Can a Cyprus-Like “Bail-In” Occur with Gold?


The short answer to the question of whether such a Cyprus-like “bail-in” could occur with gold is yes and no. It could easily occur with compromised gold ownership, but it’s highly unlikely to occur with uncompromised gold ownership. Knowing the difference between these two could mean the difference between financial devastation or financial survival and prosperity.

Compromised gold is any gold that is not owned outright and either held in hand or in allocated storage. There are no exceptions to this rule.

Uncompromised gold is gold to which a person holds clear title and stores in a vault, preferably an LBMA-member vault, on an allocated, insured basis. There is a title document that states the owner’s name, the refiner, the serial number, the weight, and the fineness or purity of the bar.

No wonder people are worried about recent events in Cyprus, because they reflect a state of desperation on the part of central bankers that is alarming. Something must be near the boiling point to cause these established institutions to make such a desperate move that in truth disarms one of their most powerful weapons—investor confidence.

Perhaps it’s the quadrillion dollars in derivatives that could explode any day that is causing concern; perhaps it’s the movement away from the US dollar, one of the six major trends discussed in my upcoming book, $10,000 Gold. This past week saw a $30-billion trade agreement between China and Brazil, then a trade agreement between China and Australia. Both agreements will bypass the US dollar completely. The US dollar, the world’s de facto reserve currency, is more threatened by gold than any other currency. Much of the downward pressure and the ramped-up negative publicity campaign against gold is likely a direct result of this competition.

As always, the most effective way to protect oneself from the potential for wealth confiscation through bail-ins is through gold, owned outright and stored in secure allocated storage.

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For more than a decade, Nick has focused on precious metals and the benefits available to investors who hold physical gold, silver and platinum bullion. As president and CEO of Bullion Management Group Inc. (BMG), a precious metals management company, he uses his understanding of the precious metals markets to develop strategies, products and services for clients looking to integrate bullion into their portfolios. In 2002, Nick launched BMG and BMG BullionFund, Canada’s only RRSP-eligible open-end mutual fund trust that purchases equal dollar amounts of gold, silver and platinum bullion. Subsequent products added include the BMG Gold BullionFund, the BMG BullionBars program and a third fund, BMG Gold Advantage Return BullionFund. Nick specifically designed all BMG products so they would not compromise any of the fundamental attributes of precious metals ownership: absolute liquidity, no counter party risk and no reliance on management skills. In 2011, BMG became an Associate Member of the London Bullion Market Association (LBMA) – the only other equally accredited company in Canada is the Royal Canadian Mint. In 2013 BMG became the first Canadian precious metals company to join the Social Investment Organization. Widely recognized as an international bullion expert, Nick has written numerous articles on bullion and current market trends that are published on various news and business websites and he speaks regularly with major media outlets across North America, Europe and Asia. His first book, $10,000 Gold: Why Gold’s Inevitable Rise Is the Investor’s Safe Haven, will be published in 2013. Every investor who is seeking the safety of sound money will benefit from Nick’s insights into the portfolio-preserving power of gold.

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