Safe Storage for Precious Metals
From an Expert’s point of view
I have heard many shows recently discuss the potential liability issues of various vaults, such as, whether or not there is actually the correct amount of precious metals in those vaults.
There have been precious metal storage facilities, precious metal dealers, or fund management companies on many internet shows discussing the concepts surrounding the recent worries of vault facilities not having the items or the precious metal program not securing the assets they are representing to their clients.
A few shows discuss what unallocated and allocated storage represent. Being an expert in the vaulting business and running a successful gold and silver storage program and physical bullion fund, I wanted to clarify some of the misinformation that is going around the internet. Many financial advisors and dealers may also not be aware of the actual differences between the various forms of storage. This is evident when many internet programs assume allocated storage is the most secure form of storage. This is not the case.
Over the last five years, I have studied nearly every precious metal program in the world. I looked at every program from an investor point of view. This is crucial since many programs are designed for the firms benefit. Cost saving functions, commingling of assets, and large bar purchases are a few items that directly effect the flexibility for the client.
One of the most critical reasons, I created my own programs is the fact that I did not find one program that had a fiduciary duty and obligation to provide delivery in small deliverable form at any time without certain limiting conditions upon the client’s request. I have been in the investment business for almost 20 years and have seen many different investment programs come and go. Without true accountability to the client, risk needs to be identified and the program needs to be fully understood.
There are some big misconceptions with allocated storage programs and the companies that offer or sell them.
For private storage accounts, the most secure way for clients to have items stored is by fully segregated storage. Again, fully segregated storage not allocated storage. There is a huge difference and individuals or institutions need to understand this. If a client wants an actual investment in precious metals that can be viewed anytime, delivered at any moment, and is the exact same bar/coin delivered out as initially bought or brought into the facility, then fully segregated storage is the only option.
Allocated Storage is a much different concept. To easily explain this, let me provide the definition between segregate and allocate.
allocate - 1. To set apart for a special purpose; designate: allocate a room to be used for storage.
segregate - To separate or isolate from others or from a main body or group.
By researching and understanding this concept, I have taken great care to look out for the client’s best interest. Individuals must identify whether they want to invest in gold and silver or simply be represented in gold and silver. Let me provide some examples that differentiate between the two types of storage.
Under an unsegregated or unallocated account, it is very common that an investment in precious metals may be pooled, commingled, or combined with every clients’ positions. However, the similar events may happen with an allocated program. For example, lets say a precious metal dealer or a structured precious metal program are selling 10 clients each, 100 ounces of silver and these clients wish to have the dealer arrange storage for the client’s account. From a cost saving standpoint, the dealer could provide storage in two ways and still provide allocated storage to the client. The first is to have a secure space at a vault facility that would store only metal for a specific dealer or program. The dealer would be responsible for accounting the ounces of metal owned by the client. For simplicity, if a client wanted delivery, the bar of metal bought by the client may not be the same bar delivered to the client. The client may receive 100 ounces of silver but it may be in a different bar or made by a different refiner than originally purchased.
Using the same example as above (10 clients buy 100 ounces of silver each), under another form of allocated storage, the dealer or management company may simply buy a 1000 ounce bar to represent and allocate the ten client’s holdings in silver. This is a form of allocated storage. The metal can be accounted for and represent the client’s purchase. Under both conditions there is risk that upon demand for delivery the client may not get the same bar he initially thought he bought (may have been sold a brand name refiner bar and only received a generic refiner bar worth less premium) or delivery may be delayed or unavailable (example force majeure) if the bar could not be refined or broken down into smaller units.
The examples above is one of the most common methods that most gold and silver programs use throughout the world.
In a fully segregated account, the structure is much simpler. The metal you buy or have delivered in is separated from all other client’s and dealers’ positions. Legal title is not transferred and the vault or precious metals program has no ability to change or use the items being stored unless stated in the storage agreement. The metal you receive or sell is the same exact metal initially delivered in. The client is assured that he can take delivery or audit their metal at any time without any risk of encountering a foreign bar or coin.
For investors that are simply looking for representation of metal and never expect to take delivery, allocated storage may work well. However, if you are buying physical metal and want the ability to take delivery at a future date due to systemic risk, devaluation of currencies, political uncertainties or other circumstances, then one should store metal only in a fully segregated environment.
Another big myth that is routinely talked about and completely misrepresented is the idea that one must keep his metals in a LBMA or Comex approved vault. The main reasons given is that the charges for assay or transportation are so expensive it will eat into the principal of the coins or bars. In reality, the cost of an assay is only about $150 per lot of metal. Another excuse used by these organizations is that once the gold or silver leaves the LBMA or Comex vaults the metal is outside the “chain of integrity” and hurts the metal’s value. There is no question if bars or coins are .9999 fine gold or .999 fine silver and held in a private facility, they are identical in value to metal stored at a LBMA or Comex vault. The real question an investor should ask is, “Do I trust the facility holding my metal?”
If the storage account is not labeled “fully segregated”, the client looking for potential delivery should have great concern.
I have dedicated and designed my programs around the client’s best interest. I have viewed gold and silver as a protective asset against the potential risks facing investors. Accordingly, I have structured my program to give clients the ultimate flexibility to make choices that are right for themselves and not for the institution holding their metal.
Bob Coleman
www.GoldSilverVault.com
Monday, April 26, 2010
Tuesday, November 24, 2009
A Mad Rush as Gold Bugs Get the Boot
By CAROLYN CUI
Fleets of armored trucks piled with gold bars and coins have been streaming out of midtown Manhattan in one unexpected consequence of the gold craze.
Amid gold's rise -- it has gained 32% this year and reached a record on Monday -- investors have been loading up on bullion and coins. One big problem now is where to store it. The solution from HSBC, owner of one of the biggest vaults in the U.S.: somewhere else.
HSBC has told retail clients to remove their small holdings from its fortress beneath its tower on New York City's Fifth Avenue. The bank has decided retail customers aren't profitable enough and is demanding those clients remove their gold to make room for more lucrative institutional customers.
An HSBC spokeswoman said the firm doesn't comment on its vault due to "security concerns."
HSBC's decision has created a logistical nightmare for both the investors and the security teams in charge of relocating the gold, silver and platinum to new vaults across the country. Many of those vaults are also feeling pressure from the surge in demand for space from clients that have stocked up on metal.
Investors have been loading up on gold this year amid worries about inflation and the stability of the U.S. dollar. The metal gained $17.90, or 1.6%, to $1164.30 an ounce on Monday. As gold has continued to set new records, other investors have flooded in. Many of them are taking possession of the metal, rather than just trading financial contracts linked to it.
Demand for physical gold, including bars and coins, is projected to rise 21% this year to 52.3 million troy ounces, the highest in history, according to CPM Group. Based on today's price, the total value would amount to about $61 billion.
The movement of gold from HSBC has created a stir not only among the bank's clients, but also among owners of warehouses and vaults around the country.
"I have never seen any relocation like this," says Jonathan Potts, managing director of FideliTrade, the parent company of the Delaware Depository Service Co., which has two warehouses in Wilmington. FideliTrade's two vaults have been filling up at an unprecedented pace, in part because it is taking in metal that has been ejected by HSBC.
Dealing with the fallout from HSBC's decision has become a full-time job for David Norris, executive vice president of GoldStar Trust Co., a Canyon, Texas-based retirement-account trustee, which organizes metal storage for its clients.
Mr. Norris says HSBC told GoldStar in July to immediately cease sending coins for storage. GoldStar, which had sent clients' holdings to HSBC for at least 15 years, is now figuring out how to get the coins out of the HSBC vault and down to the Delaware facility. "I can jump up and down and scream all day long about how much I don't like it. But it's their business decision," Mr. Norris says.
Moving the metal is like "a big military operation," he says. Precious metals are typically shipped by insured carrier services or armored trucking companies. Carriers sometimes ship the metals in plain boxes so as not to attract attention. Trucks are guarded by a team of two or three armed personnel.
Bradley Beyer, a GoldStar customer in Kewaunee, Wis., has 50 100-ounce silver bars stored with HSBC waiting to be moved. "My only concern is that the bars will be moved safely," he says.
HSBC is telling clients to either move their metal, or prepare for it to be delivered to their doorsteps. In a July letter, seen by The Wall Street Journal, HSBC said the precious metal "will be returned to the address of record... at your expense," unless instructed otherwise. HSBC recommended clients move their holdings to Brink's Global Services USA Inc., which has a vault in Brooklyn, N.Y. Brink's didn't return calls and emails seeking comments.
Like Mr. Beyer, many investors have recently added precious metals to their retirement accounts. At GoldStar, more than 1,000 new accounts are opened each month to purchase coins in retirement plans, compared to about 100 a month in 2006. Sales of American Eagle gold coins jumped 65% so far this year, according to the U.S. Mint.
"Many facilities are overloaded," says Bob Coleman, director of customer relations at Gold Silver Vault, a depository in Nampa, Idaho. Mr. Coleman says his vault has taken in several HSBC customers, contributing to the 500% growth in new metal coming in over the past quarter.
Vault and warehouse owners say retail customers tend to be more expensive in part because of their diverse holdings. They usually buy American Eagle or Canadian Maple Leaf coins, and bars of various weights and sizes, all of which need to be categorized and stored separately. In contrast, institutions typically buy standardized bars of 100 or 400 ounces, making them easier to store. Institutions also tend to hold the metal for long periods.
Precious-metal storage isn't as lucrative as it may sound. Many vaults are run on thin margins. The Delaware depository, one of the five major ones in the country, charges $6 each month for a 1,000-ounce silver bar and $12 for a 100-ounce gold bar.
HSBC's vaults contain $6 billion of large gold and silver bars, according to records held by Comex, the metals division of CME Group. There are no data for smaller coins and bars held by individuals.
First Eagle Funds, which runs a family of mutual funds, has 2.2 million ounces of gold stored at HSBC's vault, and hasn't been told to vacate the premises. Physical bullion represents "insurance and the safest asset out there," says Rachel Benepe, who runs the First Eagle Gold Fund.
Typically, a vault is protected with a 27-inch thick steel reinforced wall, surrounded with a "man-trap" -- a series of doors, each of which opens only after the previous door is locked, Mr. Coleman says.
Printed in The Wall Street Journal, page A1
By CAROLYN CUI
Fleets of armored trucks piled with gold bars and coins have been streaming out of midtown Manhattan in one unexpected consequence of the gold craze.
Amid gold's rise -- it has gained 32% this year and reached a record on Monday -- investors have been loading up on bullion and coins. One big problem now is where to store it. The solution from HSBC, owner of one of the biggest vaults in the U.S.: somewhere else.
HSBC has told retail clients to remove their small holdings from its fortress beneath its tower on New York City's Fifth Avenue. The bank has decided retail customers aren't profitable enough and is demanding those clients remove their gold to make room for more lucrative institutional customers.
An HSBC spokeswoman said the firm doesn't comment on its vault due to "security concerns."
HSBC's decision has created a logistical nightmare for both the investors and the security teams in charge of relocating the gold, silver and platinum to new vaults across the country. Many of those vaults are also feeling pressure from the surge in demand for space from clients that have stocked up on metal.
Investors have been loading up on gold this year amid worries about inflation and the stability of the U.S. dollar. The metal gained $17.90, or 1.6%, to $1164.30 an ounce on Monday. As gold has continued to set new records, other investors have flooded in. Many of them are taking possession of the metal, rather than just trading financial contracts linked to it.
Demand for physical gold, including bars and coins, is projected to rise 21% this year to 52.3 million troy ounces, the highest in history, according to CPM Group. Based on today's price, the total value would amount to about $61 billion.
The movement of gold from HSBC has created a stir not only among the bank's clients, but also among owners of warehouses and vaults around the country.
"I have never seen any relocation like this," says Jonathan Potts, managing director of FideliTrade, the parent company of the Delaware Depository Service Co., which has two warehouses in Wilmington. FideliTrade's two vaults have been filling up at an unprecedented pace, in part because it is taking in metal that has been ejected by HSBC.
Dealing with the fallout from HSBC's decision has become a full-time job for David Norris, executive vice president of GoldStar Trust Co., a Canyon, Texas-based retirement-account trustee, which organizes metal storage for its clients.
Mr. Norris says HSBC told GoldStar in July to immediately cease sending coins for storage. GoldStar, which had sent clients' holdings to HSBC for at least 15 years, is now figuring out how to get the coins out of the HSBC vault and down to the Delaware facility. "I can jump up and down and scream all day long about how much I don't like it. But it's their business decision," Mr. Norris says.
Moving the metal is like "a big military operation," he says. Precious metals are typically shipped by insured carrier services or armored trucking companies. Carriers sometimes ship the metals in plain boxes so as not to attract attention. Trucks are guarded by a team of two or three armed personnel.
Bradley Beyer, a GoldStar customer in Kewaunee, Wis., has 50 100-ounce silver bars stored with HSBC waiting to be moved. "My only concern is that the bars will be moved safely," he says.
HSBC is telling clients to either move their metal, or prepare for it to be delivered to their doorsteps. In a July letter, seen by The Wall Street Journal, HSBC said the precious metal "will be returned to the address of record... at your expense," unless instructed otherwise. HSBC recommended clients move their holdings to Brink's Global Services USA Inc., which has a vault in Brooklyn, N.Y. Brink's didn't return calls and emails seeking comments.
Like Mr. Beyer, many investors have recently added precious metals to their retirement accounts. At GoldStar, more than 1,000 new accounts are opened each month to purchase coins in retirement plans, compared to about 100 a month in 2006. Sales of American Eagle gold coins jumped 65% so far this year, according to the U.S. Mint.
"Many facilities are overloaded," says Bob Coleman, director of customer relations at Gold Silver Vault, a depository in Nampa, Idaho. Mr. Coleman says his vault has taken in several HSBC customers, contributing to the 500% growth in new metal coming in over the past quarter.
Vault and warehouse owners say retail customers tend to be more expensive in part because of their diverse holdings. They usually buy American Eagle or Canadian Maple Leaf coins, and bars of various weights and sizes, all of which need to be categorized and stored separately. In contrast, institutions typically buy standardized bars of 100 or 400 ounces, making them easier to store. Institutions also tend to hold the metal for long periods.
Precious-metal storage isn't as lucrative as it may sound. Many vaults are run on thin margins. The Delaware depository, one of the five major ones in the country, charges $6 each month for a 1,000-ounce silver bar and $12 for a 100-ounce gold bar.
HSBC's vaults contain $6 billion of large gold and silver bars, according to records held by Comex, the metals division of CME Group. There are no data for smaller coins and bars held by individuals.
First Eagle Funds, which runs a family of mutual funds, has 2.2 million ounces of gold stored at HSBC's vault, and hasn't been told to vacate the premises. Physical bullion represents "insurance and the safest asset out there," says Rachel Benepe, who runs the First Eagle Gold Fund.
Typically, a vault is protected with a 27-inch thick steel reinforced wall, surrounded with a "man-trap" -- a series of doors, each of which opens only after the previous door is locked, Mr. Coleman says.
Printed in The Wall Street Journal, page A1
Monday, June 1, 2009
Thinking of precious metal ETF's?
Thinking of precious metal ETF's?
Then you better think again...
Can't you see the yellow caution light that is flashing...
I would like to explain the difference between investing in the actual metal
versus precious metal ETFs. One should completely realize when buying a
precious metal ETF, it is simply a representation of the price in gold or
silver. Investing in precious metals entails buying the real metal directly
or through a program that offers the right to receive physical metal in
deliverable form upon liquidation with no conditions.
What is overlooked by most professionals?
One of the items that I read in the prospectus of the gold and silver ETFs
that concerns me relates to the reported expenses of the fund. I am a
professional expert in the storage and security of gold and silver. I run a
fully segregated and insured storage program that is independent of the
financial system. I also run a very unique physical gold and silver bullion
fund that takes delivery of all physical metal, as well as, stores and insures the metal outside the financial system in fully segregated and armored vaults. I am very knowledgeable with the cost of insuring and securing physical metal.
The expense ratios for many of the ETFs and other funds are very telling.
Many products want to have the lowest fee to attract today's cost conscious
investor. However, there is an old saying, "You get what you pay for". I
will take the SPDR Gold Shares "GLD" for example. They claim the custodian
charges .10 % or 10 basis point to properly safeguard the gold. A qualified
custodian must properly store the physical metal through the use of very
specific security controls such as cameras, sensors, armed guards, etc.
However just as important is the insurance which would protect the facility
and owner of the metal in the event of a breakdown in the security controls
of the vault.
What is fascinating is the unbelievably low cost the SPDR Gold Shares pays
for this security and insurance. Lets forget about the cost of simply
providing a secure facility to store the gold.
At these level of assets, there is only one company in the world that
insures physical precious metals in armored vaults. I have been told there
is no way this insurance company would charge a meager 10 basis points
annually for an "all risk" policy. That is equivalent to insuring a car
worth $10,000 and its driver for ten dollars a year. No insurance company
could ever make enough money to cover the risk of loss on that policy except
maybe AIG. Even some of the largest custodians for valuable assets pay a
minimum of 15 to 25 basis points just for an "all risk" insurance policy.
Personally, I question any program that stores their metal at a financial
institution. In many cases, the financial institution is internally insuring
much of the gold it stores. The problem with that is, if the institution
runs into financial trouble the owner of the metal has no protection against
the loss or damage to the items being stored. And isn't the idea of owning
gold and silver a hedge against a failure in the financial system?
That is why our programs store everything outside the financial system in
independently insured vaults.
Bob Coleman
www.goldsilvervault.com
Then you better think again...
Can't you see the yellow caution light that is flashing...
I would like to explain the difference between investing in the actual metal
versus precious metal ETFs. One should completely realize when buying a
precious metal ETF, it is simply a representation of the price in gold or
silver. Investing in precious metals entails buying the real metal directly
or through a program that offers the right to receive physical metal in
deliverable form upon liquidation with no conditions.
What is overlooked by most professionals?
One of the items that I read in the prospectus of the gold and silver ETFs
that concerns me relates to the reported expenses of the fund. I am a
professional expert in the storage and security of gold and silver. I run a
fully segregated and insured storage program that is independent of the
financial system. I also run a very unique physical gold and silver bullion
fund that takes delivery of all physical metal, as well as, stores and insures the metal outside the financial system in fully segregated and armored vaults. I am very knowledgeable with the cost of insuring and securing physical metal.
The expense ratios for many of the ETFs and other funds are very telling.
Many products want to have the lowest fee to attract today's cost conscious
investor. However, there is an old saying, "You get what you pay for". I
will take the SPDR Gold Shares "GLD" for example. They claim the custodian
charges .10 % or 10 basis point to properly safeguard the gold. A qualified
custodian must properly store the physical metal through the use of very
specific security controls such as cameras, sensors, armed guards, etc.
However just as important is the insurance which would protect the facility
and owner of the metal in the event of a breakdown in the security controls
of the vault.
What is fascinating is the unbelievably low cost the SPDR Gold Shares pays
for this security and insurance. Lets forget about the cost of simply
providing a secure facility to store the gold.
At these level of assets, there is only one company in the world that
insures physical precious metals in armored vaults. I have been told there
is no way this insurance company would charge a meager 10 basis points
annually for an "all risk" policy. That is equivalent to insuring a car
worth $10,000 and its driver for ten dollars a year. No insurance company
could ever make enough money to cover the risk of loss on that policy except
maybe AIG. Even some of the largest custodians for valuable assets pay a
minimum of 15 to 25 basis points just for an "all risk" insurance policy.
Personally, I question any program that stores their metal at a financial
institution. In many cases, the financial institution is internally insuring
much of the gold it stores. The problem with that is, if the institution
runs into financial trouble the owner of the metal has no protection against
the loss or damage to the items being stored. And isn't the idea of owning
gold and silver a hedge against a failure in the financial system?
That is why our programs store everything outside the financial system in
independently insured vaults.
Bob Coleman
www.goldsilvervault.com
Wednesday, February 25, 2009
Worried Investors Want Gold on Hand
Printed in The Wall Street Journal, page A3
FEBRUARY 25, 2009 Worried Investors Want Gold on Hand By CAROLYN CUI and ALLEN SYKORA
Some investors are so worried about the prospect of economic
collapse that they are buying gold and having it delivered to them,
rather than holding the precious metal in the form of futures contracts
or other securities.
The global recession and worries about the stability of the
financial system have sent the price of gold to $1,000 an ounce. But
more surprising is that buyers are taking the unusual and expensive step
of taking possession of it.
"We're having some of our strongest months ever," said Scott Thomas,
president and chief executive of American Precious Metals Exchange, a
precious-metals dealer in Edmond, Okla. "The bottom line is our numbers
are probably double what they were last year, and last year was very
busy."
Bob Coleman, who runs a bullion fund out of Nampa, Idaho, has taken
multiple deliveries of gold and silver since last fall for his clients.
The fund, Dollars and Sense Growth Fund, primarily invests in precious
metals for high-net-worth individuals.
"It's more of a trust issue," says Mr. Coleman. "Given all the
turmoil in the market, people prefer to have access to the metal."
Sales of American Eagle gold bullion coins at the U.S. Mint in
Philadelphia more than doubled in the first two months of this year.
Investors are also flocking to gold coins. At the U.S. Mint, a total
of 147,500 ounces of American Eagle gold bullion coins were sold in the
first two months this year, a surge of 176% from the same period last
year.
Demand is rising at the Comex, the metals division of the New York
Mercantile Exchange, where investors increasingly are choosing to take
physical delivery of gold, rather than cash, once their futures contacts
expire.
Rising delivery orders have kept Brink's Inc., a major carrier for
the Comex, busy. The Richmond, Va., company said it saw a large spike in
clients shipping gold and silver from the exchange over the past few
months.
Tony Klancic, an account executive at Lind-Waldock, a Chicago
commodities brokerage, says he has been taking calls since September
from individual investors wanting to buy physical gold.
These are "real people in rural America with money under the
mattress, and wealthy individuals coming to the futures market strictly
intending to take delivery," Mr. Klancic said.
In December, 4.5% of gold contracts ended in delivery, compared with
3.4% a year earlier, according to the exchange. Investors also are
taking delivery of silver, with contracts ending in delivery rising to
7.3% from 4.7%. December is typically a big month for deliveries, and in
January, deliveries remained higher than the year before.
Jewelers and other users of metals are among the buyers who take
possession of gold and silver. But with sales of jewelry down and other
industrial users cutting back, it appears that investors are causing the
increase.
Gold deliveries peaked at more than 8% in the early 1980s, when
Mexico defaulted on its foreign debt and the world economy was in
recession. Deliveries dropped and have gradually fallen back to the
range of 2% in recent years.
Gold pierced the $1,000 level last Friday, the first time since
March 2008. On Tuesday, the February contract closed at $969.10 per troy
ounce. So far this year, the precious metal is up 9.7%.
Taking physical delivery of gold can be costly and complicated.
Investors typically buy gold on exchanges using futures contracts. Since
each contract represents 100 ounces of gold, an investor would have to
pay $96,910 per contract, based on Tuesday's close, in order to take
delivery. By contrast, investors need to put down only $3,999 up front
to trade such a futures contract.
"It is an expensive proposition," says Jeff Christian, managing
director at CPM Group, a New York precious-metal research firm.
Also, the logistics of buying a big lump of metal might be daunting
for smaller players. Investors who decide to take delivery of gold
contracts face high storage and insurance costs. And if buyers actually
want the gold or other precious metals in their possession, they must
arrange for delivery by armored truck. In a recent delivery of 100,000
ounces of silver, Mr. Coleman paid $3,000 to transport the metal from
New York to Idaho.
Write to Carolyn Cui at carolyn.cui@wsj.com
Printed in The Wall Street Journal, page A3
---------------------------------
Carolyn Cui Money & Investing The Wall Street Journal. Work: 212-416-3078 Mobile: 646-593-1152 Email: carolyn.cui@wsj.com
FEBRUARY 25, 2009 Worried Investors Want Gold on Hand By CAROLYN CUI and ALLEN SYKORA
Some investors are so worried about the prospect of economic
collapse that they are buying gold and having it delivered to them,
rather than holding the precious metal in the form of futures contracts
or other securities.
The global recession and worries about the stability of the
financial system have sent the price of gold to $1,000 an ounce. But
more surprising is that buyers are taking the unusual and expensive step
of taking possession of it.
"We're having some of our strongest months ever," said Scott Thomas,
president and chief executive of American Precious Metals Exchange, a
precious-metals dealer in Edmond, Okla. "The bottom line is our numbers
are probably double what they were last year, and last year was very
busy."
Bob Coleman, who runs a bullion fund out of Nampa, Idaho, has taken
multiple deliveries of gold and silver since last fall for his clients.
The fund, Dollars and Sense Growth Fund, primarily invests in precious
metals for high-net-worth individuals.
"It's more of a trust issue," says Mr. Coleman. "Given all the
turmoil in the market, people prefer to have access to the metal."
Sales of American Eagle gold bullion coins at the U.S. Mint in
Philadelphia more than doubled in the first two months of this year.
Investors are also flocking to gold coins. At the U.S. Mint, a total
of 147,500 ounces of American Eagle gold bullion coins were sold in the
first two months this year, a surge of 176% from the same period last
year.
Demand is rising at the Comex, the metals division of the New York
Mercantile Exchange, where investors increasingly are choosing to take
physical delivery of gold, rather than cash, once their futures contacts
expire.
Rising delivery orders have kept Brink's Inc., a major carrier for
the Comex, busy. The Richmond, Va., company said it saw a large spike in
clients shipping gold and silver from the exchange over the past few
months.
Tony Klancic, an account executive at Lind-Waldock, a Chicago
commodities brokerage, says he has been taking calls since September
from individual investors wanting to buy physical gold.
These are "real people in rural America with money under the
mattress, and wealthy individuals coming to the futures market strictly
intending to take delivery," Mr. Klancic said.
In December, 4.5% of gold contracts ended in delivery, compared with
3.4% a year earlier, according to the exchange. Investors also are
taking delivery of silver, with contracts ending in delivery rising to
7.3% from 4.7%. December is typically a big month for deliveries, and in
January, deliveries remained higher than the year before.
Jewelers and other users of metals are among the buyers who take
possession of gold and silver. But with sales of jewelry down and other
industrial users cutting back, it appears that investors are causing the
increase.
Gold deliveries peaked at more than 8% in the early 1980s, when
Mexico defaulted on its foreign debt and the world economy was in
recession. Deliveries dropped and have gradually fallen back to the
range of 2% in recent years.
Gold pierced the $1,000 level last Friday, the first time since
March 2008. On Tuesday, the February contract closed at $969.10 per troy
ounce. So far this year, the precious metal is up 9.7%.
Taking physical delivery of gold can be costly and complicated.
Investors typically buy gold on exchanges using futures contracts. Since
each contract represents 100 ounces of gold, an investor would have to
pay $96,910 per contract, based on Tuesday's close, in order to take
delivery. By contrast, investors need to put down only $3,999 up front
to trade such a futures contract.
"It is an expensive proposition," says Jeff Christian, managing
director at CPM Group, a New York precious-metal research firm.
Also, the logistics of buying a big lump of metal might be daunting
for smaller players. Investors who decide to take delivery of gold
contracts face high storage and insurance costs. And if buyers actually
want the gold or other precious metals in their possession, they must
arrange for delivery by armored truck. In a recent delivery of 100,000
ounces of silver, Mr. Coleman paid $3,000 to transport the metal from
New York to Idaho.
Write to Carolyn Cui at carolyn.cui@wsj.com
Printed in The Wall Street Journal, page A3
---------------------------------
Carolyn Cui Money & Investing The Wall Street Journal. Work: 212-416-3078 Mobile: 646-593-1152 Email: carolyn.cui@wsj.com
Friday, December 19, 2008
goldsilvervault.com
Coming in a few days! Come see the premier gold and silver vault storage company at goldsilvervault.com
Thursday, December 4, 2008
A Memorable Delivery Experience
A Memorable Delivery Experience
For those who remember, I wrote a letter asking about taking delivery from the COMEX. Well I would like to tell you about a very educational experience.
Recently, we took a delivery from the COMEX. The process was a bit cumbersome but very enlightening. First, I would like to say that the process of dealing with the custodians was very professional. However, let me begin my story of amazement.
The silver and gold were to be prepared and packaged for shipment by the existing custodian. As I understand it, this was part of the delivery out fee. We will get back to the packaging later.
The metal was arranged for a pick up and delivery using a very well known armored carrier. Initially, everything was going as planned. After the metal was gathered from various custodians, it was on its way to one of our facilities. We were in contact with the armored carrier who laid out a time frame of when to expect arrival of the armored truck. We were told that shipment arrivals usually occur in the morning and with plenty of notice.
This is when the story gets interesting.
Three days after the shipment leaves New York, I get a call at 4:50 pm from one of our vault managers. He mentioned if the armored carrier ever called with a delivery time. I told him the armored carrier was supposed to call us with an estimated time of arrival. Our vault manger paused and said, “I have a big armored truck sitting outside.” He mentioned to me later that the truck was fairly weighed down in the back with the headlights shooting up in the air. Anyone in the armored transportation business would say at this point we have a problem. An unscheduled delivery, 10 minutes before the vault is locked down, darkness setting in, and a truck with an obviously big payload sounds like a setting for a Jessie James novel.
But wait it gets better.
The packaging which the COMEX custodian charged for consisted of pallets of silver with metal bands over the bars. The gold bars were in a simple cardboard box. There was no shrink wrap over the pallets or secured container holding the gold bars. It seemed like a $10 glass bowl bought on the internet was better prepared for shipment than this extremely valuable cargo.
Somehow during the transportation, the bands on the pallets holding the silver bars broke and some of the bars were scattered in the armored truck. To make matters worse there was no invoice providing an itemized list of bars and their serial numbers. In fact on the invoice, the delivery date was to be two days later.
Typically, this is a point when you get someone in charge on the phone. Well, that is what we did. We contacted the carrier’s regional transportation official. We told him in most cases a delivery like this is usually not accepted due to risk and liability. After a few words the carrier’s manager said if you do not take delivery we will send the metal back to our regional office, load it on a trailer, and send it back to New York.
When you are talking several tons of metal, you think twice about moving this around. After we inspected the metal for damage and counted the bars, we accepted the shipment.
Please understand taking delivery from the COMEX entails some risk. But for many proponents of gold and silver to simply say “have the metal shipped to a business, store it at home, or do not let a third party handle or store your metal,” investors might consider this experience. When you have armed guards show up at your doorstep with a shipment, they are trained to carry out a certain function. They are not there to greet you with a smile like a mailman or newspaper delivery boy.
Our armored facility is very well equipped to handle deliveries whether scheduled or unscheduled. Fortunately, the experience of our management team turned a potentially costly situation into safe and secure delivery.
Do not let this story dissuade you from taking delivery off the COMEX. The above story is not your typical delivery and most armored carriers provide a very secure environment for its cargo and the items held in their vault. For us the process is routine. Our facility can support you in preparing the three items requested by the COMEX custodian for delivery, arranging for a pick up and transportation, and securing valuable assets in a fully insured/segregated facility.
Bob Coleman
profitsplus@cableone.net
http://profitspluscapital.blogspot.com/
For those who remember, I wrote a letter asking about taking delivery from the COMEX. Well I would like to tell you about a very educational experience.
Recently, we took a delivery from the COMEX. The process was a bit cumbersome but very enlightening. First, I would like to say that the process of dealing with the custodians was very professional. However, let me begin my story of amazement.
The silver and gold were to be prepared and packaged for shipment by the existing custodian. As I understand it, this was part of the delivery out fee. We will get back to the packaging later.
The metal was arranged for a pick up and delivery using a very well known armored carrier. Initially, everything was going as planned. After the metal was gathered from various custodians, it was on its way to one of our facilities. We were in contact with the armored carrier who laid out a time frame of when to expect arrival of the armored truck. We were told that shipment arrivals usually occur in the morning and with plenty of notice.
This is when the story gets interesting.
Three days after the shipment leaves New York, I get a call at 4:50 pm from one of our vault managers. He mentioned if the armored carrier ever called with a delivery time. I told him the armored carrier was supposed to call us with an estimated time of arrival. Our vault manger paused and said, “I have a big armored truck sitting outside.” He mentioned to me later that the truck was fairly weighed down in the back with the headlights shooting up in the air. Anyone in the armored transportation business would say at this point we have a problem. An unscheduled delivery, 10 minutes before the vault is locked down, darkness setting in, and a truck with an obviously big payload sounds like a setting for a Jessie James novel.
But wait it gets better.
The packaging which the COMEX custodian charged for consisted of pallets of silver with metal bands over the bars. The gold bars were in a simple cardboard box. There was no shrink wrap over the pallets or secured container holding the gold bars. It seemed like a $10 glass bowl bought on the internet was better prepared for shipment than this extremely valuable cargo.
Somehow during the transportation, the bands on the pallets holding the silver bars broke and some of the bars were scattered in the armored truck. To make matters worse there was no invoice providing an itemized list of bars and their serial numbers. In fact on the invoice, the delivery date was to be two days later.
Typically, this is a point when you get someone in charge on the phone. Well, that is what we did. We contacted the carrier’s regional transportation official. We told him in most cases a delivery like this is usually not accepted due to risk and liability. After a few words the carrier’s manager said if you do not take delivery we will send the metal back to our regional office, load it on a trailer, and send it back to New York.
When you are talking several tons of metal, you think twice about moving this around. After we inspected the metal for damage and counted the bars, we accepted the shipment.
Please understand taking delivery from the COMEX entails some risk. But for many proponents of gold and silver to simply say “have the metal shipped to a business, store it at home, or do not let a third party handle or store your metal,” investors might consider this experience. When you have armed guards show up at your doorstep with a shipment, they are trained to carry out a certain function. They are not there to greet you with a smile like a mailman or newspaper delivery boy.
Our armored facility is very well equipped to handle deliveries whether scheduled or unscheduled. Fortunately, the experience of our management team turned a potentially costly situation into safe and secure delivery.
Do not let this story dissuade you from taking delivery off the COMEX. The above story is not your typical delivery and most armored carriers provide a very secure environment for its cargo and the items held in their vault. For us the process is routine. Our facility can support you in preparing the three items requested by the COMEX custodian for delivery, arranging for a pick up and transportation, and securing valuable assets in a fully insured/segregated facility.
Bob Coleman
profitsplus@cableone.net
http://profitspluscapital.blogspot.com/
Tuesday, November 18, 2008
The What, Why’s, and How’s of Physical Precious Metals
The What, Why’s, and How’s of Physical Precious Metals
The What
The first and foremost question is what are you investing in? Are you putting capital into physical metal that stands alone and outside the monetary system? This is the primary function of owning precious metals in the first place yet many we speak with seem to misunderstand or interpret this crucial factor!
Restated we might ask do you understand the difference between investing and participating in physical gold and silver. In my view, investing has the following characteristics:
Invest in a known form of physical gold and silver this can be coins or bars and sizes up to deliverable commercial silver and gold as held on the Comex.
If you elect to own metal in individual or commercial form make certain of the following:
Have the precious metal stored in an armored and insured vault.
Have the custodian independent from the financial system.
Provide the investor a choice upon distribution, cash or physical metal.
Offer accessibility to the metal and have prearranged options for delivery if client wants the metal in hand.
On the other hand, participating offers the following characteristics:
Ability to follow the price of the precious metals.
Settlement is normally in cash or currency with little emphasis on actually delivering in smaller deliverable form.
The program is directly tied to the financial or bullion dealer system.
Accessibility to the metal is hindered by the custodian in the form of sub-custodian or bailment relationships. Also, participants have to factor serious tax consequences if the program offers the ability to take physical delivery in jurisdictions where Value Added Tax is an issue.
In other words participation programs buy and store mostly large bars of metal with the focus on cost efficiency and effectiveness for the program itself.
If your preference is participation then understand the risks to your capital.. If your preference is investing then understand the risks of accessibility. Programs may have the best intention but if you can not get to your metal or your metal can not be delivered you may not have it just when you need it the most!
The Why
With the recent chaos in the financial markets one must examine their entire portfolio. Yes, that includes precious metals. For those who are involved in precious metals, what I am referring to is the form in which you are pursuing (gold and silver). Although, many own the physical metal and store it “close to home”, many others use conduits to gain participation in this sector. With all the options in the market place, lack of understanding can breed mistakes. I believe we are entering a period in which these mistakes may become very costly. However, for the investors who are involved in the bullion, the distinctions between the numerous programs are extraordinary and need to be recognized.
Lets first start with the reasons why you believe in gold or silver. The basic premise is to diversify from inflation, systemic risk, or political uncertainty. Ask yourself are my gold or silver investments in bullion attainable and accessible?
Again, the distinction depends whether you are participating or investing in the bullion itself. Review your agreements and documents, ask questions that pertain to you and your portfolio needs(for example understand the difference between fully allocated and fully segregated), and most importantly ask the precious metals program what would happen under extreme circumstances. Understanding your investment and how it operates may avoid unpleasant surprises in the future.
The How
In this dynamic political and economic climate, what sounds reasonable today may not be appropriate in the future. For example, capital and exchange controls could hamper overseas programs and your ability to receive the metal. How do you know for sure that the bullion vault is not leasing out your gold? How fast can companies turn large bars of gold and silver into deliverable ounces?
In other words the program must have already considered issues such as confiscation, changes in economic/political policy, systemic concerns within the central banking system, and geo-political events. The precious metal programs that have built a model that is flexible and adaptable to change will have the ability to overcome these challenges and protect its investors.
Three years ago, I reviewed nearly every gold and silver program in the world. None met my stringent standards and fiduciary concerns. A few of which were:
accessibility and transparency of storage,
clients assets were held in allocated form not fully segregated form, and
communication or delivery between the program or vault and the customer.
Your objective must be to invest in the precious metals not merely participate in price movement.
Therefore I created a set of unique programs for you – the precious metals investor.
The structure, which puts the needs of the investor first, is simple yet very competitive. We offer storage and investment solutions that can be tailored to each individual throughout world. We have taken into account many common concerns of precious metal investors such as viewing one’s holdings, having ideal alternative storage locations, and providing an insured, secured and fully segregated vaulting environment. Understanding the current political and economic environment is only part of the foresight included in our approach.
In summary, part of investing in the bullion markets includes understanding the market environment, eliminating as much risk as possible, and protecting your assets in a prudent manner.
To find more information visit my blog at http://profitsplusecaptial.blogspot.com or send an email to profitsplus@cableone.net We can answer any of your portfolio questions and quickly provide you many ways to purchase your very own gold and silver. We will completely furnish insured, fully segregated, and armored storage for you. At that point you will realize just how profitable and vital ownership of physical gold and silver truly is.
Bob Coleman
http://profitspluscapital.blogspot.com/
The What
The first and foremost question is what are you investing in? Are you putting capital into physical metal that stands alone and outside the monetary system? This is the primary function of owning precious metals in the first place yet many we speak with seem to misunderstand or interpret this crucial factor!
Restated we might ask do you understand the difference between investing and participating in physical gold and silver. In my view, investing has the following characteristics:
Invest in a known form of physical gold and silver this can be coins or bars and sizes up to deliverable commercial silver and gold as held on the Comex.
If you elect to own metal in individual or commercial form make certain of the following:
Have the precious metal stored in an armored and insured vault.
Have the custodian independent from the financial system.
Provide the investor a choice upon distribution, cash or physical metal.
Offer accessibility to the metal and have prearranged options for delivery if client wants the metal in hand.
On the other hand, participating offers the following characteristics:
Ability to follow the price of the precious metals.
Settlement is normally in cash or currency with little emphasis on actually delivering in smaller deliverable form.
The program is directly tied to the financial or bullion dealer system.
Accessibility to the metal is hindered by the custodian in the form of sub-custodian or bailment relationships. Also, participants have to factor serious tax consequences if the program offers the ability to take physical delivery in jurisdictions where Value Added Tax is an issue.
In other words participation programs buy and store mostly large bars of metal with the focus on cost efficiency and effectiveness for the program itself.
If your preference is participation then understand the risks to your capital.. If your preference is investing then understand the risks of accessibility. Programs may have the best intention but if you can not get to your metal or your metal can not be delivered you may not have it just when you need it the most!
The Why
With the recent chaos in the financial markets one must examine their entire portfolio. Yes, that includes precious metals. For those who are involved in precious metals, what I am referring to is the form in which you are pursuing (gold and silver). Although, many own the physical metal and store it “close to home”, many others use conduits to gain participation in this sector. With all the options in the market place, lack of understanding can breed mistakes. I believe we are entering a period in which these mistakes may become very costly. However, for the investors who are involved in the bullion, the distinctions between the numerous programs are extraordinary and need to be recognized.
Lets first start with the reasons why you believe in gold or silver. The basic premise is to diversify from inflation, systemic risk, or political uncertainty. Ask yourself are my gold or silver investments in bullion attainable and accessible?
Again, the distinction depends whether you are participating or investing in the bullion itself. Review your agreements and documents, ask questions that pertain to you and your portfolio needs(for example understand the difference between fully allocated and fully segregated), and most importantly ask the precious metals program what would happen under extreme circumstances. Understanding your investment and how it operates may avoid unpleasant surprises in the future.
The How
In this dynamic political and economic climate, what sounds reasonable today may not be appropriate in the future. For example, capital and exchange controls could hamper overseas programs and your ability to receive the metal. How do you know for sure that the bullion vault is not leasing out your gold? How fast can companies turn large bars of gold and silver into deliverable ounces?
In other words the program must have already considered issues such as confiscation, changes in economic/political policy, systemic concerns within the central banking system, and geo-political events. The precious metal programs that have built a model that is flexible and adaptable to change will have the ability to overcome these challenges and protect its investors.
Three years ago, I reviewed nearly every gold and silver program in the world. None met my stringent standards and fiduciary concerns. A few of which were:
accessibility and transparency of storage,
clients assets were held in allocated form not fully segregated form, and
communication or delivery between the program or vault and the customer.
Your objective must be to invest in the precious metals not merely participate in price movement.
Therefore I created a set of unique programs for you – the precious metals investor.
The structure, which puts the needs of the investor first, is simple yet very competitive. We offer storage and investment solutions that can be tailored to each individual throughout world. We have taken into account many common concerns of precious metal investors such as viewing one’s holdings, having ideal alternative storage locations, and providing an insured, secured and fully segregated vaulting environment. Understanding the current political and economic environment is only part of the foresight included in our approach.
In summary, part of investing in the bullion markets includes understanding the market environment, eliminating as much risk as possible, and protecting your assets in a prudent manner.
To find more information visit my blog at http://profitsplusecaptial.blogspot.com or send an email to profitsplus@cableone.net We can answer any of your portfolio questions and quickly provide you many ways to purchase your very own gold and silver. We will completely furnish insured, fully segregated, and armored storage for you. At that point you will realize just how profitable and vital ownership of physical gold and silver truly is.
Bob Coleman
http://profitspluscapital.blogspot.com/
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