How To Buy Gold
By Adrian Ash
July 20, 2007
Why buy gold – and how to
buy gold today...?
WHY ARE MORE and more private investors
choosing to buy gold today?
"People rightly Buy
Gold when they see inflation ahead," said William Rees-Mogg,
a former advisor to Margaret Thatcher and editor of the London Times,
at a recent meeting of private investors in the City.
In fact, with the world's major central banks now
struggling to maintain their inflation targets, the current lull
in
Gold Prices could prove a "table banging
opportunity" to buy gold in "decent amounts" says
John Reade at UBS.
But what's the best way to go about Buying
Gold? Type "Buy Gold" into Google, and you'll be
met with a huge range of choices. Most carry their own
advantages and drawbacks, depending on your aims and concerns.
Here are the four options now open to private investors wanting
to buy gold today:
Buy Gold for Physical Possession
Buying gold to hold in your hand remains the
ultimate in tangible wealth. But the big problem with storing
gold coins at home or buying gold bars to keep at your bank is
the loss of what professionals call "integrity". Gold
stored and traded by professional bullion dealers always comes
with an absolute guarantee of its history, weight and purity. If
you buy gold outside that professional system, your gold will
lack this guarantee – and loss of integrity is the single
greatest cost in private gold ownership.
That's why gold coin dealers charge such wide
spreads between the price to buy gold and the price to sell it.
In Europe and the US, expect to pay spreads of 4% and above,
both on purchase and sale. For modern-day bullion coins, such as
the Chinese Panda or Australian Nugget, don't be surprised to
get only "melt" value when you come to sell, even
though you will pay up to 16% above the spot price of gold when
you buy.
Buy Gold through a Storage Programme
If you're willing to cede outright ownership when
you buy gold, then an "unallocated pool programme"
will let you buy gold as an entitlement only, stored at low
cost, with a view to taking physical delivery sometime in the
future. Kitco.com currently quotes a 1% dealing spread on its
pool programme; the Perth Mint Certificate is underwritten by
the Australian government. It also offers an
"allocated" programme, where buying gold bullion
outright in your name costs an extra 1.5% per year in storage
fees, plus a $50 flat fee with a minimum gold investment of
$10,000.
Buy Gold via a Trust-Based Fund
The exchange-traded gold funds (ETFs) launched over
the last half-decade let you track the price of gold – if not
actually buy gold to own it outright – by trading a security
on the stock market. The leading ETFs buy gold and hold it in
trust at HSBC in London; ask your stock broker about LxyOr GBS
in the United Kingdom and Europe, or StreetTracks GLD in the US.
These shares can only be traded during your local stock market
hours, and like the Perth Mint, they will also require a
transfer of cash into dollars if you're not buying gold from the
US.
Another drawback of buying gold through the gold
ETFs is their daily shrinkage. These funds all charge 0.4% per
year to cover storage, insurance and administration fees,
deducting this fee from the physical gold backing each share.
But while the amount of gold backing each share shrinks a little
each day, the title on each share remains the same – typically
one-tenth of an ounce. Over time, this gap only grows wider; the
shares in Australia's Gold ETF now represent less than 9.876% of
an ounce after just four years. By 2010, they will come to
represent less than 9.75%. The sponsors of the leading gold ETF
programs are likely to consolidate the shares soon, repricing
them to account for this shrinkage.
Buy Gold Like a Professional Dealer Buys Gold
Thanks to the cost-savings enabled by the internet,
there is now a way you can buy investment-grade gold bullion,
outright in your name alone, at low cost. Stored in secure
professional vaults in London, New York or Zurich (you choose
which location you prefer), gold held at BullionVault
costs just 0.12% per year, with insurance included, starting
from a minimum of only $4 per month.
Buying gold at BullionVault
couldn't be simpler, nor more secure. The site lets you set your
own prices using a 24/7 online order board, and it gives you
instant settlement with zero credit risk. One investor who chose
to buy gold at BullionVault recently wrote to say that:
"Having ownership of physical gold in BullionVault's
London vault is better than having AAA-rated bonds. Yes, we
could have saved a miserly 0.12% per year by buying unallocated
gold with a bullion dealer, but we now call that 'sub prime'
gold!"
To find out more about Buying
Gold at Low Cost Today, be sure to visit BullionVault.com
and claim a complimentary gram of free gold – stored in
Zurich, Switzerland – now...