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goldmoney review

GoldMoney Review

161 comments

Reading time: 8 – 13 minutes

This interview took place at the 4-5 AUG 2011 GATA conference in London. Since I make price predictions around 2:16 it is fun for historical context to recall the price of gold was $1,665 and the price of silver was $41.04. Once again, I was right.

In my opinion, the major flaw with GoldMoney is the lack of integration with Bitcoin.; particularly (1) the ability to buy bitcoins and (2) withdraw them to a wallet under the sole control of the Holding owner.

This GoldMoney review is the result of being asked by many readers for my opinion about GoldMoney.com and whether GoldMoney is a scam or fraud. So I took an afternoon to sit down and did an in-depth review of the applicable legal documents. The result of my GoldMoney review is that it is a trustworthy institution to deal with.

While this article should not be considered legal advice or a legal opinion. With this GoldMoney review I have attempted to provide easy access to many of the source documents, applicable law and other references that I came across in my review. I hope you find this helpful.

WHAT IS GOLDMONEY?

I found that GoldMoney is a great way to buy gold or silver along with being an innovative digital gold currency.  I performed a similar review on the ETFs GLD and found GoldMoney far superior. Gold belongs in an investor’s portfolio at all times and in all circumstances.  This video is a brief introduction to GoldMoney and how to buy gold and silver online.  Holdings are free to open, no minimum balance, take about 20 minutes, can be funded within 24 hours and are perhaps the best and most affordable offshore option that is efficient, safe and secure.

BULLION AND NATIONAL CURRENCIES

Bullion held with GoldMoney is NOT subject to counter-party risk.  National currencies (Dollars – USD, Canadian Dollar – CAD, British Pounds – GBP, EURO – EUR, Swiss Francs – CHF and Yen – JPY) are held with the safest banks in customer segregated funds accounts and interest is earned.  Whether you want to hold national currencies or bullion such as goldgrams or silver ounces that can be petted GoldMoney is a great solution.

As referenced in the video the due diligence on GoldMoney is collected here: a brochure from GoldMoney.

GOLDMONEY REVIEWS FROM OTHERS

Several investment professionals have reviewed and recommend GoldMoney including billionaire Eric Sprott, John Embry, Mike ‘Mish’ Shedlock and Doug Casey.

Outspoken critic of ‘paper gold’ Adrian Douglas of GATA warned:

What should investors do? Investors need to do their due diligence. They need to determine if they are actually holding a 100-percent precious-metal-backed investment. There are some unallocated investment vehicles that are entirely honest where all the gold and silver sold is actually purchased and held on behalf of the customers. One such example is GoldMoney.com, which conducts and publicizes third-party audits to verify 100-percent backing.

Peter Schiff recommends GoldMoney on page 228 of his bestseller CrashProof.

There are also several places to buy gold on the Internet, and even several that offer storage programs.  In general, I would be very reluctant to trust most storage programs, but one exception is GoldMoney.com, founded by James Turk, a longtime gold advocate and widely respected figure.  Investors and shareholders of GoldMoney include two publicly traded gold mining companies

Michael Maloney recommends GoldMoney on page 192 of Guide to Investing in Gold and Silver

I can speak from personal experience here as I have used one of these companies for some time now.

Having an account at the company I deal with is sort of like having a bank account, currency trading account, payment system, and bullion storage account, all in one.  You can hold any combination of, and/or trade between, U.S. dollars, euros, British pounds, Canadian dollars, gold, and silver.

While holding these currencies you are paid interest at a rate comparable with a savings account, and, when holding gold or silver, your storage and account fees are among the most competitive in the industry.  The metals are allocated and at all times vested to and owned by, the customer. So you are the absolute owner of your gold and silver … no one else.

I believe this is the best way to hold precious metals outside your own country.

WARNING FOR US PERSONS

Those subject to US jurisdiction as US persons, either citizens or permanent residents, may be required to file a TD F 90-22.1 Form and other reporting requirements under FACTA if they own a Holding.

SHAREHOLDERS, REGISTRATION, LICENSES AND LAW

GoldMoney shareholders include two publicly traded companies DRDGold (sold its interest in 2008) and IAMGOLD.  IAMGOLD offers investors the ability to receive dividends payments via GoldMoney.

JFSC Company Registry

Certificate of Registeration

Jersey Business Banking Law of 1991 – An example of the applicable Bank Privacy provisions.  Part 4 – 42 Restricted information, “no person who under purposes of this Law receives information relating to the business or other affairs of any person; and no person who obtains any such information directly or indirectly from a person who has received it as aforesaid, shall disclose the information without the consent of the person to whom it relates and (if different) the person form whom it was received as aforesaid. … Any person who discloses information in contravention of this Article shall be guilty of an offence and liable to imprisonment for a term not exceeding 2 years or a fine, or both.”

 

GoldMoney Business Name Registration

GoldMoney Patents

LBMA

Via-Mat International

GoldMoney gold and silver bullion bar count

Holdings can be opened via IRAs

GoldMoney customers can obtain the Deloitte & Touche audit report from GoldMoney customer service through the internal messaging system.

GOLDMONEY DOES ULTRASOUND GOLD TESTING

As of October 2010 GoldMoney begun using ultrasound scanning technology to verify that each of the gold bars we store for you is free of foreign materials and defects. Any bar that fails the ultrasound test is melted down, assayed and then recast into a new bar. We aim to complete the scanning of all gold bars in the first quarter of 2011.

The quality test is performed using an ultrasound scanning device, developed by General Electric Inspection Technologies (GE). The test is carried out directly within our vaults. It is the same technology used to assure personal safety in the medical and aviation industries.

Ability to Demand Delivery of Gold. According to the User Agreement under VIII. Storage:

E. A User may, by providing GoldMoney with delivery instructions, which instructions must be in the form prescribed from time to time by GoldMoney and the Vault, at any time request GoldMoney to change the goldgrams and silver ounces in his Holding into grams of gold or ounces of silver that are available for physical delivery to the User, provided that there are sufficient goldgrams and silver ounces to take delivery of a London Good Delivery bar of gold, which bar weighs approximately twelve thousand five hundred (12,500) grams, or bar of silver, which bar weighs approximately one thousand (1,000) ounces. GoldMoney will not charge a fee for its service, but fees may be charged by the Vault for acting on the delivery instructions.

COMPETITORS AND THEIR DISADVANTAGES

Other ways of purchasing gold, particularly when counter-party risk is present, entail restrictions on demanding delivery of bullion.  For example:

The Problem with the ETFs GLD and SLV

GoldMoney competitor called BullionVault, which appears to be a respectable operation, offers ‘allocated storage’ has this restriction:  “Excepting only duly authorized shipments to another BV gold storage location – such as might be requested by customers in response to an international crisis – BV undertakes that on no single day shall any amount exceeding both 25 kilograms and 5% of the bullion vaulted at a BV location be authorized for removal.”

The NYMEX has significant restrictions which can significantly delay delivery.

The TOCOM now allows ‘paper gold’ to settle futures on physical gold contracts.

These forms of ‘paper gold’ may because of their lack of transparency involve significant fraud while GoldMoney does not because of the internal controls that are built inherently into the system that result in significantly more transparency.

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161 comments

ABOUT THE AUTHOR: Trace Mayer, J.D., author of The Great Credit Contraction holds a degree in Accounting, a law degree and studies the Austrian school of economics. He works as an entrepreneur, investor, journalist and monetary scientist. Follow him on Twitter. This is merely one article of 241 by .
Free Free Great Credit Contraction Sample

{ 56 comments… read them below or add one }

1 Alan Edson May 17, 2009 at 4:12 pm

In regards to Goldmoney with US citizens holding more than $10,000 in their holding, you said:

“Those subject to US jurisdiction may be required to file a TD F 90-22.1 Form.”

Would they need to or not with the above conditions?

2 Karl Verebey November 26, 2009 at 6:53 am

How one can find out reputable dealers
for phisical gold& silver?

for example Gold line is advertised heavily.
Are they trustworthy ?

3 Trace Mayer, J.D. January 14, 2010 at 9:34 am

I have not purchased from Goldline. I assume they are trustworthy because they are so large, have been in business for a long time and have a B+ with the BBB. But the advertising expense has to be paid somehow and it is usually through higher premiums on the products.

4 Susan Esbensen May 19, 2010 at 8:40 am

I can highly recommend this source for quality information.
They review several sources for gold; silver buying. They recently released an informative documentary entitled, “Meltup.” Worth watching!
http://www.youtube.com/watch?v=eb1n1X0Oqdw

5 Robert Lichliter June 16, 2010 at 12:29 pm

Thanks so much for your research and advice

6 Jack Maxwell July 16, 2010 at 9:06 pm

In your review you indicate that “Those subject to US jurisdiction may be required to file a TD F 90-22.1 Form.” but you do not say if this is a requirement of the IRS or GoldMoney or both. Other than the IRS requirements that every US citizen must report their income annually what are the requirements of Gold Money? Do they submit to the IRS any reporting of purchases or sales of gold? Jack Maxwell

7 Trace Mayer, J.D. July 18, 2010 at 11:41 pm

Hi Jack, the form is a requirement under US federal law and not a requirement of GoldMoney in anyway. GoldMoney is regulated by the Jersey Financial Services Commission. I am not sure what reporting requirements GoldMoney is subject to, if any, to the IRS or anyone else regarding purchases or sales of gold. They may even be subject to confidentiality under the Jersey Banking law. It is wise to keep in mind that any international wires originating from the US are automatically reported to the Treasury and Federal Reserve. With the new reporting requirements tucked into the Health Care Bill and other legislation, such as the extremely broad foreign financial assets disclosure, it is even more likely that a GoldMoney account will need to be reported.

8 David W. Young August 26, 2010 at 6:50 am

As a successful bullion dealer for over a decade now, I have gotten the message that any U.S. citizen over age 18 should have assets overseas. Remember that the global financial system has failed and is failing, so the weakest link in all of these offshore arrangements is the financial institution holding the invested funds prior to PM purchases. If you have a currency account, which is earning nada interest right now, thank you Ben Bernanke et. al., you need to know the financial exposure of the holding institution to real estate and derivatives versus their total capitalizations. Not an easy task. Buy the precious metals shortly after you transfer the funds, then figure out if the depository holding your metal has any legal connection to say a Swiss bank or financial institution and what are the firewalls between the two entities, depository and institution. None of this is simple to discern, but it is called due diligence. So far both BullionVault and GoldMoney have not absconded with any of my funds or metals, but the proof of the pudding is in when you want physical delivery or return of funds. That is the only real test and most of us are not their yet since the Dollar ain’t where we want to be with our money. Good article, but more rock turning to be done.

9 SofJ April 10, 2011 at 3:23 am

Disappointing you can’t get any interest on the precious metals.. I was about to join, too. There really isn’t much you can do with this account other than send gold. Where is the incentive besides being able to hold my investment?

10 Trace Mayer, J.D. April 11, 2011 at 9:40 am

Hi SofJ,

The incentive mainly consists in being able to preserve your purchasing power, avoid counter-party risk and ‘spend’ the bullion to other people who have holdings. Interest is supposed to compensate for risk. It is ironic that fiat currencies pay so low interest in the Zero Interest Rate Policy environment; return-free risk. If you consider the storage fees a ‘negative interest rate’ and then compare gold against a savings account then figure the ‘store of capital expense’ as being the decline in purchasing power of the fiat currency plus interest earned then gold in GoldMoney is far cheaper than an interest bearing bank savings account. In fact, from 2001-2007 the monthly ‘store of capital expense’ for $1,000,000 of value in gold was about $500/month whereas in an interest bearing FRN$ bank account it was about $1,500.

11 Mike April 14, 2011 at 6:38 pm

In order to spend goldmoney, does the merchant need to also have a gold money account? If my gold appreciates, then I spend it, is it considered a capital gain? Does goldmoney provide a debit card? Thanks.

12 Trace Mayer, J.D. April 15, 2011 at 12:03 am

Yes, the other party needs a GoldMoney holding. No, they do not currently provide a debit card. The capital gain issue depends on your unique situation. As a US person yes there is likely a capital gain triggered as you are their milk cow.

13 Ashley Madison May 16, 2011 at 1:39 pm

GoldMoney looks to be a legitimate way to buy and sell precious metals and it also appears to have solid management.

14 Van Prince June 27, 2011 at 9:58 pm

I recently asked GoldMoney for the following info. Of course, even though I said explicitly I was asking for info/facts, not advice, they said they couldn’t give advice and did not answer the questions. If anybody has experience with this, please educate the rest of us.

1. For the average U.S. taxpayer, are transactions in a GM account treated the same (gain/loss) as transactions in a “normal” U.S. financial account?

2. Does any other country have a tax interest in the transactions?

3. Is any type of year-end statement provided?

Thanks for any help anybody can provide.

15 Trace Mayer, J.D. July 1, 2011 at 9:17 pm

Van Prince,

#3 – No, a formal year-end statement is not provided. However, you can generate a history of all transactions from the holding, can specify the dates and I think it can be downloaded in .xls format. This can easily be used to create any type of year end statement you want.

#1 & #2 – Those are much more complex questions and understandably beyond the scope of GoldMoney’s services. You will likely want to consult a tax professional or attorney if you want an opinion that can be relied upon.

Here are my thoughts which should not be construed or relied upon as tax or legal advice. In my discussions with a tax manager at a big four accounting firm that specializes in foreign currencies and who also has a GM account he thinks the issue turns on whether you are using the gold as a currency in ordinary business transactions or whether as an investment mechanism. I think the average U.S. taxpayer would be using it as an investment mechanism in which case the 28% rate for collectibles would most likely apply.

As regarding a tax interest from any other country, that is extremely broad and would turn on the nature of the transaction. For example, are you paying for real estate, buying a magazine or downloading a special report in PDF form? Another critical fact is whether you are a permanent resident and subject to tax liability for worldwide income and whether they tax gains on gold, silver, platinum, palladium or foreign currencies and if so then how? From what I understand, unlike silver coin purchases, there is no VAT due on metals purchases in the London or Zurich vaults. Then there are tax treaties that can be taken into account like if you remit dividends from a Hong Kong company to Belgium then only 5% of the total tax liability is actually due.

As you can see, it can get complicated quickly and tax laws are always changing.

16 Roy Houston July 3, 2011 at 1:35 pm

I have read that bank wires to goldmoney have resulted in 30% being taken out as a a withholding tax by US income tax authorities. i.e. send $100,000 and actually get $70,000 into the GM account. I thought this was not to happen until 2013. Anybody wire US dollars to GM recently with any problems with the interception from the IRS??

17 Trace Mayer, J.D. July 4, 2011 at 7:27 pm

Roy, I am not aware of this. GM did recently open a collection account in NY where you wire, which is then forwarded to Jersey, to if you are US and have a Full Holding. It would be interesting ti know if anyone has had any experience with the 30% withholding.

18 Van Prince July 5, 2011 at 5:49 am

I contacted GoldMoney about Roy’s info. Following is their reply. Notice he didn’t say yes or no.

A representative of the GoldMoney Relationship Management Team wrote on 2011-Jul-05:

Dear Sir/Madam,

Thank you for taking the time to contact us and to express your concerns.

The Hiring Incentives to Restore Employment Act (HIRE) was signed into law on March 18, 2010 and applies to US residents. HIRE contains various measures regarding tax compliance on foreign accounts owned by US residents, including a 30% withholding tax on certain payments to foreign financial institutions made after December 31, 2012.

We have referred this matter to our attorneys for their ongoing review. They are analysing the implications of HIRE for the operation of our banking relationships, but at the moment, no changes are required.

Many market participants are also evaluating their response to these measures, but at this moment, the implications remain uncertain. However, on all tax matters, we always recommend that you seek guidance from your professional tax advisor.

For any further queries, please do not hesitate to contact me.

With kind regards.

James Mitchell
Senior Relationship Manager – GoldMoney

———-

You wrote on 2011-Jul-05 03:35:43 GMT (your preferred method of contact is by email):

There’s a posting on http://www.runtogold.com that U.S. tax authorities are intercepting money wired to you and withholding 30%. Is this correct?

19 David W. Young July 6, 2011 at 6:00 am

Let’s not get too worked up here about Big Brother taking 30% of new INVESTMENT FUNDS into an overseas bullion account, vs. investment returns or investment proceeds. Withholding under U.S. I.R.S. regulations in all cases refers to Interest or Dividends Earned and paid-out to a U.S. accountholder and POSSIBLY PROCEEDS FROM SALES OF ASSETS so you don’t attempt to avoid capital gains tax on the sale. This is what 1099-B’s are all about on domestic bullion transactions. This latter category is what has to be analyzed regarding the new HIRE rules and GoldMoney and BullionVault accounts, etc. Be advised that Uncle Sam is as broke as Lehman or AIG, actually worse, so his tenacles are going to intrude in every aspect of your financial lives where he can extract another bloody shilling out of you in order to keep full employment in WASHINGTON. Swiss accounts under UBS precipitated this increase in overseas investment scrutiny and this expansion of PRE-EMPTIVE TAXATION, so while you maybe out of the reach of Federal confiscation of the bullion assets under local laws, you are not going to escape the beloved IRS unless you are Greek. Or if you are a public official in the United States. KEEP THROWING THE BUMS OUT UNTIL WE GET SOME BUMS WE CAN LIVE WITH!!!!!!!!!!!!!!!!!! Sage of Wexford

20 Van Prince July 6, 2011 at 6:49 am

I called BullionVault Tue. AM ET U.S. to see if it was withholding money. The man I spoke with didn’t know anything about it but seemed concerned and said his people would look into it. He took my phone number and email address and said they would get back to me. I also found law firms that had info on their sites about this law. I left questions about the law at one of the sites; hopefully they’ll get back to me.

If you search on something like “hire act” “30%” you’ll find tons of info/comments about this law, including the law itself. Select anything mentioning Mark Nestmann, and you can get an easy-to-understand explanation. Once on his site, type the word “hire” in the search box, and you’ll get more writings of his about the law.

I’ll report back anything I hear from my requests for information.

21 Roy Houston July 7, 2011 at 9:24 am

When the next run up of PM equities, hopefully around September I’m going to take some cash off the table, about $10,000 and wire it to GoldMoney to see what happens. If they take the 30% well I’m not out a whole lot and I’ll have $7000 out side the US.

Note to response of TRACE MAYER, J.D.
You wrote: “GM did recently open a collection account in NY where you wire, which is then forwarded to Jersey, to if you are US and have a Full Holding… ” Do you have a phone number, hyperlink or email address of this collection account in NY??

22 Trace Mayer, J.D. July 7, 2011 at 5:21 pm

Roy, These are the only details I have about the collection account. I suppose if you initiate a wire transfer and get instructions from GoldMoney then it will give the new collection account details. You can read the News by clicking on Messages & News after logging into your holding.

27 June 2011 – “We are pleased to announce that with effect from Monday 27th of June 2011, all customers with a Full Holding can wire funds domestically from their US bank account to GoldMoney’s new cash collection account at Bank of America in New York. This significantly reduces the bank fees incurred and increases the efficiency of your funds transfer.

Please note that the collection account service provided by Bank of America through our bank, Lloyds TSB (UK), is available to transfer funds to your GoldMoney Holding and it may not be used to return funds back to your bank account. Therefore, any US dollar transfers back to your US bank account, will be made by international wire transfer from our bank account in Jersey.

US residents with a Basic Holding have the option to upgrade to a Full Holding to be able to use our Bank of America account.”

11 March 2011 – “In addition, our bank account at HSBC London is now available for Basic and Full Holding customers to fund their Holding. The wire details can be obtained when placing an ‘Add Funds’ request. Some of our customers may find it easier to send funds to our HSBC account in London than to our RBSI account in Jersey, so we have made the HSBC account details available as well. In the case of British pounds, we still collect funds solely at RBSI Jersey because they are connected to the domestic UK BACS and CHAPS payment systems.”

14 Dec 2010 – “We have halved the wire fees for funds transfers back to your bank account and the reduced fees came into effect today.”

23 Roy Houston July 9, 2011 at 9:36 pm

Trace Mayer, J.D.
Thanks so much for your inputs. Could you explain the difference between Basic Holding and Full Holding? I have never heard of these terms before.

24 Trace Mayer, J.D. July 12, 2011 at 3:02 pm

From the GoldMoney Glossary:

“Holding – A Holding is your account at GoldMoney, and the record of information about the quantity of precious metals held at a vault and currencies held in Customer Segregated Funds bank accounts. There are two Holding types: Basic Holdings and Full Holdings. A Basic Holding enables customers to transfer in funds from one specific bank account up to a limited amount in order to purchase metals. A Full Holding gives customers unlimited access to all services of GoldMoney.”

25 Van Prince July 14, 2011 at 11:47 pm

Here’s a link to more info about HIRE Act: http://www.chrismartenson.com/forum/its-official-america-now-enforces-capital-controls/37545

It’s an overstatement to call this “capitol control”, but I think it’s a step in that direction and a portent of worse things to come.

26 Van Prince July 17, 2011 at 11:36 am

Here’s an update on HIRE Act.

Last week the Treasury Dept./IRS delayed implementation of some parts of this law. Foreign financial institutions now have more time to develop agreements with the IRS so that withholding won’t happen. Also, withholding has been delayed until 1-1-14 and 1-1-15, depending on the category of funds involved. In addition to reporting foreign accounts on Sched. B and the FBAR form, my understanding is that if you have more than $50,000 with a particular institution, another form has to be filled out. Does anybody know what this is?

My bank told me that all outgoing wire transfers are reported to the gov’t. I have reason to believe this ain’t necessarily so. Does anybody know about this?

Finally, my understanding is that the gov’t has the legal authority to require U.S. residents to repatriate their financial assets. In other words, liquidate your PM holdings, convert foreign currency holdings to the U.S. dollar, and bring it all back to this country. This being the case, we’re not necessarily free-and-clear just because we’ve transferred assets out of the country. We have to hope that, no matter how bad things get in this country, the gov’t never gets to the point of using this authority. At the very least, the Trading With the Enemy Act is involved here.

27 Trace Mayer, J.D. July 18, 2011 at 10:07 am

Thanks Van.

I saw the extension until 2014 and 2015 so it looks like it will be a while before this becomes a ripe issue again. I think all foreign wire transfers are reported because of how they clear.

Yes, you raise a great issue about repatriating funds if you are a US citizen. Keep in mind, only 300m of 6.5b are Americans so most people do not have to worry about that and for the most part America’s place in the world is rapidly shrinking. Many people are getting their expatriation plans in place should that become necessary. The NYT article about it showed a sharp increase with the number of people renouncing citizenship has doubled every year for the past three years. With about 100,000 US taxpayers paying most the taxes I suppose the 1,600 that expatriated in 2010 starts to become material. We wrote about it on How To Vanish in The Expatriate – How Americans Can Renounce Citizenship.

28 Trace Mayer, J.D. July 18, 2011 at 10:10 am

There are already capital controls in the US. I wrote about it years ago in Current Dollar Currency Controls.

29 Van Prince July 19, 2011 at 10:14 pm

To answer my own question on the HIRE Act $50,000 form mentioned above, it is Form 8938. At this point, the form exists only in draft form. It can be seen on the irs.gov web site (http://www.irs.gov/pub/irs-dft/f8938–dft.pdf). My understanding is that the form will be operative and required even before the extended dates mentioned above. In fact, it may need to be filed retroactively.

30 JeremyD August 23, 2011 at 9:38 pm

Suppose that I have opened the Holding, but have not wired any money yet.
If I have changed my mind and decided not to proceed, is there any mechanism to close my Holding? Given the fact that I have already transfered all the necessary docs copies and my bank account info, would it be possible for GM to somehow charge me, or ortherwise capitalize on my stupidity?

I was surprized not to find any e-mail address for communication in the GM’s contact US section.

Thank you in advance

Jeremy D

31 Trace Mayer, J.D. August 25, 2011 at 6:28 pm

Jeremy, you should be able to send them a secure message when logged into your Holding. I do not think there is any fee. If you have already sent everything needed to setup the Holding why close it? Could just keep it available should you want to use it in the future?

32 Van Prince August 25, 2011 at 10:53 pm

Jeremy,

GM might not provide an email address, but right there on their Contact Us page is their internal messaging system apparatus. I’ve used it 2 or 3 times, and they’ve gotten back to me in a day or two, and I don’t even have an account with them. You shouldn’t have any trouble getting in contact with them. I’ve even swapped emails a couple times with the man himself, James Turk, using his other web site, http://www.fgmr.com. I’m sure the operation is thoroughly legitimate, and you shouldn’t have any difficulty at least communicating with them.

Also, why do you say you’re stupid if you open an account, then change your mind? I’ve made lot bigger mistakes than that in my life–talk about stupid.

33 JeremyD August 26, 2011 at 5:05 pm

Many thanks to Trace Mayer and Van Prince for useful clarifications.
About my stupidity: everything is relative. I am relatively smart, but not in this group and not in this business. I began to feel stupid after reading the discussion in this discussion forum. As I have discovered here, if one wires, say, $100,000 to GM, then he/she should be prepared that GM will sell only $70,000 worth of gold, and that the process is somewhat unpredictable, and on top of that subject to change without notice. After reading all that, I realized that I need to be much smarter to circumvent all possible traps and greedy Uncle Sam’s tentacles.

All the best to everybody. Keep your certificates in safe place during hurricane Irene!

Jeremy

34 Trace Mayer, J.D. August 27, 2011 at 2:01 pm

Jeremy, The FACTA 30% withholding provision does not come into effect until 2015 so it is nothing to worry about currently. If you wire $100,000 to GM then that will get into your account (minus any small wire transfer fee) and you will be able to buy the full $100,000 worth of gold at the next LBMA fix.

I suppose stupidity is relative but I do not think you are stupid even in this area of knowledge where you do not have expertise. If anything having an open mind, being diligent, studying and trying to assess the environment is the opposite of stupidity. It is the captain of the Titanic, chosen for the unsinkable vessel, whose worldview does not permit it to sink and who clings to the wheel until the icy water surrounds him being so stubborn to change his worldview that is, in my opinion, stupid. Of course, in the current environment it is the bankers and their puppet polititicans who are the stubborn stupid captains and not individuals like yourself seeking to protect themselves.

35 JeremyD August 27, 2011 at 5:29 pm

Thanks, Trace!

This is a really great discussion group. I feel some relief (not feeling smarter yet, sorry!).

But let’s revisit a more obvious way of dealing with gold. I have checked with a local coin dealer and concluded that, given all the expenses associated with GM, the cost of ownership of gold (including the premium paid for selling coins back) are on approximately the same level with coins as with GM. Therfe are of course fears that
your gold and yourself are not quite safe and secure. But on the other hand you have a nice feeling that you own a real thing, not just an abstract line in an abstract file on the abstract server in the abstract vault indicating, presumably, that there is another vault in another country where the gold is stored and which is YOURS. A very high level of abstract thinking is actually required to convince yourself that you have something. And in fact a fairly complex procedure is required to really convert the imaginary gold into the greens (also somewhat imaginary).

What is not quite clear to me, however, how the taxation is conducted in case of coins. In particular, suppose that I go to a coin place and buy 20 pieces of American Eagle. Does IRS know about this purchase? Does it asks me anything when I prepare my next tax return? Further, suppose I am patiently waiting until total collapse of everything, go to the same dealer and sell my Eagles back to him with 300% profit (are dreams allowed in this website ?! :) ). The coin dealer gives me his corporate check. I deposit it into my account. When I deposit I do not indicate the sourse of this money. So, when and how the IRS jumps into game? Does coin dealer
report to IRS? In principle, how does he know that I have gain? The coins are not numbered, so when I sell he does not have any mean to know whether I sold with profit or with loss?

Sorry, my questions are still very naive, but I promise to get smarter soon (maybe when I lose all my money).

Best, Jeremy

36 Trace Mayer, J.D. August 28, 2011 at 8:36 pm

Jeremy, WIth GM they have extremely thorough corporate governance procedures and the bullion is in the vault, regularly audited, etc. In my opinion, it is a product for people who want to allocate $25,000+ to the metals. After that amount one has to start weighing whether to get a safe, etc. for bullion at home or office and most insurance policies will not insure against theft, etc.

Now what about if, like one of my friends back in Feb who purchased $12 million of physical silver? GM was the best option taking into account time and attention that would need to be dedicated to the project. A couple months ago a reader, who is not a gold bug, flew in via his Gulfstream to see me because he wants to get $4-6m of bullion in the next 30 days and another $20-25m over the next year and I helped him craft a plan that involves coins and GM. So I think coins and GM each have advantages and disadvantages which are pretty complimentary to each other and it mainly depends on what the individual goals and circumstances are.

With regard to the taxation issues, whether income, estate, gift, sales, property, etc., there are some established procedure but in some cases it is still murky. There is a 28% collectibles capital gains tax, 1099 reporting requirements, etc. involved but unique for transactions based on the individual facts involved and I would recommend getting a professional and I would help but do not currently practice.

There can be some very creative tax planning involved, particularly when using American Gold Eagles as opposed to GM, but you will need a like-minded professional to help. I can recommend CA attorney Bill Rounds who co-authors HowToVanish with me.

37 JeremyD August 29, 2011 at 5:30 pm

Trace: Thanks again for important clarifications. There is one more question in this GM business which is murky to me. Suppose that I wired some funds and ask the GM to use these funds for a purchase of gold. To be more specific, let us assume that I want unallocated gold. Given twide variations of the spot price during the trade day, which exactly spot price is supposed to applied to my trade? In dealing with a dealer, things seem to be more obvious: I call and ask to lock the price for me. Since he is my dealer and trusts me, he locks the price and i provide the money later. Do I have any control regarding the locking the spot price with the on-line trading, with GM specifically? What exactly is the sequence of events triggered by my purchase order?

38 Trace Mayer, J.D. August 29, 2011 at 9:53 pm

Jeremy, GM has unallocated allocated gold which is a 1:1 ratio but you do not own any particular ounce unless you segregate a particular bar. This is completely different from ‘unallocated gold’, which GM does not offer, and leaves the owner as an unsecured creditor. This is the type of product most other outfits offer like the bullion banks, Kitco, Perth Mint, etc.

The sequence of event with GM is pretty simple. If the order is small enough then the price is locked at the current spot price and usually delivered to your account within about 2 hours. If the order is large enough then the price is locked at the next LBMA fix because GM goes and acquires the metal at the LBMA fix and the metal is usually delivered about 2 hours after the fix. If the physical metal needs to be acquired then the fiat currency (Dollars, Euros, Yen, etc.) are taken from the Holding and used to pay for the metal which is then transported via Brinks of Via Mat to the secure vault and after it is securely there then the ounces are created in the GM system and added to your Holding. This would only really happen if you are order 2+ bars ($1m+).

In essence, with GM you get a fair price relative to the spot price but if you are looking for a trading tool then I would recommend the GLD or futures market and not GM as it is dealing with the actual physical bullion and the premiums are a higher with each transaction.

39 Anita September 19, 2011 at 10:50 pm

Too bad you can’t get any interest on the precious metals but on the other hand you can protect yourself from what’s coming (currencies collapse).

40 Midas October 23, 2011 at 2:58 pm

It’s a good thing there is no interest on the PMs. Interest would require that GM lend out its metals, defeating its very purpose.

41 Ken December 15, 2011 at 12:47 pm

I was considering trying GM with $1k to $5k to buy and hold silver for about 5 years or so. I like how GM makes buy/selling easy vs going to dealers. However, it looks like the storage fees will take away a good amount of the investment. This doesn’t look a right fit for small investments. It seems GM works better for large investments. If so, how much do you think? In my situation, it might seem better to buy physical bullion to hold directly. Any suggestions on this would be appreciated. Thanks.

42 Trace Mayer, J.D. December 15, 2011 at 2:39 pm

Ken, with only $1-5k and no intent to put in additional amounts over the years and with a 5 year horizon I do not think GoldMoney would be a good fit. Instead, I would pick up Silver American Eagles from GoldSilver. No storage fee!

Plus, now is a great time with silver at 0.8172x its 200 day moving average which makes silver extremely cheap relative to its performance over the last decade.

43 sabreliner December 24, 2011 at 12:22 pm

GM sounds like a great idea.
One question:
You can make a domestic wire transfer to GM BoA account in NY.
Assume you had unpaid bills (medical, credit card, mortgage, etc), could your creditors use the domestic transfer to trace the money to your holding and get a court to force GM to disburse the money in your holding to your creditors ?
Thanks, and Merry Christmas !!!

44 Sam December 26, 2011 at 10:17 am

Very interesting discussion! Thanks, Trace for your insight. I have been researching gold ETF’s, such as SGOL, IAU, PHYS for my IRA currently held by Vanguard. I had previously opened a GM account, but have never funded it, due to lingering concerns about whether GM was really valid, or not.

Do you have any thoughts on the relative safety of say, SGOL through Vanguard, vs GM and Entrust for a large IRA?

45 Trace Mayer, J.D. December 26, 2011 at 11:43 pm

Sabreliner, yes, the domestic wire transfer does go through BoA if I recall correctly and the transfer could be traced. Your question raises the issue of fraudulent conveyances. I am not sure what the Statute of Limitations is in Jersey but I think it is short like 1 or 2 years. To have greater privacy you could send the wire to someone and they would send you metal in the GM system. Then there would only be a wire to trace to that person. But if there is a bankruptcy proceeding or judgment then you may have to disclose any assets you own or control. That is where bitcoins could come in really handy.

46 Reuven February 13, 2012 at 8:35 am

Hello there,

I have had a GoldMoney account since around April of 2011, and am wondering how to report my transactions come tax time. The only activity in this account has been purchases and sales of metals in order to shift them from one vault to another. What I’m wondering is how to report these short term gains/losses that occurred when I made my vault transfers. Do I just list them in my Form 8949 and Schedule D as if they were stock transactions? Keep in mind it wasn’t a straight vault to vault transfer. I had to sell them first (thus accrue a gain or loss), then buy them in the new vault.

I read about the 28% collectible rate, but it’s only for long term gains. I’m going to assume that since these were short-term that they get taxed at my marginal rate.

Thanks

47 Trace Mayer, J.D. February 13, 2012 at 11:06 am

Reuven, there may be a 1031 issue here. You may want to consult with a CPA to make sure you are not paying anymore taxes than legally required. As for reporting, there are both FACTA and FBAR reporting if the $10,000 threshold has been met.

48 Reuven February 13, 2012 at 11:38 am

Trace,

Thank you for the quick response. I will consult a CPA and see what they have to say.

I’m also aware of the FACTA and FBAR reporting. I’m going to be filing the FBAR form, but FACTA doesn’t apply to me as I only have to file form 8938 if I have an aggregate value exceeding $50,000

49 zeke February 20, 2012 at 6:50 pm

Has anyone ever taken delivery from goldmoney? Is it private or are there customs records saying “this person is getting a gold delivery”.

50 Jeff February 24, 2012 at 12:45 pm

I own some PM, but don’t have an account at Gold Money (yet). I have a couple questions:

1. Is there a way to open an account at GM and transfer in physical metals, without converting to one of the nine fiat currencies and back?

2. What are the “regulatory burdens” that cause GM to shutdown the payment service? From the website: “… owing to both the relatively low use of this service and increasing regulatory burdens, in January 2012 GoldMoney decided to stop metal payments in all countries except Jersey…”. This makes me uneasy about starting an account at GM, as from my point of view, this is the best reason for and most valuable feature of an account if I were to open one. It makes me wonder how much “influence” various governments have and will continue to have on the directors of GM through various means of coersion and persuasion. What’s the whole story and the reason for stopping this service?

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