Avoid the scrutiny of FATCA/FBAR/Form 8938 by putting your gold in an offshore safety deposit box

Cross posted from the Isaac Brock Society.

Simon Black (Do I Have To Report My Offshore Gold…?) asks whether custodial gold “accounts” (e.g., James Turk’s Gold Money) fall under FATCA provisions and his people think so. However, gold kept in a safety deposit box would not fall under FATCA:

What’s more, in all of those 544 pages, there is not a single mention of the words, “gold”, “silver”, or “precious metals”. So there’s still quite a bit of mystery with respect to the question, “Do I have to report my offshore gold…?”

I’m still having my team go through the rules; after an initial read, though, the language of the regulation does suggest that custodial gold institutions (like GoldMoney, etc.) should be reported. Offshore safety deposit boxes (like Das Safe) do not.

This is good news for “structuralists” like myself. In a discussion with Just Me, I learned that my suggestion of opening a few extra accounts to get one’s total over 25 (thus avoiding a detailed FBAR) could be “structuring”. Structuring is the practice of breaking up a single large transactions into multiple transactions below the reporting threshold. See what happened to this Greek American couple: My Big FAT IRS case. A US Person in Canada could withdraw funds from their FATCA covered account, until it is below $50,000, and then buy legal tender gold coins (Maple Leaf). These coins would go into safe storage–meaning it would be safe from burglers and from the snooping noses of the IRS, for such coins would not be reportable under FATCA, FBAR, or Form 8938. But almost certainly, it would be a violation of United States law for you or me to exercise our Canadian freedom to buy legal tender coins minted by the Royal Canadian Mint and legally purchased in a legitimate Canadian business, providing all kinds of jobs to Canadians. You would become a structuralist.

For those readers in Canada, I suggest that you take few seconds and take a deep breath. Breath in that Canadian air. Isn’t that good? That’s because you are breathing freedom–freedom from the tyranny of the United States.

Bear in mind also the ramifications of these legal tender coins for Form 8854. The current retail buy price of the Maple gold (1 oz of super fine gold, purity of 0.9999) is about $1650 (See Canadian PMX in the Toronto Area), but its face value under legal tender laws is $50 CDN. So let me ask the question: when reporting on Form 8854, does one report the legal tender value or the intrinsic value of legal tender coins? If you had ten million US quarters, you would have to report their face value on Form 8854 (US $2.5 million). It would be illegal to report only the intrinsic value of the coins (ca. $500,000). This is because the US quarter is a legal tender coin and its reportable value is what is marked on the coin. So therefore, if you have 6,000 Gold Maple Leaf coins, you would be required to report CDN $300,000 on Form 8854. Accuse me of being a structuralist vis-a-vis United States law. Just do it! But I am obeying the laws of Canada where I live.

There are some people who say that gold is not a good investment, such as the crony capitalist extraordinaire Warren Buffet. Others point to the gold chart and say that this is why gold is a bad investment. Well, I admit that that argument is slightly counter-intuitive.

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Goldman Sachs says gold will go down $500: LOL

The Financial Post has repeated a Business Insider article about Goldman Sach’s prediction that gold will go down $500.  Here is my comment:

The National Post loses credibility with these Business Insider “articles”. Henry Blodget, the founder of Business Insider lost his right to trade in the US when he openly pumped dot.com stocks but then said privately that they were worthless. Others are just partisan hacks who write anything to make the Obama administration seem credible or the US economy seem stable.

The facts are that the interest rate can’t go up because that would cause the economy to collapse. The United States can’t stop monetizing its debt because it has too large a debt, too large a budget deficit and unfunded liabilities in excess of 60 trillion dollars. So the factors which cause the gold to go up are actually becoming stronger not weaker.

Goldman Sachs is one of the banks that is trying to manipulate the price of gold down, and their report that gold will drop $500 is a case of short and dump on–i.e., the opposite of pump and dump–in short and dump on, you first short something, then you loudly claim as publicly as possible that it is going to go down for whatever reason.

When I went to the Canadian PMX in December there were no one oz. coins or bars of gold or silver. They said they would have delivery in January, which they did around the second week. Get it while you can. Imagine the price of gas went down to 50 cents a litre but you went to the gas station only to find out that it was going to be a couple weeks or more before they had any gas. Well, a lot of good it does to have falling prices if there is none to be had. The prices of gold and silver are manipulated and the world markets are a broken price setting mechanism. That is because of the large short positions (paper gold) sold by the bullion banks. While there is abundant paper traded every day, the actual physical gold and silver is scarce.

Price setting mechanism for gold and silver is broken

The law of supply and demand should dictate that when a physical commodity is scarce and there is unsatisfied demand, that the price of that commodity will increase. Yet in the last few weeks, the world market price for the scarce commodities of gold and silver, which are still at least a week away from physical delivery in our local Canadian PMX,  has shrunk.  How is this lower price helping to assure that buyers and sellers are able to make transactions?  Lower supply of the physical item should result in a higher price, and instead, we see the price go down. Clearly, the price setting mechanism is broken, for if there is supply but no demand, the price goes down.  In this case, we have great demand but no supply.  So the price should go up.  The fact that the price has gone down is proof that the gold and silver markets are manipulated and not free.

Paper-Gold Fraud Now Out In The Open by Jeff Nielson

In Paper-Gold Fraud Now Out In The Open, Jeff Nielson makes the point, that I made in an earlier post, that the market price of gold is manipulated, offering the supply crunch of physical gold as the proof.  Here are some interesting tidbits:

The virtues of (actual) “free markets” are well-known to anyone familiar with basic market dynamics: they self-correct. If supply exceeds demand, the price falls to a sufficient level to discourage more supply and encourage more demand – until those simultaneous dynamics achieve equilibrium: supply and demand matching, with prices stable.

Conversely, where demand exceeds supply; prices must rise sufficiently so that more supply is encouraged and more demand is discouraged, until once again equilibrium is achieved. Thus a permanent supply-deficit is ipso facto proof of price-suppression.

The problem with the price-suppression of any kind of physical “good” is always the same, one inevitably runs out of inventory as the repressed supply and excessive demand caused by artificially low prices means that buyers will always outnumber sellers.

Now this should help explain why investor grade bars and coins are not available at bullion stores–the price is manipulated too low.  Buyers are readily available but sellers are scarce, and so physical metal is not available.

Disclosure:  I own Sprott Physical Gold Trust and Sprott Physical Silver Trust

Fear a normal US dollar correction

The US dollar is correcting against gold this morning

Stockhouse has a great piece this morning, Don’t fear a normal gold correction, except that is exactly wrong. Gold doesn’t “correct”. Gold is real money with intrinsic value that has been of great worth for thousands of years. The dollar is a fiat currency with only symbolic value and it is constantly going down in value against real goods like precious metals, oil and food. So if anything, the United States dollar, like all fiat currencies, to the degree that anyone accepts them in exchange for real goods and services, is technically in bubble territory. Here, we see in the inverse Kitco chart, that this morning, the dollar is correcting against gold. This correction will continue with a high degree of volatility (meaning that it won’t be a straight line down), until the US dollar is worth nothing and people will stop attempting to determine the value of gold and other real things in dollar terms.