have been cases where dealers did not physically segregate unnumbered bars held as allocated and the court ruled that the metal was thus part of working stock of the business.

When you get into any pooling situation, be it allocated or unallocated, then the legal wording and operational process become even more crucial. Unless pool allocated is held in some explicit trust type structure it is likely to be deemed an asset of the business and you just a creditor.

It does ultimately come down to whether you trust your dealer - even full allocated doesn't stop a dodgy dealer using your gold to get themselves out of a "temporary" problem or just outright stealing it. Unallocated used to just be something the Perth Mint did, but now many dealers offer it and it is a convenient way to accumulate. You can minimise your risk by only dealing with established dealers who are busy - an owner of a profitable business isn't going to throw away ongoing profits for a quick gain. A dealer who's store hardly has anyone in it is probably a red flag.
Click to expand...

Hi Bron with regards the Perth Mint - the main selling point is that the deposits/unallocated are backed up by the State Government. In past years when the WA government was in surplus and had the capacity to borrow are long gone. The WA state has been downgraded and is in debt up to its proverbial eye balls. Surely this must impact your (PM) guarantee which based on the Stare finances ain't worth much?
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The government has still the power of taxation so, at the end, the taxpayers will pick up the bill as usual.
 
downgrades in govt guarantee are a factor but we aren't exactly junk debt level. Keep in mind the point of the guarantee is as a back up. firstly metal is 100% backed, so the mint has no price exposure if prices go up or down, second we insure all the metal, so the guarantee is only really to cover the situation where metal is stolen AND the insurance doesn't pay out. Its not like the allocated or unallocated accounts are some sort of financial product where we just take in client money and trade it and do funny stuff and if we lose money the government will make up the loss.
 
bron suchecki said:
downgrades in govt guarantee are a factor but we aren't exactly junk debt level. Keep in mind the point of the guarantee is as a back up. firstly metal is 100% backed, so the mint has no price exposure if prices go up or down, second we insure all the metal, so the guarantee is only really to cover the situation where metal is stolen AND the insurance doesn't pay out. Its not like the allocated or unallocated accounts are some sort of financial product where we just take in client money and trade it and do funny stuff and if we lose money the government will make up the loss.
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I appreciate your reply but honestly I can show you several past reports of reputable organizations claiming to store your valuables, coins and PM without having them in their possession.. Even major Mints like the Royal Canadian Mint has a get out of jail cash payment clause for its unallocated holders (http://truthingold.blogspot.com.br/2012/11/just-another-paper-bullion-scam-this.html). I dont know if the PM has a similar clause (probably has) but my issue with the Perth mint is that their unallocated is supposed to be working inventory as you have explained before. In a true metal shortage, we are led to believe the mint will stop selling metal long long before it runs out so that the unallocated holders are protected. Bron what are the chances that will be implemented as income plunges in a metal shortage and if that is true does the mint regularly release figures for the total oz of unallocated holdings vs the oz of working inventory. No one has any idea if the unallocated holders have 10% of the working inventory or 99% ? We keep getting reassured that these current shortages (US mint, Canadian Mint and major dealers) are production issues and have nothing to do with silver or gold supplies. Maybe maybe not.
 
Kranzler isn't the most objective of writers. Anyway, the situation with the Perth Mint on cash payment is covered here https://www.perthmint.com/storage/h...i-am-not-guaranteed-to-receive-physical-metal

We don't reveal ounces by metal, just total dollar value, see https://www.perthmint.com/storage/h...how-strong-are-the-finances-of-the-perth-mint but if you look at our annual reports http://www.perthmint.com.au/about_us_the_perth_mint_annual_reports.aspx take 2014 one, there is note 11 which says our precious metal assets are $2.833 billion and note 22 that our precious metal borrowings (which is how the accountants classify Depository unallocated) is $2.480 billion. Those figures are audited by an independent auditor whos appointment and work is controlled by another independent party, being the Auditor General. This is a tougher standard that private companies, who appoint their own auditors.

If you think you are paranoid about whether we are running a dodgy show, then you have nothing on the Government, whos Treasury staff take particular interest in what the Perth Mint does given the dollar figures that flow through this business.

In a metal shortage mines are still going to be producing, indeed the spot price will have surged so much that they will be mining like crazy, so we are still going to be refining it (someone has to) and selling 400 tonnes of gold a year and making money on that. Sure, maybe we could be selling 600 tonnes in that environment, but it is not like there will not be any metal at all available, just that prices/premiums will be high. That scenario is hardly going to be "income plunges" situation for us.
 
Thanks Bron for that info. So the unallocated client holdings represent about 88% of the inventory. In the event of increased demand that remaining 12% will vanish like a drop of water in the Great Sandy Desert.

Bron, I don't agree with you that should the prices skyrocket mines will churn out masses of product and the Perth Mint will be making even more profit. These last few years have seen miners slash their exploration and development budgets. They have focused on the high yield (low hanging fruit) ores and I think their ability to ramp up serious production in the short term is very limited. Honestly, this practice is right through the industry. If The Mints have currently a serious shortage of blanks (let us assume its not metal supply) at a time when demand in the West (excluding Germany) is near an all time lows and the shortage is fueled purely by Asian demand, what happens when the Western demand increases 100 fold.

A more likely scenario is that a huge price increase and concurrent $ devaluation will create massive shortages and no supply for the PM to sell. Longer term money starved governments will make nationalization of the Mines a priority or how do they put it ? an issue of National Security. We know how nationalized mines or any industry works ask the Cubans or the USSR?

We are no longer in a free system governed by supply and demand and this current collapse in Metal prices has eviscerated the mining sector and significantly impacted future production.
 
I currently hold some silver in Silver Saver (www.silversaver.com), and after reading this thread, I'm a bit nervous. I invest here because I don't have to worry abut storeage. It is easily tradable from cash to metal. I can take delivery of the product. I deposit a little money each week to build up a metals position, to etiher take deliver, or settle cash. Anyone have any thoughts about silversaver? Do you use it? Thanks much.
 
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