Gold Certificates - Pros and Cons

What Are Gold Certificates?

What are gold certificates? They are certificates that prove you are the owner of gold that you don't personally possess. Normally, such certificates are issued by money institutions from where you buy gold, and those finance institutions physically store the gold for you. At least that is how it's intended to go.

Having certificates of possession is like having your money in a gold pool account. You hand over your money to the company who executes the program, and when you redeem your certificate they pay you any returns you will have accrued based on this gold spot price. But they may not store any physical gold for you. Instead, they are thought to take your money, and invest it in whatever they expect to achieve the highest returns instead of in gold, pay you the returns on gold, and pocket the rest of their gains for themselves. That ignores the question of what happens if they make some mistaken investment choices and lose your money, and are not able to pay you your returns on the gold price? I am not sure. What happens if the institution goes bankrupt what would happen to your investment? If it is's not physical metal, I believe it might vanish.

There are several positive facets of gold certificate programs. One is that you can essentially purchase gold at the official spot price without having to shell out for any premiums for physical metal or pay any storage charges. Those premiums and storage charges can cut into your profits quite a bit, so gold certificates represent an alternative that gives you the best returns.

One option for gold certificates is the Perth Mint's gold certificate program. The Perth Mint's program is fully protected by the government of Western Australia, which affords rather more of a sense of security than holding gold certificates from a private institution that would go broke and witness your non-physical gold vanish. The Perth Mint's gold certificate program charges 1.75% charges on all purchases plus a $10 certificate surcharge, plus a 0.75% fee when you sell. This is far lower than the current premiums on physical bullion which have soared during the current precious metals deficit. There are no storage fees. There is a minimum primary investment of $5000 Aussie dollars. The Mint claims that every oz. you buy stays on the premises of the mint and can't be removed. Your investment is both state backed and insured by Lloyds of London. That is for regular unallocated storage ( however again they do claim to keep gold on grounds for you, in some form ).

The Perth Mint additionally offers allotted gold storage programs, but this needs both storage charges and a fabrication fee ( to mold the gold into whichever form you choose to have set aside for you ).
Whether you invest in gold certificates will rely on how much trust you are prepared to put in an establishment to store your acquired commodity for you. I am personally someone that is prepared for the worst while at the same time not paranoid, and looking for the best returns possible. That has lead me to the belief that keeping a heap of physical bullion as the basis of your portfolio is important, but that in addition to that base it is ok to diversify and keep certificates or other types of gold accounts that do not have allocated storage. I actually do not play a role in the Perth Mint program or others, but I do keep gold in an e-gold account. I believe these are fine so long as you understand that there is some quantity of risk, and observe the markets with the willingness to sell your certificates or egold if investment demand actually picks up. I might personally feel little stress in investing in a Perth Mint account, but I might possibly avoid a financial institution's certificate program.