Gold bullion banks offer two types of gold accounts – allocated and unallocated:
Effectively like keeping gold in a safety deposit box, this is the most secure form of investment in physical gold. The gold is stored in a vault owned and managed by a recognised bullion dealer or depository. Specific bars (or coins, where appropriate), which are numbered and identified by hallmark, weight and fineness, are allocated to each particular investor, who pays the custodian for storage and insurance. The holder of gold in an allocated account has full ownership of the gold in the account, and the bullion dealer or depository that owns the vault where the gold is stored may not trade, lease or lend the bars except on the specific instructions of the account holder.
One allocated storage provider that I highly recommend, and will continue to recommend, is BullionVault. The main reason is that they have such great rates, and is very friendly to us smaller investors. You can purchase gold in quantities as small as 1 gram. If you’re serious about gold investing just check out the BullionVault website and find out more about the benefits they offer. There is way too much detail to include here, but suffice it to say this is one of the best ways to own gold that I’ve found – probably even better than physical ownership.
Investors do not have specific bars allotted to them (unless they take delivery of their gold, which they can usually do within two working days). Traditionally, one advantage of unallocated accounts has been the lack of any storage and insurance charges, because the bank reserves the right to lease the gold out. Now that the gold lease rate is negative in real terms, some banks have begun to introduce charges even on unallocated accounts. Investors are exposed to the creditworthiness of the bank or dealer providing the service in the same way as they would be with any other kind of account. As a general rule, bullion banks do not deal in quantities under 1000 ounces – their customers are institutional investors, private banks acting on behalf of their clients, central banks and gold market participants wishing to buy or borrow large quantities of gold.
My personal bias is that this type of gold ownership should be eschewed at all costs, but then again for some of you this just might be the best solution.
Other opportunities for smaller investors include:
Gold pool accounts
There are alternatives for investors wishing to open gold accounts holding less than 1000 ounces. For instance, in Gold Pool Accounts – where you have a defined, unsegmented interest in a Gold accounts pool of gold – you can invest as little as one ounce.
One such gold pool account is offered by Kitco and is available at this link:
There are also electronic ‘currencies’ available – linked to gold bullion in allocated storage – which offer a simple and cost-effective way of buying and selling gold, and using it as money. Any amount of gold can be purchased, and these currencies allow gold to be used to send online payments worldwide.
The most prominent gold currencies are:
Liberty Reserve: http://www.libertyreserve.com
Webmoney Gold: http://www.wmtransfer.com
I believe that’s all of them. If I’ve missed some then someone please let me know.
Gold Accumulation Plans
Gold Accumulation Plans (GAPs) are similar to conventional savings plans in that they are based on the principle of putting aside a fixed sum of money every month. What makes GAPs different from ordinary savings plans is that the fixed sum is invested in gold. A fixed sum of money is- withdrawn automatically from an investor’s bank account every month and is used to buy gold every trading day in that month. The fixed monthly sums can be small, and purchases are not subject to the premium normally charged on small bars or coins. Because small amounts of gold are bought over a long period of time, there is less risk of investing a large sum of money at the wrong time. At any time during the contract term (usually a minimum of a year), or when the account is closed, investors can get their gold in the form of bullion bars or coins, and sometimes even in the form of jewellery. Should they choose to sell their gold they can also get cash
If you’re wondering why in the first place should you should keep a portion of your wealth in gold, then you really must check out this Free Gold Report – In Gold We Trust