Online Purchase & Storage of Precious Metals
The technology available in today’s world certainly makes things more convenient. Using the Internet, everyone can now transact just about anything online. This includes the purchase and storage of precious metals.
In evaluating the different online precious metals services, one must consider at least the following criteria:
- The service provider should have a track record that can be verified. Make use of the world-wide-web and search for news about the provider that may indicate financial or fraudulent activity. For providers in the U.S., you can check with the Better Business Bureau to see if anyone has lodged complains or if there are any lawsuits pending. In any case, do the homework and due-diligence necessary prior to investing. (And that is true for any investment.)
- Geographically speaking, where does the provider store the metal? What are the political environments like in those countries where their vaults are located and what are the chances of government seizure of the precious metals held in those vaults? Some providers offer several different vaulting options, thus providing for geographical diversification and exposure to more than one country-specific market.
- What are the fees associated with buy and sell transactions? It is normal for companies to charge commissions and fabrication fees, but excessive fees should be guarded against. A combined transaction fee of less than 5% is reasonable. Anything larger, depending on the situation, should be questioned. The fee structure should be understood prior to making any investments.
- What are the storage fees? And on what basis (monthly or annual) are they charged. What form do the storage fees take? (Do they require a cash deposit to be held, or do they simply deduct a portion of the metal stored in their vaults from your account?
- How closely to the provider’s spot-rate quotations for the prices of their metal compare with the overall precious metals market? This varies greatly among providers and should be understood prior to investing.
- Another thing to look for is that the provider should regularly be publishing results of independent audits showing that they do indeed hold the precious metals they claim on behalf of their clients.
- Finally, and this one is extremely important, there should be some method the provider offers to allow the cutomer to take physical delivery of the metal if desired. Not all providers offer this, which would make them an electronic-only bullion dealer. The terms under which a physical delivery can be requested as well as the fees involved should be completely understood prior to making any investment.
There may be other considerations depending on the investor’s needs, but this should serve as a necessary first line of thought to be given to this type of investment.
Below is a table comparing the author’s personal experience with 3 of the more popular and reputable precious metal online storage providers.
|Positives:SilverSaver® is unique in that it offers its customers Rewards, which is a program that pays people for signing up friends and family.
- Every time a referred client makes a purchase, the SilverSaver® Rewards program ensures that the referrer gets a small ‘kick-back’ (in gold or silver).
- SilverSaver® stores it’s metal at First State Depository located in Wilmington, Delaware.
- Easy sign-up. Adding bank accounts for transfers is easy too!
- Customers can purchase either gold or silver on a one-time basis or on a recurring schedule.
- Customers can sell their precious metals for cash at the daily SilverSaver® Base Rate without any fees or commissions. This is much better than other providers & dealers, which typically take 3-10% of the final sales amount!
- Customers can take delivery of their gold or silver in many different forms (each having their own associated fabrication fees).
Disclaimer: The author of this article is using the SilverSaver® Rewards program and if you click through these links provided to SilverSaver® and create an account there, the author will benefit, but there is no extended cost to you.
- SilverSaver® seems to be only available to U.S. and Canadian customers.
- The storage fees seem reasonable (0.02%/month), but their premium (the amount the customers pay on top of the price of the physical metal in order to cover expenses and commissions) is based upon a graduated scheme, currently ranging from 2.99% to as much as 7.49%. But this amount is a combined amount over a two month period, so the more the customer buys, the premium rate gets better.
- The SilverSaver® Base Price changes every business day according to the real physical market. SilverSaver® indicates that it is “historically comparable to internationally recognized silver prices such as the London Daily Fixed and the Handy & Harman Daily Fixed prices.” When a customer places an order, he/she only has an approximation of the Base Price they will end up paying for the metal. This is due to the fact that when an order is submitted, the actual Base Price for the date of purchase hasn’t been established yet. This may not be suitable for all investors, but for those wishing to utilize Dollar Cost Averaging during this precious metal bull run, it is a good investment mechanism.
|Positives:Once past the initial hassle of getting a GoldMoneyaccount set up (see below), the investor is rewarded with a vast array of investment options.
- It is possible to invest in gold, silver, platinum & palladium.
- Trading markets and vaults are globally dispersed – located in London, Zurich & Hong Kong.
- Two different vault depository companies are used – VIA MAT and G4S.
- Metals can be moved from one geographic location to another or from one type of metal to another (for a fee, of course).
- Buying and selling metals can be done with a wide assortment of currencies – USD, CAD, GBP, EUR, CHF, JPY, AUD, HKD, NZD.
- Premiums charged for precious metals depend on the geographical location of the market as well as the amount of metal being purchased. Most are reasonable expectations, given the variety of options.
- Physical delivery is possible and in multiple forms.
- Storage fees are mostly reasonable, but note that they vary according to geographic location and vault.
- Setting up the intial account requires verification steps, which include creating photo copies of two forms of identification and submitting to GoldMoney prior to funding the account. This could also be viewed as a positive feature as it serves to protect both the investor and GoldMoney, but it is a bit time consuming.
- GoldMoney is headquartered in the British Channel Islands (UK). So for most investors outside the UK, it is necessary to initiate an international wire transfer prior to purchasing any precious metals.
- Since this is considered a “foreign financial account” by the U.S. Department of the Treasury, if the account has a value of $10,000 or more during the year, US investors must file form TD F 90-22.1 (FBAR), which is separate from the federal income taxes filed to the IRS. (More accurately, the $10,000 is an aggregate amount for the total sum of all foreign accounts the U.S. investor may own. If the total is $10,000 or more, every foreign account will need to be listed on the form above.)
|Positives:Again, after the initial account set-up, Bullion Vaultoffers the investor a unique precious metals trading platform.
- Trades can be made for either gold or silver.
- Exposure to London, Zurich & Hong Kong markets.
- The Bullion Vault web platform allows the investor to see live streaming markets in each geography. Bid & offer prices as well as market depth are visually displayed.
- The investor is able to easily make trades instantly or may even place bid or sell offers, which is something other providers lack.
- Storage fees are reasonable and are transacted using the available cash in the account.
- Initial account set-up is time consuming and involves making copies of at least two forms of identification and submitting them to Bullion Vault.
- Bullion Vault is headquarted in London, so an international wire transfer is necessary for most investors prior to purchasing any metal.
- The same foreign account U.S. regulations apply as already mentioned above using form TD F 90-22.1 (FBAR).
- Changing a funding bank account is not convenient. One must basically go back through the account set-up process again. Supposedly, this is to fight against money-laundering and to protect the customer as well as Bullion Vault.
- Taking delivery of the precious metal is only possible if it becomes absolutely necessary due to bank insolvency or some similar catastrophe.
|Information as of September 7, 2011