Would you deposit your gold at the local bank?

Posted By Dick Sterling
March 30, 2013

In recent years Turkey has encouraged its citizens to deposit their gold at the bank, as if it's cash. It's an effort to get bullion out of peoples' homes and into the banking system. The program has met with a measure of success.

Once deposited, the gold can be withdrawn, transferred, converted to cash, even borrowed against. The banks in turn can use the gold to bolster their reported reserves, strengthen their balance sheets and boost investor confidence. Everybody wins, right?

Unlike Westerners, Turks are known to hoard gold. Same goes for Indians, and much of Southeast Asia. Wearing it, stuffing it under the floorboards, burying it in the garden. It's part of the culture. But all that is unnecessary when gold can be deposited like cash at the local bank.

Is any of this relevant to North Americans? Actually, yes. I believe the re-monetization of gold is becoming a reality, albeit gradually. Within the decade I think it's likely we'll see Western banks encouraging their customers to deposit gold, treating it almost as cash, as have the Turks. Sustained global currency debasement almost guarantees this.

As more North Americans begin holding a portion of their liquid assets in gold, you can bet the banks will be expanding their offerings of gold related services, Turk-style.

But would you deposit your gold at the bank? Many will, trusting a global banking system which led to the recent Cyprus bank recapitalization at the expense of depositors. If it happened in Cyprus, could it happen elsewhere in Europe? Or in the United States? Keeping your gold on deposit with the local bank could be a risky proposition.

Posted by: Dick Sterling, Editor   contact here