What is depository storage? Do you need it to store your precious metals? Are there any rules surrounding the storage of precious metals in depository storage? These are some of the interesting questions that you may be asking yourself about depository storage, and the good news is that you’re in luck because we shall talk about it in today’s article. If you’d like to find out more, then read on till the end.
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What is a depository?
A depository is a facility in which items are deposited for storage, or for the purposes of storage. It can also be an institution such as a savings association or a bank, in which customers can store currency deposits. There are some depositories that exist as institutions that also hold securities and enable customers to trade in securities.
In most cases, depositories offer security to the customers and provide liquidity to the market. The customers who place their items under the care of the institution that is acting as a depository expect that they will get those items back in the same condition upon request.
More on depositories
As highlighted above, depositories are buildings that allow different consumers and businesses to deposit their funds, securities, or other valuable assets, for them to be kept safely. In most countries, depositories include:
- Financial institutions
Depositories serve different purposes to the public. For starters, they help eliminate the huge risk of an asset owner having to hold the assets by themselves. Banks and other institutions, for instance, allow consumers to deposit funds into well-structured time and demand deposit accounts.
Time deposit accounts are interest-bearing accounts that have specific maturity dates, while demand deposit accounts are designed to hold funds until there is a need to withdraw them, such as what happens with checking or savings accounts.
Customers can also make deposits in the form of securities. Bonds and stocks are two of the most popular securities that you can deposit in a depository. The institutions you deposit your securities in hold them in electronic or book-entry form, or in the form of physical certificates.
Such organizations help to create liquidity in the market. When you, as the customer, give your money to a financial institution such as a bank, you expect that it will hold it for you, and give it to you whenever you need it. The bank may even pay you some interest on the amount that you deposited with them. This is, however, only possible because while holding your money, the bank also lends it to other institutions and individuals in the form of loans or mortgages, and generates more interest.
Some special functions of depositories
One of the special functions of a depository is in the transference of the ownership of shares from one account to another during the execution of a trade. This function helps with the reduction of paperwork that would otherwise be needed to execute a trade and speeds up the entire process.
A depository also helps investors eliminate the risk of holding their securities in physical form since this would open the possibility of loss through theft, damage, fraud, or delay in delivery.
Investors who also want to buy precious metals can do so by acquiring physical bullion, or paper-based precious metal assets. Once purchased, the precious metal assets can be held in a third-party depository. Note that when you purchase gold futures contracts, that you do not own the gold. The gold is owed to you, and can only be accessed at a specific time in the future, based on the terms and conditions of the contract.
The different types of depositories
The 3 main types of depositories you can get served by today are:
- Credit unions – these are non-profit firms that are highly focused on the provision of customer services.
- Savings institutions – these are for-profit firms that mainly focus on offering mortgages, but also offer commercial and credit card loans to their customers.
- Commercial banks – these are the largest type of depositories. They accept deposits from customers and use them to offer different types of loans, including mortgages, commercial and real estate loans.
These institutions get their funds from the deposits that their customers make. If the safety of the assets held in a depository is your main concern, worry not, because they are all insured by the Federal Deposit Insurance Corporation (FDIC). The assets are, however, insured up to certain limits. It is advisable for an investor to check the insurance limits of the depository they want to entrust their assets with, just for their own peace of mind.
Are depositories the same as repositories?
No! depositories are not the same as repositories, as much as the two are often confused for each other. A repository is a place where items are kept for general safekeeping. Unlike a depository, however, the items held in repositories are mostly abstract. You may, for instance, find that data can be kept in a software repository, or a well-structured central location in which are the files are housed. There are different categories of repositories, including those that are used to hold information about:
- Financial services
- Plants and animals
- Human health
- Aircraft, etc.
As you can see, depositories are quite important in the lives of investors, who would most likely be struggling to keep off thieves and other potential risks to their valuable assets.
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That will be all for today’s article in which we have looked at what depository storage is all about, and what you stand to gain from such institutions. Let me know if you have any questions about today’s article. Also, let me know whether you have thought about investing in precious metals and whether you’d need help getting started.
I wish you well,
Eric, Investor and Team Member at Gold Retired!
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