Gold Investing 101 – Beware Unallocated Gold Accounts With Indebted Bullion Banks And Mints - Part 2

Investors looking to gold again but gold buyers need to exert caution

Royal Mint – a royally expensive way to help the government

Unallocated gold – unsecured creditor of a bank?

If you cannot hold it, you do not own it

Own gold bullion coins as insurance, to reduce counter party risk and to preserve wealth

Conclusion – Reduce counter parties, Don’t over complicate

Yesterday we pointed out how the gold market is seeing renewed interest from new, first time gold buyers and gold investors. Concern unites them – they are concerned about the current trajectory of the world – politically, financially, economically, monetarily and environmentally.

As the old adage goes though – ‘all the glitters is not gold’ and novice, and indeed experienced, investors need to be careful that they are not seduced by ‘shiny trinkets’ which look ostensibly attractive but in fact are fraught with risk and not the safe haven that gold bullion is – when owned in the safest ways possible.

We looked at collectible gold and silver coins with massive premiums, gold plated coins masquerading as “pure gold coins” and the assortment of such coins for sale on eBay and other online retail platforms.

Today, we move up the food chain of the gold market and look at some of the bigger beasts who offer various gold investment schemes – two of which are unallocated gold accounts with bullion banks and with government institutions and mints.

Below we take a look at some of these popular options and explain why they might not be the gold standard of gold investment.

For all of our talk about avoiding gold scams you might think that the wisest thing to do would be to go straight to the source in order to buy your commemorative coin or even a bullion coin. Whilst this does remove the risk of buying a fake, it certainly does not remove the chances of being royally ripped off when it comes to the price and buying intrinsically worthless coins are very high prices. This is most likely the case when it comes to newly minted commemorative coins.

The Telegraph writes that the Royal Mint’s London Olympic 2012 coins set was priced at £1,295, almost twice the value of each coin’s gold content (38 grams of 22-carat gold). One wonders how much a 2008 ‘Olympic handover’ coin is now going for given it was trading for 5% below the original retail price, in 2009 despite a 30% climb in the sterling price of gold.

The mark-up of such coins is not the only problem with the Royal Mint. In recent years there has been a push to bring in more investors who are keen to hold both their bullion and bullion coins in storage with the government owned institution.

When investors decide to invest in gold, one of the contributing factors is that they are looking for an investment that not only has reduced counter party risk, but also is kept out of the reach of those institutions that are responsible for the financial crisis that has caused you, the investor, to want to invest in gold.