In the same category

Precious Metals ETFs Lack Proper Insurance

IMG Auteur
Published : June 02nd, 2009
566 words - Reading time : 1 - 2 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Gold and Silver

 

 

 

 

Thinking of precious metal ETFs? Then you'd better think again. Can't you see the yellow caution light that is flashing?


I would like to explain the difference between investing in the actual metal versus precious metal ETFs. One should completely realize when buying a precious metal ETF, it is simply a representation of the price in gold or silver. Investing in precious metals entails buying the real metal directly or through a program that offers the right to receive physical metal in deliverable form upon liquidation with no conditions. What is overlooked by most professionals?


One of the items that I read in the prospectus of the gold and silver ETFs that concerns me relates to the reported expenses of the fund. I am a professional expert in the storage and security of gold and silver. I run a fully segregated and insured storage program that is independent of the financial system. I also run a very unique physical gold and silver bullion fund that takes delivery of all physical metal, as well as, stores and insures the metal outside the financial system in fully segregated and armored vaults. I am very knowledgeable with the cost of insuring and securing physical metal.


The expense ratios for many of the ETFs and other funds are very telling. Many products want to have the lowest fee to attract today's cost conscious investor. However, there is an old saying, "You get what you pay for". I will take the SPDR Gold Shares "GLD" for example. They claim the custodian charges .10 % or 10 basis point to properly safeguard the gold. A qualified custodian must properly store the physical metal through the use of very specific security controls such as cameras, sensors, armed guards, etc. However just as important is the insurance which would protect the facility and owner of the metal in the event of a breakdown in the security controls of the vault.


What is fascinating is the unbelievably low cost the SPDR Gold Shares pays for this security and insurance. Lets forget about the cost of simply providing a secure facility to store the gold. At these level of assets, there is only one company in the world that insures physical precious metals in armored vaults. I have been told there is no way this insurance company would charge a meager 10 basis points annually for an "all risk" policy. That is equivalent to insuring a car worth $10,000 and its driver for ten dollars a year. No insurance company could ever make enough money to cover the risk of loss on that policy except maybe AIG. Even some of the largest custodians for valuable assets pay a minimum of 15 to 25 basis points just for an "all risk" insurance policy. Personally, I question any program that stores their metal at a financial institution. In many cases, the financial institution is internally insuring much of the gold it stores. The problem with that is, if the institution runs into financial trouble the owner of the metal has no protection against the loss or damage to the items being stored. And isn't the idea of owning gold and silver a hedge against a failure in the financial system?


That is why our programs store all physical gold and silver outside the financial system in independently insured vaults.


Bob Coleman

Dollars and Sense

 

Also by Bob Coleman

 

 


 

 

 

 

<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Bob Coleman is the managing member of Profits Plus Capital Managment, LLC and the President of Idaho Armored Vaults, LLC. Mr. Coleman is a renown expert in the delivery of and safe storage for precious metals. Mr. Coleman has been quoted in the Wall Street Journal regarding the importance for taking physical delivery of gold and silver. Mr. Coleman writes many distinguished articles which have been published on many internet sites such as FinancialSense.com, Goldseek.com, 24hgold.com, and Silver-Investor.com. Mr. Coleman has been a guest commentator on nationally syndicated radio programs regarding the economy and precious metals. Prior to owning his Registered Investment Advisory Company, Profits Plus Capital Management, Bob Coleman was a Vice President for Morgan Stanley Dean Witter. Mr. Coleman was instrumental in developing the retirement and pension plan division for the West Coast region. Mr. Coleman was the scheduled speaker at Morgan Stanley Dean Witter's regional summits. Mr. Coleman is the financial analyst for ABC affiliate ,KIVI Channel 6. Mr. Coleman has been recognized in Washington D.C. for Business Man of the Year in 2003 and has been directly involved in the financial markets since 1992.
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Take advantage of rising gold stocks
  • Subscribe to our weekly mining market briefing.
  • Receive our research reports on junior mining companies
    with the strongest potential
  • Free service, your email is safe
  • Limited offer, register now !
Go to website.