October 6 (Bloomberg) -- If you’re looking for a safe place to put your investments, Chad Venzke has a suggestion: Dig a hole in the ground four feet deep, pack gold and silver in a piece of plastic PVC pipe, seal it, and bury it.
The 30-year-old central Wisconsin resident trusts no one but himself to store and protect his gold and silver—not banks, not investment funds, and certainly not the government. It’s precisely because of this suspicion of institutions that he invests in those metals to begin with. In case of emergency, "you always want to have your precious metals within arms reach," he says.
Venzke is hardly the only investor who wants his precious metals nearby at all times. A pound of gold worth about $24,000 can easily fit in a pocket; how to protect it is a decision that carries expensive consequences. Do-it-yourself investors who don't trust banks must find creative storage options, whether burying gold in the yard, submerging it in a koi pond, stashing it behind air-conditioning ducts, or placing it under carpets. All these options are debated in online gold and silver investor forums. They're also debated and demonstrated in youtube videos, including one by Venzke that has been viewed more than 7,000 times.
While there’s no way of knowing how many investors take Venzke’s advice, there are growing piles of precious metals in, under, or near American homes. From mid-2010 to mid-2011, U.S. investors bought up more than 100 tonnes of physical gold coins and bars, up from 15.2 tonnes in 2007, according to the World Gold Council. (A tonne, or metric ton, is 1,000 kilograms.) Worldwide bar and coin demand rose 37 percent during the mid-2010 to mid-2011 period, according to the Council, even as demand from exchange-traded funds backed by physical gold, and similar products, fell 84 percent.
The notion of keeping one’s gold in a safety deposit box—inside the banks many gold aficionados find so untrustworthy—is anathema to many gold bugs. Venzke, who predicts "runaway inflation" and a crisis leading to a "new form of currency within this decade," worries that the boxes won't be accessible if banks shut down in a crisis. "How are you supposed to get your stuff out of there?" he asks.
For those storing gold and silver in or around their home, the most immediate danger isn’t a crisis or a dip in metal prices. It’s theft. The FBI, which tallies the theft of precious metals and jewelry in one category, says $1.6 billion was stolen in 2010, up 51 percent from 2005. Just 4.2 percent of the lost loot was recovered last year.
Metal detectors are a big worry. Basic detectors can find metal on the surface or in the first 12 inches to 14 inches below ground, depending on soil conditions, says Louis Mahnken Jr., a sales representative for Kellyco Metal Detectors in Winter Springs, Fla. That’s why Venzke advises burying it at least four feet deep. There are online debates about the best way to frustrate such thieves, including using scrap metal as decoys or hiding metal by covering it underground with asbestos or mirrors.
DOORSTOPS, BOAT ANCHORS
Metal owners also use the "hiding in plain sight" maneuver. According to dealers, some customers buy 100-oz. silver bars, paint them black, and use them as doorstops. That's foolish, says Steven Ellsworth, a coin dealer in Clifton, Va., who teaches security classes for the American Numismatic Assn.
Ellsworth is a believer in keeping precious metals in bank safety deposit boxes, as well as having high security at home. "My wife sometimes thinks we're over-secured and calls our residence 'the compound,'" says Ellsworth, a retired Army colonel. His security measures include fences, alarms, cameras, and dogs.
Safes can certainly deter thieves. Yet an inexpensive fire safe may be exactly the wrong place to put your valuables. Richard Krasilovsky, president of Empire Safe, calls such safes "handy carrying cases for burglars." A fire safe is designed to protect papers from fire, not from intruders, says Ryan Smith, a senior product manager at SentrySafe. "It wouldn’t be wise to put any more than $20,000 of valuables in our products," he says.
Krasilovsky, whose company makes high-end safes, says safes must be very strong and very heavy—a recent sale was of a $10,000 safe that weighed 4,000 pounds. A proper safe starts at $2,000 and could cost as much as $40,000, he says. If the safe isn't certified to resist burglars with tools for 30 minutes, a so-called "TL-30" rating, "you're buying an expensive boat anchor," says Ellsworth.
Of course, whether gold is buried, put in a safe, or hidden under your bed, there’s nothing to stop a determined person with a gun from making you show them where you put it. That’s why it’s important no one ever know you have gold in the first place. Krasilovsky’s company will deliver safes in the middle of the night, installing them where no one, including a contractor, is likely to stumble across them.
"People have to be extraordinarily secretive," Krasilovsky says. This secrecy keeps away not only thieves but also prying relatives and the tax man. "One of the benefits of owning precious metals is nobody knows you own it," Venzke says. "It’s the most private investment you can make."
Unless, of course, you feel compelled to post youtube videos sharing insights about where to stash your gold.
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