BullionVault vs physical-in-hand vs ETF ?

hydnum_repandum
By hydnum_repandum on Fri, Oct 31, 2014 - 6:19am

[UK based but of interest to all.]

It is common knowledge that 'paper' gold is not a substitute for physical metal because in times of crisis it may well be worthless. This post takes that as a given. I want to discuss the various different ways to get exposure to physical metal and their relative merits. This is not discussed enough.

As I see it, there are three ways to own physical gold (and silver):

  1. hold physical bars and coins in a safe place, where you can touch it
  2. use an account like BullionVault (or GoldMoney) that holds allocated physical gold on your behalf
  3. use a physical-gold ETF (like ETFSecurities' Physical Swiss Gold ETF)

 

 

1 pros: no counterparty risk, zero involvement with the financial system; almost invisible to government

1 cons: you have to pay sales tax (VAT, 20% in UK) on silver for this option (not gold); high transaction costs (there are big spreads between the sell and buy price for physical bars and the buyer needs to test them for purity etc - usually at cost to seller); it may be lost of stolen if held at home; cannot be held in a tax-free savings account (ISA) or pension account (SIPP)

 

2 pros: no sales tax on silver; low transaction costs; convenient, online, can be managed from anywhere with an internet connection; very simple because it is not a financial security just a lump of metal

2 cons: in event of collapse of banking system (or internet) you have no access to your metal;  you need to trust the custodian; cannot be held in a tax-free savings account (ISA) or pension account (SIPP)

 

3. Note I am talking about *physical-backed* ETFs, not 'paper gold' ETFs such as GLD

pros: no sales tax on silver; low transaction costs; convenient, online, can be managed from anywhere with an internet connection; can be held in a tax-free savings account (ISA) or pension account (SIPP)

cons: in event of collapse of banking system (or internet) you have no access to your metal; this is still a financial security so intrinsically suspect (the issuer may lie about the gold holdings, or the gold may 'disappear' in a time of crisis)

 

I invite constructive comments on the above.

,

6 Comments

kanute's picture
kanute
Status: Bronze Member (Offline)
Joined: Mar 21 2014
Posts: 34
I hold SGOL and SILV in my

I hold SGOL and SILV in my 401.  My Financial Advisor thinks I'm nuts to not be pouring money into equities right now.  I think time will tell.  I would much much rather hold physical, but I need the tax advantages at this time through the 401.  

I guess that if gold and silver shot up drastically, that would indicate something bad happening in the overall market, at which point I could sell the paper and buy equities and wait for another flurry of stimulus.

phecksel's picture
phecksel
Status: Silver Member (Offline)
Joined: May 24 2010
Posts: 204
kanute wrote: I hold SGOL and
kanute wrote:

I hold SGOL and SILV in my 401.  My Financial Advisor thinks I'm nuts to not be pouring money into equities right now.  I think time will tell.  I would much much rather hold physical, but I need the tax advantages at this time through the 401.  

I guess that if gold and silver shot up drastically, that would indicate something bad happening in the overall market, at which point I could sell the paper and buy equities and wait for another flurry of stimulus.

My Metal's IRA holdings are separate from the IRA my financial advisor manages.  He took great glee a couple of months ago showing me how well my portfolio that he manages has grown while my metals IRA is down.

I haven't resolved the issue of how to safely hold the metals in my hot little paws.

-Casey-'s picture
-Casey-
Status: Bronze Member (Offline)
Joined: Nov 12 2013
Posts: 64
first bank of folgers

I wrestled with this and ultimately decided holding physical in a large safe I can access anytime (outside the banking system) was the best option for me, nothing else let me sleep as well at night.  There is the security issue but the zombies will have to go through me to get it and I'll have worse things to worry about at that point. We don't have the VAT problem so that helps.

My 401k "advisor" also is gleeful when he tells me how crappy the metals are doing.  Just yesterday I though I was safe buying the dip after two down days and picked up a monster box of ASE's.  Today I feel like throwing up, obviously.

james_knight_chaucer's picture
james_knight_chaucer
Status: Silver Member (Offline)
Joined: Feb 21 2009
Posts: 160
Wouldn't you have to pay

Wouldn't you have to pay capital gains tax on bars in the UK?

tomccoy1's picture
tomccoy1
Status: Member (Offline)
Joined: Nov 8 2010
Posts: 21
Why Not Use Two or Three of the Options.

Why not keep coins/bars in your safe at home, for peace of mind, if the world as we know it ends.  But additionally, enjoy the conveniece of Bullion ETF's/Trusts.  (I think the Sprott Gold and Silver Trusts fall well into this category (PSLV and PHYS).   Gold Money and Bullion Vault do roughly the same thing as the ETFs in my mind.  

I think it comes down to the dollar amounts you have in mind.  

You may feel differently about sleeping at night with (for example) $10,000 in bullion in your home safe versus $1,000,000 in your home safe. 

Certainly the convenience of an electronically controlled investment like the ETF has tremendous advantages.  In say a very extreme situation where you wanted to move funds to another country, I would feel alot more comfortable moving funds overseas electronically, rather than taking a flight to Singapore, with a quarter million in gold and silver bulllion in my backpack.  

Tom

 

 

jgritter's picture
jgritter
Status: Gold Member (Offline)
Joined: Dec 13 2011
Posts: 273
I like physical

Call me old school but I prefer physical.  I sleep better knowing that I have a hand pump water supply, a years worth of food, guns and ammunition, and I can hold my metal in my hand.  I paid cash over the counter for all my metal, the premiums are higher but there is no paper trail.  If the banks fail, if the grid goes down, if the entire village is burnt to the ground, I will still be able to get my hands on my silver.

I like physical,

John  G  

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments