3 gold buying questions to ask as Brexit shocks price to 3-year highs...
BUY GOLD the wrong way, and you risk destroying its value as insurance for your savings,
writes Adrian Ash at BullionVault.
And protecting your savings, of course, is why you're buying it. And rightly so, as
this analysis shows.
Of course, if this Brexit shock now develops anything like the global financial crisis did, today's new buyers will be very glad they took action at £1,000 per ounce, as prices rise amid the next 4 or 5 years of turmoil.
But the Brexit rush to buy gold above £1,000 per ounce today puts private investors and savers at serious risk of missing out on gold's true returns.
Over the past 5 weeks, gold prices in the wholesale market have risen 17.6% against the British Pound. The returns to people buying retail gold investment products have varied wildly...
...and even before you include the hassle, time and insurance risk involved.
How you buy gold is just as important as when. Because more than any other major asset class, a huge proption of your gold gains can get eaten up by dealing costs.
Before you buy today, ask yourself:
Who will buy my gold from me? What hassles and delays might I face? How wide is the gap between their prices to buy and prices to sell?
Lots of coin and small-bar shops are currently bidding for your business on Google and other search-engine sites.
Indeed, they're bidding up to £8.59 for you just to click on their advert, never mind if you actually go on to become a customer.
That's because, as the table above shows, profit margins in the retail gold investment market can be very lucrative for the provider. But not for the investor.
In contrast, the wholesale gold bullion market of miners, bullion banks, hedge funds, large investment managers and governments doesn't trade little coins or small bars. Not on those costs! Instead, it trades big '
Good Delivery' gold bars, cast by a small and closely-monitored number of large refineries.
These Good Delivery bars weigh around 400 ounces (12.5kg) and come with a guarantee of quality. Because if any bar is ever found to be lighter, or less pure, than the markings stamped onto it state, then the original refiner will make good. Hence the name.
Kept inside specialist vaults – whose managers act as the gatekeepers, rejecting or querying any bars they aren't 100% sure of – these large gold bars are essentially bound in concrete, behind a heavy steel door, guarded by the latest hi-tech motion sensors, plus (in key centres like
London,
New York and
Zurich) immediate armed-response thanks to being located inside the perimeter fence of major world airports.
Sitting there
fully insured, these bars retain their maximum re-sale value right up until the moment they are withdrawn by the latest owner...
...and shipped off to be melted down and re-made into bracelets, wedding rings,
bonding wire for the micro-chips in your smart phone, protective shields
for skyscraper windows, sporting trophies or medals, smaller 100 gram bars, or even little gold coins containing barely 7 grams of fine gold.
The smaller the unit, of course, the higher the manufacturing cost per gram. And the more people between you and the manufacturer, the more you'll have to pay to cover their shipping and handling costs, insurance, and profit margins too.
Hence the table above. It shows you how a private investor buying gold one month ago would have fared now that Brexit is a fact and gold prices have leapt.
The table also shows how much profit you would have made if you'd used the No.1 physical market for private investors online. It makes quite a contrast.
BullionVault lets you trade as little as 1 gram at a time...held inside one of those large Good Delivery bars...held inside specialist vaults in your choice of London, New York, Zurich, Singapore or Toronto.
So on top of the lowest costs, you also get hassle-free investing – and selling – at whatever time of day or night you choose.
Who are we? Founded in 2003 and live since 2005, we have won two Queen's Awards for Enterprise, and been backed by big names in the investment business.
Read more here.
What's involved in buying gold on BullionVault? Simply
register your account here (using just your email address) and you can either buy instantly with your debit card, or make a bank transfer online, ready to buy the moment your funds clear in the segregated Client Bank Account.
You'll then need to add a few details within a couple of weeks. But there's no delay to you buying right away. And the prices you see online are live prices for metal which is already safely inside the vault right now. That gold (or silver) will become yours the very instant you buy. Zero risk of settlement failure, and zero shipping costs or delays.
Most importantly, how will you know your gold (or silver) is where it should be...inside your chosen vault and exclusively owned by you?
Uniquely, and ever since we launched in April 2005, BullionVault publishes
a full Daily Audit of all client holdings, and matches them against the Bar Lists issued by the independent specialist vault operators we use.
Independent assayers then check the Bar Lists, and independent financial auditors then
check and confirm all the documents are correct. There can be no double-counting of client property, your single biggest risk as an owner of value property in third-party storage.
It's this transparency, plus the low costs of using BullionVault, which have made us the No.1 for private gold and silver investors online. Used by more than 61,000 across 183 countries, we now care for over £1 billion of gold for our customers.
Last Friday alone, our online Order Board helped our users trade over £30 million of physical gold and silver. Today they own more gold than most of the world's central banks do.
Alternatively, you could queue up to buy a small gold bar or a handful of coins today, or click to buy them online...and then wait for delivery.
Just accept that you will give away one-third of your gains...if not one-half...or even 83%...by trying to "protect" your savings with products actively targeted at you, the "retail consumer".
Do also remember to check that your gold is covered by your home insurance policy, and doesn't in fact invalidate it.
Either way, please be sure to check the exits from gold before you go in. Today could prove a great day to buy. Buying 1 month ago would have been better. Buying back at last December's 6-year lows – and with the ability to sell instantly, whenever you choose – would have been smarter still.
We don't know which way prices are heading for sure. But we do know you could all too easily worsen your losses, or hurt your returns, buying the wrong way.
