Kitco - Exclusive Commentaries

As an investment advisor, I consistently encounter the same reaction when I tell investors they should own physical precious metals in a certain portion of their portfolios. “You mean buying shares in mining companies, not owning the actual metal, right?”

While this reaction, due to a 20-year precious metals bear market, is not surprising (and is, in fact, quite bullish from a contrary perspective), it also highlights that actually buying physical gold, silver or platinum still seems daunting to most investors.

What all investors should know is that buying mining company shares represents a leveraged speculation on the trend of precious metals prices; physical metals themselves constitute the ultimate protection against government-created inflation and the resulting decay in your dollar savings.

As a full service investment firm, ours offers many ways to gain precious metals exposure. When it comes to the purchase of physical gold, silver or platinum, however, one investment stands out: the Perth Mint Certificate Program.

Here’s how the Perth Mint Certificate Program (PMCP) answers the concerns most investors have about buying physical precious metals:

Perhaps the biggest obstacle that prevents most people from buying physical metals is the question: how do I know I’m getting the best price? Well, this is a fair, if unnecessary, question. Do you go down to the local coin dealer and just take his marked-up rate? If you do, can you trust this stranger to deliver at the agreed upon price if the market moves substantially in the interim? While most such dealers, I’m sure, deal honestly, it is my understanding from investors that this problem does indeed exist.

How about the familiar-named gold brokerages or internet dealers? Should you have to shop around? And when searching for various dealers, do investors remember to factor the cost of shipping into the price? Can investors fight the urge, as some brokerages will recommend, to buy precious metals using leverage? Such margin-type financing, in my opinion, is poor advice and defeats the very purpose of buying physical metal in the first place: to hold the ultimate physical financial security.

In actuality, pricing should be the least of a gold buyer’s concerns; the market for metals is open nearly round the clock and there’s only one price that matters—that of the spot market. There’s no reason, in my opinion, to pay any other price.

Under the Perth Mint Certificate Program, investors purchase metals at the spot market ask WITH NO MARK-UP. The only costs investors need to know about are, as with any quality investment, completely transparent: this program charges a 2% service fee and a $50 administrative fee.

For example: based on the program’s low minimum investment of $10,000, the total cost would be $10,250. That’s it!

Factor in the next feature we’ll discuss, the program’s eye-opener regarding storage, and knowledgeable investors quickly realize why the PMCP is so attractive.

Here is the big additional cost to owning gold that many investors don’t consider prior to buying or, if they do, is the concern that keeps them from purchasing physical gold: what do I do with the stuff once I buy it?

Should one lease a safe deposit box? Increasingly, banks don’t want precious metals in their vaults. Indeed, many now prohibit the storage of gold in such boxes thanks to Patriot Act disclosure requirements, so you probably couldn’t even store gold this way if you tried.

Certainly, the annual fees many bullion banks charge are prohibitive. And how do you know these facilities are not loaning out your gold once you deposit it with them?

Do you purchase a safe, dig a hole in your backyard and take the risk of self-storage?

That’s right: choose this program’s unallocated bullion option and you can store your metal at the Mint for free indefinitely. This feature is particularly attractive for silver buyers because this metal is so much more bulky than gold.

I’ve heard investors groan, “Oh, I don’t trust that those certificate programs actually have the gold on hand.” The PMCP, however, is not like any other certificate program. Here’s why:

- Every ounce you purchase, regardless of storage method, remains on the premises of the Mint at all times and cannot be loaned out. How can the Mint offer such a remarkable program? Perth’s is a functioning mint. It saves money in its day-to-day operations by having this excess metal on hand and, therefore, not being forced at any particular time to lease metal from the market.
- Unlike the U.S. Government, which has confiscated gold from its citizens once and many fear may do so again in a time of financial panic, Australia has no such history. Indeed, it could not afford to do so because the mining industry is too vital a component of the Australian economy to disrupt in such a manner; this nation could ill afford to cause investors to lose faith in the security of gold.

Why do so many investors tend to shun physical precious metals and invest in gold and silver through shares in the mining companies? In my experience, it seems to be a matter of convenience; log into your online investment account or call your stockbroker and the purchase of shares can be completed in minutes.

Here, too, the Perth Mint Certificate Program answers the challenge— the program’s short, 2-page application couldn’t be simpler… just complete that form, send it in and wire funds. That’s it—placing your trade is then as simple as buying a stock: just call to tell your representative when to pull the trigger.

Part of the obvious attraction of the PMCP for investors concerned about the direction of the U.S. Dollar is the opportunity to move some capital off-shore. What those same investors may also be pleasantly surprised to learn is that the Mint does not report to any U.S. Government agency; additionally, the purchase of gold, silver or platinum through the Mint does not constitute a foreign account that must be reported under current disclosure rules.

Although the program’s certificates are non-negotiable (for investor protection), they are transferable. For a simple administrative fee of $50, an owner can change title of these certificates at any time.

We offer an entire range of precious metals alternatives to our investors. When it comes to the purchase of physical metals, however, this program trumps all others.

Transparent pricing, safety, low cost—these features and more represent why I believe the Perth Mint Certificate Program represents the best way to invest directly in precious metals.

Mr. Hanlon is the C.O.O. and Chief Domestic Strategist at Euro Pacific Capital, Inc. in Newport Beach, CA, a full service brokerage firm specializing in direct trading access to international markets.
www.europac.net
chanlon@europac.net