Keeping Your Gold Coins Out of the Gold Bank

February 13, 2010 – In an effort to parlay the fears of last year’s banking crisis into a new business venture, a new “bank” is trying to get its hands on investors’ gold coins. Attempting to package itself as offering an alternative currency, the organization is trying to scare people into participating in a gold-backed banking venture.

Calling itself the “Gold Bank”, this fund claims to be the “only 100% backed-by-gold bank” and claiming that the people who are part of the bank have put themselves “on a personal gold standard with a new kind of currency that’s rapidly growing in popularity.” The concept is that people participating have a credit line that is entirely backed by gold they have in the company. This would be more like a secure credit card and less like a bank.

The theory sounds good, but has its flaws. Notice the statement, “The currency comes in electronic form, but can be used like any other currency in the world today to pay for goods and services and even settle debt.” On the surface, this is impressive; dig a little deeper and what this claim really says is that there is an exchange of gold into other currencies. If you purchase something in the United States, it is based on dollars; this is the same as any other credit card or electronic purchasing company.

Receiving promises that your funds are backed by gold can be hollow for many investors. In legitimate US banks, the funds are protected and guaranteed by the US government through the FDIC.

For most people, there is no substitute for owning and holding physical gold coins or bars. The investment that is generally regarded as the most successful during the past decade is secure and just as profitable in the investor’s hands as it is in a “bank.” Because gold is a highly liquid asset, an investor can convert it on demand and use it in whatever currency he or she desires.

The security of a bank that is backed by the strength of gold is very appealing. However, for most investors, it is best to keep their gold coins in their own hands and out of a gold bank.

Kevin Johnson

Senior Staff Writer –

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