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.