Gold News

Gold Bullion: Useless in Greek Crisis?

Might your gold become useless to you in a Greek-style crisis...?
 
ANCIENT ATHENS hoarded its silver and gold bullion coins upstairs above the Parthenon, according to one Canadian archaeologist, writes Adrian Ash at BullionVault.
 
Where are Greece's poor citizens holding their gold and silver today?
 
Certainly not in Zurich, Singapore or anywhere else via  BullionVault. We saw internet traffic from Greece rise 50% during the first half of this year from the Jan-June period of 2014. But new accounts? Zero growth...with just a handful of customers again.
 
No, the preferred choice for Greeks buying gold has remained bullion coin. Specifically gold Sovereigns, bought from the UK's Royal Mint in Wales...and distributed through the central bank in Athens, the Bank of Greece. At least, that's what Greek law demands.
 
Incredibly, a rule stated on the central bank's website here has made it the ONLY legal route for gold bullion sales and purchases in Greece since at least 1999, with commercial banks invited to apply for approval if they wished. Word is, small private-sector dealers have long ignored that rule ( Google.gr suggests likewise). After all, it flew in the face of the European Union's general directive on free trade in legal goods, even if it fits with the classic Euro-fudge known as the principle of subsidiarity, which says national governments can arrange things domestically pretty much as they like, provided they don't block cross-border trade and capital flows. Y'know, in the way that, say, today's capital controls do.
 
Prior to this banking shutdown, therefore, residents of Greece could also buy gold coins or small bars from dealers abroad, and get them posted across the border. Because inside the EU's common market, a citizen anywhere can buy legal goods such as gold bullion from any other member state.
 
That's what the European Union is supposed to be about, at root. The Bank of Greece's stated monopoly on gold bullion inside the Hellenic Republic didn't contradict that core EU aim. But with Greece now stuck in a week-long banking shutdown thanks to the debt crisis, the Bank of Greece has shut its gold operations. Or so Bloomberg reported Monday.
 
This news didn't feature in last Sunday's capital controls notice (they're always imposed on a Sunday). But it does appear on the central bank's immediate suspension of transactions with the general public. The broader chaos in Greece, however, already raises the issue of what freedoms a precious metals owner might expect, both legally and in practice, during the kind of crisis you might be buying to guard against today.
 
Bloomberg headlined its story " Bank of Greece stops gold sales". But the central bank also sets itself out as the only legal BUYER of bullion in Greece, too. If the gold window is closed, that also means the Bank has stopped buying.
 
This is more important, because in a banking shutdown...after 5 years of economic collapse...people will be rushing to raise cash, not buy gold. Losing the key insitutional dealer only would only worsen liquidity, and prices, for would-be sellers. Amid the kind of confusion now hitting Greece, gold held in-country risks becoming useless to its owners.
 
Each household's shortage of Euros worsens every time they spend money. So who will buy gold from you for Euros? No doubt there's a thriving black market, however. Gold always finds a way, as India's attempts to block legal imports have proved time and again. Greece only made giving till receipts mandatory for all businesses in 2012. Foreign-issued credit cards are apparently helping some people get round Greece's new capital controls today. And in gold, acting legally under EU rules always made you a criminal anyway under the Bank of Greece's more controversial claim to a monopoly. The lines have long been blurred.
 
Now contrast that hassle, risk and lack of willing buyers with the safety, instant pricing and deep liquidity available to that handful of Greek citizens who bought and now hold bullion outside the country. BullionVault users owning gold in Switzerland or Singapore, for instance, can sit it out, and maintain some wealth away from Greece's collapse for when the crisis finally passes. Or they can sell a little...and receive funds back to their Greek bank...ready to spend from their allotted €60 per day ATM withdrawal (if they can find a machine with any cash). Because there are no blocks on receiving funds from abroad, of course.
 
If you're right to buy gold against a Greek-style crisis, in short, then you'd be right to own it in a safe, secure jurisdiction abroad. This is rule No.1 on the Gold Buyer's Checklist.
 
And if things get really bad? No amount of gold, or any other asset, can guarantee you escape any and all kinds of  crisis. But owning physical bullion outside your own borders means you have a high-value asset...instantly priced, deeply liquid and sellable for local currency...ready and waiting should you and your family need to get out. And be able to.
 
Everyone hopes it won't come to that. Everyone always hopes that it won't.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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