Should storage fees deter precious metals investors?

Should the cost of storing physical gold and silver deter people from considering precious metals as an investment option?

Idaho Governor Brad Little thought so.

Last year, he vetoed a bill that would have given the Gem State an option to invest up to 7.5 percent of the state’s “idle moneys” in physical gold or silver. In effect, it would create a process for the state to hold reserves of gold and silver along with its other investment assets.

The governor’s stated objection to the legislation was “the many additional costs that will be borne by taxpayers for the storage, safeguard, and purchase of commodities such as gold or silver.”

Under current Idaho law, the treasurer is authorized to hold cash, as well as invest "idle moneys" into U.S. bonds, treasury bills, interest-bearing notes, corporate bonds, and money market funds. In other words, paper.  And those paper assets not only have counterparty risk, but also their yields tend to be below the rate of inflation.  That's called a "negative real return."

Last week, an investigative journalist in Idaho published a report showing that Idaho lost out on more than $200 million over the past year because of the state's failure to own gold.  The yellow metal has risen almost 50 percent since Little's veto... truly uncanny timing!

The storage "problem"

Are Little’s supposed concerns about the cost of precious metals storage justified? And how much does it actually cost to store gold and silver?

Of course, storage costs do exist. But they are not high, and for large holdings, they are really small. And it’s important to remember there are costs associated with investing in any assets, including those already authorized under Idaho state law.  Dealer fees on bond offerings are typically way more than the costs associated with storing and insuring gold.

When individuals or entities invest in bonds or equities, they incur broker fees, commissions, account maintenance fees, etc. These costs can vary significantly depending on the broker, the size of the portfolio, and other factors. In general, investors can expect to pay on average between 0.05 to 2 percent of the total assets under management in fees. At the high end, an investor could lose as much as $2,000 annually to fees and other charges on a $100,000 portfolio.

The reality iss that Little, a liberal Republican, didn't do his homework at all.  And political insiders assert he actually vetoed the bill out of spite toward the Idaho conservatives who for the mostpart vocally supported it.

And by failing to properly examine the gold reserves option, Governor Little arguably breached his fiduciary duty to safeguard Idaho taxpayer funds.  In retrospect, the governor's veto in early 2024 looks like quite the blunder today.

The annual average cost of vault storage can vary significantly depending on the provider, the location, and the specific services offered. Generally, the annual costs range between 0.3 percent and 0.75 percent of the total value of the gold being stored.

The storage fees at Money Metals Exchanges' state-of-the-art bullion depository typically run less than 0.49 percent. That means the cost of storing $100,000 in gold would average around $490 per year. This fee includes “all-risks” insurance coverage for the full value of the metal stored in the vault.

Money Metals’ storage fees for gold or silver held in an IRA are even less at 0.29 percent. And it is likely that a very large investor, such as the state of Idaho, would enjoy much lower storage rates than the average investor.

The inflation factor

While the cost of storing gold and silver isn’t zero, it certainly isn’t a bank-breaker. This is especially true when you consider how much is lost due to inflation by holding cash.

The current annual CPI is 2.4 percent. If you accept this data (and you shouldn’t), it means the purchasing power of money sitting in Idaho's bank accounts is losing 2.4 percent of its purchasing power every single year. When rates are low, the interest paid by banks to account holders often doesn’t even cover this monetary devaluation. When the CPI was in the 9 percent range, real interest rates were deeply negative. Under these conditions, the state was effectively paying banks to hold its money.

This is why it is wise to have gold and silver on the table as an investment option to serve as an inflation hedge. Price inflation is always stealing the value of the dollar.

In 2024, gold gained over 26 percent. The yellow metal edged out U.S. stocks to rank first among traditional asset classes last year. And gold has increased another 26 percent so far in 2025.

The state of Idaho couldn't take advantage of these gains because gold and silver aren't investment options. And because Little is worried about a less than half a percent cost in storage fees (and the state’s cost would almost certainly be less than that), it won't be able to take advantage of future gains.

Meanwhile, the state’s cash holdings are earning less than 2 percent (assuming a generous 4 percent return on a money market fund).

Nobody is suggesting that the state of Idaho should put all its funds into precious metals. The bill was intended to expand the state’s investment options and to allow it to shield some of its assets from the pernicious and relentless effects of price inflation. After all, isn't the most oft-cited bit of financial advice to "diversify" one's holdings? 

Investors always need to factor in various costs associated with a given investment option, including storage fees for precious metals. There may be times it doesn't make sense to hold a lot of gold and silver. But there are certainly times (such as the last 18 months) when you absolutely want gold and silver -- and a lot of it!

It is foolish to take gold and silver off the table simply because of extremely modest storage costs. 

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