Disadvantages of Fungible Storage (Unallocated Storage)
Storing silver in fungible storage (unallocated storage) at a bank or dealer might have the following disadvantages:
- Disasters: The items stored in fungible storage (unallocated storage), silver included, are normally not insured against floods, fires, robberies or similar disasters.
- Accessibility: If you store your silver in fungible storage (unallocated storage) at a bank or dealer it might not always be accessible, especially during holidays or after office hours. In fact, even in instances where your silver is accessible 24/7 when stored in fungible storage (unallocated storage), it’s normally only accessible after successfully passing various security tests (correct signature, correct key, correct code, etc.). Now more than one silver investor or holder of silver might not have a problem going through the security tests each time they want to access their silver, but for some it might be downright annoying.
- Silver confiscation: By storing your silver in fungible storage(unallocated storage) at a bank or dealer you increase the risk of government confiscation of your silver at least tenfold. The reason being is because it will be much easier for a hostile government to confiscate the silver of 5000 or more people pooled together at a bank or dealer than the silver of 5 million people spread out in 5 million or more homes. E.g. no less than 7000 safe deposit boxes were confiscated when over 300 heavily armed police raided the vaults owned by Safe Deposit Centres Ltd in the UK in June 2008.
- Complicated procedures: You have to go through complicated procedures to request the delivery of your silver with fungible storage (unallocated storage).
- No or little bankruptcy protection: You will become a creditor if the bank or dealer goes bankrupt or is declared insolvent. In such an instance you can expect to receive back only a portion of your silver (if any).