Gold Certificates - Pros And Cons

By Author: Stuart Brian
Total Articles: 41
Comment this article

Gold Certificates And Their Pros and Cons

What are gold certificates? They are certificates that prove you are the owner of gold that you don't physically hold. Normally, these certificates are issued by financial institutions from where you buy gold, and those finance establishments physically store the gold for you. At least that's how it's intended to happen.

Having certificates of possession is similar to placing your cash in a gold pool account. You hand over your cash to the company who executes the program, and when you cash out they give you whatever returns you'll have accrued based on the present gold price. But they might not keep any physical gold for you. Rather, they are thought to use your cash, and put it into whatever they are expecting to get the most impressive returns instead of in gold, pay you the returns for gold, and keep the remainder of their gains for themselves. That begs the question of what occurs if they make some poor investment choices and lose your money, and are not able to give you your returns on the gold price? I am not sure. What occurs if the establishment goes ...
... broke what would happen to your investment? If it's's not physical metal, I believe it might disappear.

There are some positive aspects of gold certificate programs. One is that you can fundamentally buy gold at the official spot price without having to shell out for any premiums for physical metal or pay any holding costs. Those premiums and holding charges can cut into your profits quite a lot, so gold certificates represent an alternative that offers you the most productive returns.

One option for gold certificates is the Perth Mint's gold certificate program. The Perth Mint's program is fully guaranteed by the governing body of Western Australia, which allows somewhat more of a feeling of safety than possessing gold certificates from a private establishment that could go bankrupt and see your virtual gold vanish. The Perth Mint's gold certificate program charges 1.75% charges on all purchases plus a $10 certificate fee, and a 0.75% fee when you sell. This is much lower than the current premiums on physical bullion which have skyrocketed during the current precious metals deficit. There aren't any storage fees. There is a minimum initial investment of $5000 Australian dollars. The Mint claims that each ounce you buy remains on the premises of the mint and can't be removed. Your investment is both government backed and insured by Lloyds of London. That is for basic unallocated storage ( though again they do say they store gold on grounds for you, in some form ).

The Perth Mint also offers allotted gold storage programs, though this needs both storage charges and a fabrication charge ( to shape the gold into whatever form you choose to have put aside for you ).

Whether or not you invest in gold certificates will depend on how much trust you are willing to have in an establishment to store your bought gold product for you. I am personally someone who is prepared for the worst while concurrently not paranoid, and looking for the best returns possible. Which has brought me to the belief that possessing a heap of bullion coins or cars as the base of your gold portfolio is vital, but that on top of that base it is ok to broaden and own certificates or other kinds of gold accounts that do not have allocated storage. I actually do not play a role in the Perth Mint program or similar ones, but I do have an e-gold account. I suspect these are ok so long as you know that there's some degree of risk, and pay attention to the markets while being willing to sell your certificates or e-gold if market demand really increases. I might personally feel little anxiety in investing in a Perth Mint account, but I would probably stay away from a fiscal institution's certificate program.
Gold Certificates are another option for diversifying your gold portfolio. Learn more about them and other issues related to precious metals at The Gold Market.