As with anything in the market, investing in silver bullion has both pros and cons, and what’s appealing to one investor may not be a good choice for another. But once you start getting to large amounts, it’s unsafe to store physical gold and silver at your home. If you want to hold more, it’s important to store it offsite professionally with security. This comes with regular fees, which eats away at your investment. Historically, gold and silver rise much faster in price than storage fees, but it can be volatile along the way.
While costs to enter and exit the position are very low, the key drawback of these products is the ongoing cost of management fees. These fees vary depending on the offering and the type of metal held. Some of the larger ETF’s charge management fees of 0.40% for gold backed funds and 0.50% for silver backed funds. A portion of the gold, silver, or platinum backing the ETF is sold each month to cover the cost of these management fees. Therefore, an investor in these shares will expect that the amount of gold, silver, or platinum backing their shares will continuously decline over time. There is a trend in the market where new entrants are offering ETF’s with similar characteristics, but with somewhat lower management expenses.
Suppose a wealthy client had 400 oz of gold in BullionVault already, but with heavy demand from buyers there were few offers on the Order Board. The cheapest gold on BullionVault would start to drift above the world market price, as bidders bid over the world price. But the wealthy client can execute a spot market order to buy at the world market price, and offer the gold they already own in the vault to other BullionVault users for a small but easy profit.
The main upside of using ETFs is that you won’t have to pay for shipping, storage, and insurance costs. There’s also the advantage of not having to worry about your metals getting stolen or lost. Plus, you can buy and sell ETFs quickly and easily through many online brokers. Physical gold and silver usually take more time and effort to buy and sell than ETFs.
Two of Kilo’s principals, having been senior team members at one of the largest global bullion banks, observed the significant benefit this process generated for the central bank and institutional investor clients over time. With this experience informing us, we decided to use the efficiencies of modern technology to bring these benefits to smaller institutional investors, family offices and individual investors. The result, our Precious Yield account, offers investors the ability to buy and sell gold, silver, and platinum at low spreads, and most importantly, to earn a yield on their investment.