I’ve previously written about programs like the Public Bank gold investment, which are basically passbook accounts intended to track gold price movements, but ultimately be redeemed in the native currency. Indeed, the redemption minimums are 5 times as large as the minimum investment to open an account. Moreover, an incident in the spring of 2010 displayed a problem with redemption in physical metal.
Bullion Direct From Bullion Storage Outfits
As an alternate way to invest in precious metals, there are a variety of programs that allow you to buy bullion direct from companies designed to store your metal for you. I personally prefer physical delivery myself, but if you can not or will not safeguard your own precious metal stockpiles, then you must purchase bullion direct from someone who will do it for you. And these programs that warehouse actual metal you are buying are better, in my mind, than “investing” in financial instruments intended to track metal prices but be cashed out in fiat currencies. When you get bullion direct from one of these outfits, you generally choose between allocated accounts (with your name on the pile of metal) and unallocated accounts (pooled accounts where your bullion is in there, somewhere).
As you might wonder, it’s certainly true that the sum total of all bullion ought to be there regardless, in which case it shouldn’t matter which you choose. At the same time, I’m a bit skeptical and an not exactly sure that there’s even enough metal to satisfy all supposed purchases. See, anyone can sell you “paper” bullion. And even if the vendor could find the metal you “ordered,” what’s to stop them from floating on your money and delaying purchase? To make matters worse, keep in mind that it’s not uncommon for these programs to be able to loan out the gold and silver they do have as per the fine print you never read. This raises the question as to what could happen in the event of widespread redemption requests if loaned metal never comes back from the borrowers. It’s probably not unrealistic to expect allocated account holders to be treated a bit better, with the missing metal apportioned to the unallocated general account.
Bullion Direct Options
With all that in mind, it’s probably obvious that I’m not the biggest fan of getting bullion direct from these programs, but I nevertheless want to review some of them to help you make an educated decision. One option is the EverBank account, which requires a $5,000 initial investment with their pooled account and $7,500 to start an allocated account. You will simply want to look into their current fees for trading, storing, and converting in the event you want physical delivery, in which case there are also delivery fees. There are, for sure, plenty of little fees. A couple of other options exist with GoldMoney and BullionVault, but you’ll have to take an ETF-sized 400 ounce if you want physical delivery, which is a lot of metal.
Bullion Direct Beats Border Confiscation
If you really want to go with a certificate program, maybe one of the best is the Perth Mint Certificate. Again, I do not use “paper” metal programs myself. Nevertheless, I hasten to point out that the Perth Mint Certificate is the only metal storage program that is government-backed, with the state of Western Australia supporting this. You do need $10,000 American dollars to start, but the nice thing is that there is no storage fee for unallocated bullion. So, if you are not in Australia, this is a nice way to get some of your “metal” out of your native land by simply getting bullion direct from another country to begin with, rather than having to expatriate your metal.
At the end of the day, we’re more or less back where we began. I’m not convinced that any of these programs are best-suited for people who really want to hold bullion in their hand for its inherent benefits. So, if you think you’d someday want to take physical delivery, I’d make someday today and get it done. Yet, even if you see precious metals as a mere investment class, there would be more parsimonious ways to do this. For instance, there are a number of ETFs that gold producers for what I see as a safe investment with greater leverage. Frankly, I like an ETF on junior mining companies even more, for greater leverage. On the flip side, if you don’t want to take on any more risk than necessary, think about royalty companies that trade like a stock but offer diversity of mutual funds.