abc bullion, page-7

Forgive me for being a little long-winded but this is an important concept to grasp in precious metals.

Precious metals schemes that don?t involve you taking immediate delivery of your metal are a swindle. Unallocated accounts are designed to divert profits from your pocket to the bullion dealers who may sell one ounce of precious metals many times over to many different customers. Geoffrey Christian speaking on behalf of the CME group, advisors to bullion banks, dealers and central banks, at the CFTC hearing in Washington May 25th last year testified that for every 1 ounce of precious metal there were 100 deals involving that 1 ounce.

There have been 2 court actions against bullion banks over the last couple of years for charging fees for unallocated precious metals that never bought the metal on their customers account. Those that don?t charge fees are making money on your metal in other ways either by delaying the purchase on your behalf until the price falls below what you paid for it or by delaying the purchase on your behalf until the rare chance that you may take physical delivery. Could it be that the reason why some dealers don?t charge fees for unallocated accounts is that it would be inherently illegal to charge fees for storing metal that doesn?t exist?

For those of you who want to defend the likes of Perth Mint on this forum don?t come back at me whingeing that they are different because they are using your metal for inventory. The Perth Mint interestingly have closed their scheme to new customers exactly one week after the last court case was announced. For those who still have metal in the Perth Mint unallocated scheme, none of their documents guarantee they will buy the metal within a certain time of you buying the metal. Makes you wonder when they say their scheme was so successful they had to close it off. I wonder what their own risk analysis was telling them about the scheme and if that had any bearing on the decision to close??

If you are going to invest in precious metals why would you enter into a scheme that relied on hiding or delaying till some undefined time in the future your purchase from the physical market? In other words the market may never know that someone has purchased physical metal if they have entered into an unallocated scheme. What?s the use of purchasing an investment if the market doesn?t know about it, if the market doesn?t know about it your investment how can the market respond accordingly by adjusting values?

Another point of precious metals is that they are a safe haven. The only way they can be a safe haven is if you have them in your own possession. If there is a rush on precious metals as many predict, unallocated customers who think they own gold or silver will be disappointed to find the vaults are empty when everyone pours in to take delivery.
20 kg of silver will fit in less than the space of a shoe box and can easily be concealed. 20 kg of gold if you were fortunate enough to own it would take up even less space. Get creative about the secure storage for your precious metals. Paying someone else to take care of the worries (out of mind out of sight) may well prove to be more like paying them to take it off your hands!!