In the past I’ve discussed passbook-type accounts, like the Public Bank gold investment, which are aimed at tracking the spot price of precious metals but ultimately be redeemed in the government issued currency in play. You get a good read of this by simply recognizing that the minimum quantity of metal you have to take delivery of is 5 times as large as the minimum amount to get started, so a large number of folks may never even have enough “metal” to actually get it into their hands. Plus, back in the spring of 2010 there was actually a suspension of the redemption component of the program, which was later renewed.
In lieu of passbook accounts “linked” to gold, you can choose to buy bullion direct from entities that will store the metal on your behalf. I like to get my metal in hand, but some people want others to safeguard it and like to buy bullion direct from companies that inherently store the bullion as part of their business model. Buying bullion direct from someone who sets it aside for you is better, I suppose, than putting money in an account that is intended to mimic precious metal price moves. Note that when you get bullion direct from one of these vendors, you will usually choose between pooled accounts (general storage) and allocated accounts (where your metal is set aside with your name on it).
Theoretically, all of the metal is supposed to be there anyway, so it technically shouldn’t matter which you go with. But, being the realist that I am, I’m nervous about there not being enough metal to go around. It’s easy to sell certificates. It’s also easy to delay using the proceeds to acquire the underlying metal… assuming you can find enough to cover the certificates sold. And even if it’s all “there,” many of these programs are allowed to lend their gold out. What happens in a mass redemption and some of the loaned metal never finds its way home? I have to believe the allocated accounts would receive a bit of priority, and that the missing goodies would come from the generic stash.
Having said that, and though you can tell I’m not crazy about buying bullion direct from these programs, I at least want to introduce you to a few so you can make an informed decision. First, there is EverBank, which offers a $5,000 minimum on a pooled account and $7,500 minimum on an allocated account. Check for current trading fees, storage fees, conversion fees if you want physical possession at some point, and delivery fees. Yes, the fees. You can also look at GoldMoney and BullionVault, but note that physical delivery minimums are no different than ETFs, so you need to be prepared to take delivery of a 400 ounce bar!
If you insist on a certificate program, perhaps my favorite is the Perth Mint Certificate. I want to reiterate, however, that I am not personally invested in this, neither do I see that happening. At any rate, this is the only bullion storage arrangement backed by a government, in this case the state of Western Australia. It will take you $10,000US to begin, but there’s no storage fee for unallocated bullion. This option allows you to diversify into a relatively safe geo-political arena by getting bullion direct from a foreign country (unless you’re Australian) that will store overseas and keep you from having to expatriate your stash.
Having said all of that, we’ve come full circle. Exactly none of these programs are ideal for folks who ultimately want physical precious metal. If you anticipate wanting to have it in your hand someday, I suggest today is the best day. On the flip side, if you are looking to participate in bullion as an investment, there are much better ways to do it. For example, I would recommend an ETF that tracks producing gold companies for greater leverage, yet relative safety. One that tracks juniors is even better, in my book. However, if you want to run the other direction, an even safer alternative over an ETF on producers would be to take a position in several royalty companies, who each function as their own little mutual fund, and yet trade conveniently as a stock.
Source by J. Scott Talbert
Bullion Direct - Direct Into Storage, That Is
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