Gold can be bought and stored in a variety of ways, each with its own advantages and limitations. Self-storage provides direct control, but is exposed to the risk of theft or loss. Third-party vaults offer high security, but come with costs and access restrictions. Bank securities allow you to invest without managing the physical metal, but rely on the institution. Blockchain gold allows for fast, digital transfers, but requires trust in the issuer.
Let’s briefly explore all the methods for buying and storing investment gold.
Disclaimer:
The information provided does not constitute a solicitation for the placement of personal savings. The use of the data and information contained as support for personal investment operations is at the complete risk of the reader.
Contents
#1. Physical gold (self-stored)
It can be purchased at any metal bank accredited by the laws in your territory, in person or electronically, and then collected or sent via an ad hoc courier to your home.
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It can be presented in the form of:
- Coin
- Bar/Ingot
- Plate (which often have a millimetre thickness)
Why choose it? 💁
Because it is the most concrete way to actually own gold.
Advantages 👍
- You are the absolute owner of your gold.
- You are solely responsible for its safekeeping, no one else is responsible.
- No storage costs.
- No taxes for holding it.
Disadvantages 👎
- The responsibility for its safekeeping falls entirely on you.
- Moving large quantities requires knowledge and foresight.
- Buying and selling commissions generally higher.
#2. Physical gold (held by third parties)
You can buy it in the same way as self-stored gold. However, some businesses, which operate almost exclusively online, do not allow you to access the vaults to visit the gold you purchased. However, they allow physical delivery to your home.
I do not recommend buying gold online from companies that operate outside of Italy to avoid possible legal problems. However, some of them store the products in a free zone, which allows you to avoid paying VAT on silver, palladium and platinum.
It can be presented in the exact same forms as self-stored gold.
Why choose it? 💁
Because it is a good compromise between owning physical gold and being able to resell it at any time and from any part of the world you are. It is practically always allocated gold.
Advantages 👍
- Generally you can buy and sell it at any time and anywhere in the world.
- There is almost always insurance that covers any theft.
- No tax for holding generally, if held abroad you should usually declare it and it is subject to a small rate.
Disadvantages 👎
- You have to trust the person who keeps it for you.
- Buying and selling commissions are generally higher.
- Custody has an annual cost proportional to the value under lock and key and usually varies between 0.5-1%.
#3. Financial gold
It can only be purchased in the financial world, usually in the form of funds, and it is necessary to have a securities account opened at a credit institution or any accredited operator that allows you to do so.
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It can be in the form of:
- ETCs: only ETCs allow you to invest specifically in gold.
- Multi-underlying ETFs: by nature, ETFs must have a certain differentiation of the underlying, therefore it is not possible to invest specifically in gold with them.
- Stocks or ETFs of mining companies: it is not really gold, but for many it is like investing in gold that has not yet been extracted.
- Other: certificates, CFDs, Options, Warrants, etc.
Why choose it? 💁
Because it is the cheapest, easiest and least demanding way to be in a sense an owner of gold, without physically owning it. If it is “Physical” it is almost always allocated gold.
Advantages 👍
- You can buy and sell it through a platform, at any time and anywhere in the world.
- Buying and selling commissions generally much lower than physical gold.
- Cost of the annual stamp duty (if any) added to the cost of managing the title is generally lower than a normal cost of storing physical gold with third parties.
Disadvantages 👎
- You do not own physical gold, but a share of a quantity.
- If it is not gold backed 1:1 with physical gold stored, it is just paper covered by other paper.
#4. Gold on blockchain
It can be purchased through a cryptocurrency exchange or directly from the website of the company that issues it on the blockchain. To own it, you need a digital wallet, independent of financial circuits, on which to hold the cryptocurrencies or tokens that represent the purchased asset.
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Why choose it? 💁
Because it is an easy way to have all the advantages of financial gold at the lowest possible cost. Costs and conditions still depend on the type of token or cryptocurrency used.
Advantages 👍
- You can buy and sell it through a platform, at any time and anywhere in the world.
- Buying and selling fees generally much lower than physical gold.
- Storage costs generally unbeatable.
Disadvantages 👎
- You do not own physical gold, but a share of a quantity.
- It is a type of gold that is part of a market that is not very protected and regulated, riskier than stock market securities.
- If it is not gold covered 1:1 with physical gold stored, it is just paper covered by bytes.
#5. Allocated and unallocated gold
Allocated gold
Gold remains the property of the buyer in all respects, even if the company in charge of its custody goes bankrupt or finds itself in financial difficulty. This means that the investor maintains full rights to his physical gold, without the risk of it being included among the assets of the bankrupt company. In fact, the custodian company has no possibility of lending, investing or selling the gold entrusted to it, thus guaranteeing maximum security and transparency in the management of the precious metal.
In some cases, custody may also involve the direct assignment of a specific coin or a specific ingot, identifiable by serial number, which effectively becomes your exclusive property. This type of management allows the investor to know exactly which asset he owns and where it is located.
Opting for this method of possession involves a slightly higher cost than purchasing unallocated gold, as it requires more specific custody and management costs. However, this choice offers greater protection and control over your investment. Given the nature of gold as a safe haven, it is often advisable to bear a small additional cost to be sure that your assets are truly protected and safe from any external risks.
Unallocated gold
In this case, gold does not belong directly to the person who buys it. The buyer does not become the actual owner, but simply takes on the role of creditor towards the institution or company that manages the deposit. This means that the investor only has an economic right to the gold, without having a direct link to an identifiable physical asset. The custodian company therefore has the possibility of lending, investing or even selling the gold in the deposit, following its own operational or financial strategies.
In this type of management, defined as a “non-specific gold account”, the investor holds the right to a share, part of a total amount of gold held by the company, without being assigned a specific ingot or coin. This means that, in the event of financial difficulties or bankruptcy of the custodian company, the gold may not be immediately available to the investor.
One of the main advantages of this type of account is the lower cost compared to the custody of allocated gold, since it does not require the same security measures and personalized management. However, this reduction in costs comes with some significant disadvantages, including less protection of the invested capital and a higher risk in the event of insolvency of the custodian. Therefore, while this method is cheaper, it can expose the investor to potential vulnerabilities, especially in unstable market environments or in times of financial crisis.
#6. The best solution
Of all the solutions, I believe that owning physical gold personally is the best choice as you will have the total certainty of having certain coins or bars.
Of course, it is more expensive to buy and sell it than non-physical gold, but over the years these costs are amortized by avoiding custody costs, stamp duty and fund management fees.
Preferably it should be self-stored but, if you do not feel like holding it personally, feel free to entrust it to third parties. Use the foresight not to store it with credit institutions but with private entities who are disconnected from the banking system.
If you store gold with third parties, give preference to allocated rather than unallocated gold.
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