Thursday, February 25, 2016

In Odd Twist, Canadian Bullion Dealer Offers To Pay Interest On Gold And Silver

(Zero Hedge)  There are three certain things in life: death, taxes and paying vault storage fees to keep your gold safe. Or at least there were: recently the third of these certainties got somewhat muddied when, over the past year the government of India unleashed an attempt to soft-confiscate the nation’s publicly held gold, by offering to pay interest for said gold. Incidentally, the effort has failed miserably as India has been able to collect only a few tons of gold as part of this gold monetization scheme.
Where India succeeded was to finally quash the old saying that gold does not pay dividends. It does, but until now the dividend was only available in one country.
That has now changed and as of this moment, a Canadian physical gold distributor, Canadian Bullion Services (profiled recently by the Globe and Mail) has boldly gone where only India has gone before, and is offering to pay interest to its gold and silver customers if they hold their precious metals at the bullion dealer.  In fact, based on the tiering of interest, CBS will pay as much as 4.5%/year if the gold deposited for at least 3 years.
Surprised? Wait until you see the full offer:
Earn Interest on Your Bullion
Canadian Bullion Services is happy to introduce a new service exclusively to our clients. Purchase gold and silver and hold gold and silver in secure storage; and earn interest just by keeping gold and silver in the Boost storage account.
What is The Boost Storage Account?
The Boost Storage Account is a proprietary program developed exclusively by Canadian Bullion Services.  In a nutshell, the program allows investors to:
  • Purchase gold and silver;
  • Hold gold and silver in secure storage; and
  • Earn interest just by keeping gold and silver in the Boost storage account.
Is this a new idea?
We would like to say we thought of it ourselves, but the idea is very popular in the Eastern parts of the world, where governments, banks, and bullion dealers have a variety of storage interest bearing accounts for their hard assets.
Benefits at a glance:
  1. Purchase physical gold and silver for safety and growth.
  2. Have your gold and silver secure in a vault.
  3. Earn interest while your gold and silver is safely in storage.
  4. Get full transparency – receive monthly audited statements.
The Program is right for you if:
  • You desire the safety of hard assets like bullion but want your bullion working for you;
  • You wish to participate in the potential growth of the bullion markets (hard assets only, no paper assets);
  • You would like to receive interest payments while storing your gold and silver;
  • You believe in a buy-and-hold strategy; and
  • You want your bullion stored safely and securely.
How does the Boost Program work?
  • Purchase a minimum of 500 ounces of silver or 10 ounces of gold (does not matter which Mint)***
  • Store the gold and silver at one of Canadian Bullion Services secure depository vaults.
  • The Boost accounts are yearly accounts. Interest earned is based on holding time:
    • Store your bullion for 1 year and earn 2.5%/annum on your bullion*
    • Store your bullion for 2 years and earn 3.5%/annum on your bullion*
    • Store your bullion for 3 years and earn 4.5%/annum on your bullion*
  • At the end of the term you can renew your Boost Program or have your bullion delivered**
  • Your interest is earned monthly with actual physical bullion.
Getting interest on your gold: that sounds suspiciously close to what fractional reserve banks do to incentivize depositors to fund them with the unsecured liability known as cash; a liability which as Europe is learning the hard way can be bailed in at any given moment. But that is impossible, because as Ben Bernanke will attest, gold is not money, it is tradition. So how can this be?
Well, a quick look at footnote one, and some loud alarm bells should promptly go off:
*Liquidity is at the end of your term only; you may not receive the exact bullion you purchased; the interest will accrue monthly with the purchase of more bullion, any funds remaining will be credited as cash in your account.
At least the company is honest and warns you upfront that the gold you “receive” may not be the exact bullion you purchased, in other words this is nothing but the first incarnation of a bullion dealer rehypothecation scheme.
But why? After all Canadian Bullion Services is a small dealer which allegedly only had a few million in revenue.
Perhaps the answer can be found in the following recent press release, in which CBS announced it was now collaboration with precious metal vaulting legend, Brinks.
Introducing Local Pick Up at Brinks-Revolutionary Service for Gold and Silver
Canadian Bullion Services Inc. has now introduced its leading on-time pick up option at Brinks in Toronto.
“With this new feature, clients can secure their price of gold and silver bullion and now pick up their order at Brinks in Toronto.” said Jamie Cohen, Chief Strategy Officer of Canadian Bullion Services.
This new service was created to help individuals accelerate their precious metals holdings. Clients will no longer need to wait for their deliveries. This helps drive more business value for Canadian Bullion Services by lowering insurance costs and delivery costs while enabling clients to receive their product faster.
In the future, this service will be rolled out to all products and to Brinks in most major cities in Canada. For more information, please contact Jamie Cohen at Canadian Bullion Services.
We wonder if CBS’ generous precious metal interest payment scheme is funded by Brinks or one of the other prominent names in the business such as Scotia Mocatta, HSBC or even JPM, all of which as we have documented in recent months, have been running precariously low on physical gold in their gold vaults.
After all what better way to promptly replenish physical stores than to not only not demand gold storage fees but to offer to pay interest to the public for the “privilege” of holding its gold.
In retrospect we can’t help but have flashbacks to FDR’s infamous executive order 6102, which promptly and overnight confiscated all physical U.S. gold.  At least this time around the “confiscation” of gold is on a voluntary, “handover” basis and those who part with their hard money are incentivized to do so with promises of some future paper money interest payment.
At least for now.
And if, like in India, dealers are unable to procure much needed physical, things just might escalate. Unless of course, there is nothing ulterior or sinister about this scheme, in which case those who are interested should call 416 214 4299 for further details.

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