Gold News

BullionVault 'Works Like Charm. But the Costs?'

A review of buying gold on the No.1 platform...
 
"EVERYTHING works like a charm," writes a reviewer of BullionVault on the independent Trustpilot site.
 
"However the fees are actually really high, not low. They are transparent, yes, but for newcomers it is nevertheless hard to tell how much on fees you will actually pay.
 
"Just as comparison: For 1 kg Gold bought and sold after one year you pay on fees:
 
"Local gold marked (Vienna): 1.3% spread. On Bullionvault: 
  • Purchase: 0.5%
  • Selling: 0.5%
  • Storage cost: 0.12%
  • Spread: 0.4%
  • Fund retrieval fees: 0.08%.
"This makes in total 1.6%, and hence [my] local bank is the more efficient solution."
 
Responding to this review of BullionVault, founder and chairman Paul Tustain replies:
Thank you for your comment, which requires a detailed answer.
 
The apparent spread on BV when world markets are open is usually less than 0.2%, not 0.4%. 0.4% is more typical of a weekend. As I write, on a Monday morning, it's below 0.1%.
 
However the average spread on BullionVault's gold market Order Board is exactly zero, even at weekends, because for every user who pays a spread there is one who receives it – by offering a price which is then taken, rather than taking a price which is already offered.
 
You too can offer your price to any takers and earn the spread, rather than pay it. Obviously you cannot do this at your bank.
 
Make only this adjustment and we are cheaper than your bank, but there's a lot more.
 
It is not clear if your bank offered a 1.3% spread for gold in € or $. Because gold is ordinarily priced in US$ it would be unusual of a European bank to make a gold price directly in €. They would tend to buy the Dollars for you on their FX desk, taking from you a second (currency) spread which adds to the quoted dollar spread for gold. On BV the price is offered directly in Euros, so we usually save you the cost of exchanging your currency.
 
Also BV commission is variable. That 0.5% which you quote is our maximum rate (it applies on the first $75,000 of your trading) and reduces steadily to 0.05% on larger trades. It also reduces to 0.05% if you trade frequently. I doubt the bank's spread reduces. 
 
And of course we include insurance in our storage charge, which you don't mention for your bank's gold.
 
Make these adjustments and BullionVault will usually be materially cheaper than your bank. The qualitative aspects of your transaction are also important. 
 
Where is your gold stored? It appears not to have a storage charge. This raises 2 likely scenarios. 
 
Either (i) 'your' gold is 'stored' at the bank for no charge. This style of gold ownership is enthusiastically promoted by banks because it provides them with reserve capital at no cost. It is called 'unallocated', and we strongly recommend against it.
 
You can see the issues discussed on our website's front page. Basically 'unallocated' gold creates a bank ledger entry in your favour. You become a permanent creditor of gold, never an owner of it. This 'paper' gold is exceptionally dangerous for you in a financial crisis, because your credit balance is unsecured and outside bank deposit protection.
 
BullionVault only deals in real, physical gold, and you become its owner, not a creditor. You don't need bank deposit protection when you are an owner – you need proper commercial insurance, which we include in your storage cost.
 
Or (ii) you took your gold kilo home, which generates material hidden risks and costs.
 
If you did not specifically insure your gold at home then you are taking a risk far bigger than you realise. Actuaries assess home stored gold as exceptionally high risk. Moreover a kilo of gold usually exceeds the limit not only of any special items on your insurance policy, but also even of a normal domestic safe (typically €10,000). Your normal household insurance is unlikely to pay out if it is stolen. 
 
If you did insure your gold specifically then you will have spent a certain amount of time finding an insurance company to offer cover. You will have left at least one record of your gold ownership, possibly more if you shopped around. These records indicate where your gold is, which means you have to start worrying about data security at insurance brokers. And presumably if you did insure then the insurer would have charged you a premium, which is usually very many times the cost of insurance via BullionVault (included in your storage charge) because of the elevated risk. 
 
The fact that you did not mention this suggests that your gold is probably not now insured. 
 
As a final point we recommend overseas storage in a trusted and politically stable country. This overcomes a key risk for gold owners, which is the imposition of strict controls on gold in their own country during a time of political or economic crisis. It is to cover this style of risk that many people buy gold in the first place. But if you stored your gold either in your local bank, or at home, then you are exposed to these risks. In the long sweep of history these are the ones which have caught out more gold owners than any other.
 
I too bought my first gold through a bank (a Swiss one) in 1999. It was 'unallocated', as I discovered when I read the small print. This, and the concealed costs, were what led me to found BullionVault in 2003. 
To judge BullionVault's and costs against other gold deals you may be considering, check and compare your full expenses using the Gold Costs Calculator here.

Paul Tustain is the founder and chairman of BullionVault.

See the full archive of Paul Tustain articles.
 

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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