Gold News

Racing to Buy Gold? Stop!

Stop, breathe, think before buying gold. Because 'how' matters as much as 'when'...
 
BUYING GOLD has suddenly returned as a trend,  writes Adrian Ash at BullionVault.
 
Searches for "bullion" online rose 77% in the last week, according to Google Trends. The price has now risen over 18% against the British Pound so far in 2016, jumping Thursday to its highest price for UK investors since September 2013 at £873 per ounce.
 
Whether or not this surge in prices continues, new investors should beware acting in haste before making a decision to buy gold.
Because the way you buy gold can be just as important to defending your savings as your timing.
Gold Sovereign coins, for instance, are one of the most expensive "bullion" products on the market. Even buying 10 of these gold coins from the UK's cheapest retailer would cost you 9% more than the wholesale spot price. Selling them back would incur a loss of 10.5% at the very least.
 
Add the hassle of shopping around for the best buy-back price, plus the need to travel or arrange insured postage when you sell, and you can see why many coin investments never get sold, whatever the price.
 
Check this comparison, pulled today (Friday, 12 February 2016) at 09:00 GMT...
 
Who's got the very best deal?
 
In bullion as in everything else, it's wholesale dealers of course. 
 
The wholesale bullion market is where professional traders and investors deal at 'spot' prices. They trade only large gold bars, weighing 400 Troy ounces and meeting the specifications of the globally-recognized London Good Delivery standard.
 
To retain full re-sale value, these bars must stay inside secure, market-approved vaults until they're finally sold to be melted down and become jewellery, coins or bonding wire for the electronics in your smart-phone.
 
Until 2005, you needed to trade at least one whole 400-ounce bar at a time to get in. That would cost you one-third of a million pounds at today's prices.
 
Moreover, you needed a storage account in a market-approved vault to take delivery too – but the vault door wouldn't open for less than 10 bars or so. That made the price of entry nearer £3m at current levels. 
 
Private savers can access this wholesale market directly using BullionVault. It enables you to sell just as easily as buy, trading as little as 1 gram at a time of Good Delivery gold 24/7 at live prices.
 
The metal you buy is already vaulted in specialist facilities in your choice of London, New York, Singapore, Toronto and Zurich. There is a small storage charge, with insurance included (0.01% by value per month, with a minimum US$4). Counted against the cost of the bid/off spread in Krugerrand coins, you could enjoy 21 months' storage for 1 ounce of gold bought on BullionVault, or 33 months against the bid/offer cost to investors buying 1-ounce worth of gold in Sovereigns.
 
Thursday, by the way, saw the busiest day on BullionVault's peer-to-peer gold and silver exchange since mid-April 2013, with users buying and selling almost half-a-tonne of gold between them, and nearly 7 tonnes of silver.
 
All told, that was worth £15.75 million. It's this size which enables BullionVault users to share the low costs, secure storage and tight wholesale pricing which – previously – private investors were locked out of. And it's BullionVault stand-out value to self-directed investors everywhere which continues to make it the very largest provider of privately-owned gold and silver bullion online.
 
Monday Update: Gold prices have fallen at the start of this week's action overnight, as Chinese traders got back to work after the New Year of the Monkey holiday week, found gold at 12-month highs, and sold it hard.
 
For UK investors, that's taken spot down from £854 to £834 per ounce by 10am today. But the impact on investment costs?
If you see this drop as a dip,  and you want to take advantage, be sure you don't simply give away the price savings by paying the wide spreads charged on retail gold bars, nevermind that 10% spread between buy and re-sale prices on Sovereigns.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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