Most large gold investments are secured in a special gold vault. But it is becoming increasingly popular for gold storage to be done offshore in Dubai’s new DMCC vault.
Advantages of Offshore Gold Storage in Dubai
Dubai is known as “the city of gold”. One fifth of the worlds gold production is managed in Dubai. There are numerous refiners of gold in the UAE, with most of those able to handle large volumes of high quality refined gold. With the gold refining being done in the UAE, storage in Dubai means there are very low transport costs between the mint and the gold vault.
In 2009 the 5th most secure and technically advanced vault in the world was constructed in the Dubai DMCC tax free zone. Unlike other ultra-secure vaults around the world, storage costs are still low thanks to being the largest vault in the UAE.
Using this gold vault in the DMCC tax free zone means gold investment transactions are all tax free. This is a very important factor to consider as gold and silver bullion investments in other parts of the world can incur sales taxes. Thanks to the DMCC, Dubai is fashioning itself the capital of international trade. In addition to no sales taxes, there are also no capital gains tax and inheritance tax applied to gold or silver investments.
Anonymous Offshore Storage
According to international rules like FATCA and FBAR, precious metals held in an allocated vault in a non-bank institution are “non-reportable”. So storage in Dubai can provide you complete anonymity. When you store gold offshore, especially if you protect it anonymously in a place like Dubai, it’s virtually impossible to lose that gold to any frivolous lawsuit back home.
The whole idea behind offshore storage with gold and silver is that no one government has total control over your financial options.
Gold Confiscation by the U.S. Federal Government
Yes this has happened. And not just in the USA.
In 1933 Roosevelt’s government passed a bill banning the ownership of investment grade gold for any reason. Overnight it became a federal crime to own bullion punishable with 10 years in federal prison and a $10,000 fine. (Not a small sum at the time).
As stated above if you buy and store gold in the Dubai DMCC tax free zone no government will ever know of your holdings, and cannot claim or tax it.
Asset loss risk due to Government instability or Insurgency.
Unfortunately in many regions of the world the National governments cannot be trusted as much as they once could. Their fiscal stability is one risk which could result in wild policies like in 1933. But also social instability and civil wars have been common place in the Middle East and many African countries. For these reasons even “currently” stable countries like Egypt and Saudi Arabia are looking for a way to secure their wealth outside their own boarders. They don’t want to lose their gold stores held locally to a rogue government or militant insurgency as has been seen in other Middle Eastern Countries.
Indian government increasing taxes on Gold Imports
While not exactly a rogue government, the Indian government recently moved to tax the wealthy of India by increasing the import taxes on gold. India is one of the largest consumers of gold as jewellery and for investment. The tax hike on gold imports had a significant impact on jewellery sales, and on investors. However investing in gold bought and stored offshore in Dubai not only cuts out any and all tax considerations, but also decreases transportation costs.
Gold investing in China
China also has a cultural love of investing in gold. The Chinese government has not only been dramatically increasing its gold holdings, but encouraging private citizens to invest in gold coins and small gold bars. But larger investors have been seeking ways to move their wealth offshore out of China. For some it may be fear that the Communist government might crack down hard on the countries wealthy. For many others it is concern over the levels of private and business debt the government has been feeding the nation over the past few decades.
The popular wealth storage of “land banking” is facing increasing legal issues in many of the previously popular countries. Countries such as Australia have already started making it harder and more expensive for foreign (mostly Chinese) investors to buy properties in their stable markets. Other regions are looking into similar plans to limit foreign property investment.
One of the best avenues to feed that flow of money the wealthy Chinese want to move offshore is into Dubai gold.
Is Gold a Good Investment?
Most smart investors hold gold to diversify their portfolios. Gold is seen as a low risk investment and a true store of value. This is because gold is traded internationally, and its value is not set by any one currency or economy. Both large personal investors and institutional investors hold a portion of funds in gold as a hedge against economic turmoil. When there is more global uncertainty gold tends to increase in value as money is pulled out of at risk assets.
This can be most recently seen during the subprime crisis last decade. Investments in property plummeted in value as properties were handed back to banks as overleveraged owners were unable to repay their debts. The economy slowed as home owners realized they owed more than their homes were worth. Job loses put fear into everybody. Investments in “safe” institutions like “too big to fail” banks were decimated when lenders were over burdened with the bad loans they were selling. Even the city of Detroit, the automotive capital of the US, went bankrupt.
There was no class of investment that was “safe” – except gold.
In the years leading up to, but more significantly during and after the crisis really started to hit home, the price of gold increased. This was due to investors all over the world pulling money from investments that were suffering into the traditional “safe haven” of gold.
Gold Stability during market crashes
Again in early 2015 gold flourished when the over leveraged Shanghai stock market crashed repeatedly despite government attempts at intervention. The huge sums of money lost by Chinese investors eventually impacted the US tech stocks as large Chinese investors struggled to cover their losses. But gold moved opposite to the world markets and rewarded those with gold as part of their diversified investments.
It can be seen again and again through various “crisis” that holding gold can protect against losses being suffered elsewhere.
Gold is also seen as “inflation proof”. Regardless of government policies or economic conditions that effect the value of a local printed currency, gold will fairly steadily maintain the same buying power. Researchers have found that in the time of Nebuchadnezzar in 562BC one ouch of gold bought 350 loaves of beard. Today an ounce of gold still buys roughly 350 ordinary loaves of sliced bread.