Bullion investors place excessive focus on purchase premiums but often neglect the cost of selling, storage, insurance and logistical flexibility, which dominate over the long term.
When selecting counterparts for bullion investments, the investment’s full life cycle (buying, holding and selling) should be considered. It is important to build optionality and flexibility into all arrangements in case circumstances change. (See chart opposite)
Each stage has costs. Many investors dwell too heavily on purchase premiums, which can cloud judgement on holding and selling costs. Some dealers make more on sales than purchases, and your options with some providers may be limited when it is time to sell.
When bullion is purchased for the long term, the cost of vaulting and insurance becomes a more important consideration than the premium paid. This is shown on the chart above, which illustrates the accumulated costs of holding bullion over a long period of time based on premium and storage costs.
Storage and insurance costs are essential for protection and keeping bullion within the chain of integrity, and in doing so enhance its liquidity and utility. Some look at this ‘cost’ as a downside of holding bullion, failing to appreciate that financial assets incur a custody charge and have complex ownership implications.
It is worth paying a bit more to secure a quality service, strong security arrangements and optionality with respect to logistics and alternative locations. Holding fully allocated and segregated bullion within professionally managed facilities with third party audits and broad insurance coverage has a cost which in our view is always worth paying.
Storage Advisory
Where and how bullion is stored is a critical strategic consideration, yet no location or plan is perfect. Future changes can be disruptive and undermine the value of different locations, making logistical flexibility essential. Diversifying storage location and approach can help mitigate these risks.
Vaultonomics’ storage advisory service covers global facilities, as well as a number of ancillary service providers. Our research considers over 450 factors to develop a detailed picture of the most suitable storage options for a specific individual, family or institution. This includes evaluation of jurisdictions and specific storage facilities and locations to ensure alignment with unique goals, circumstances and global footprints..
Disclaimer
Important: This is NOT INVESTMENT, TAX or LEGAL ADVICE.
Independent professional investment, taxation and legal advice should be sought before making all investment decisions including where and how to store bullion.