Precious Metals ETFs Lack Proper Insurance

Thinking of precious metal ETFs? Then you'd better think again. Can't you see the yellow caution light that is flashing?

I would like to explain the difference between investing in the actual metal versus precious metal ETFs. One should completely realize when buying a precious metal ETF, it is simply a representation of the price in gold or silver. Investing in precious metals entails buying the real metal directly or through a program that offers the right to receive physical metal in deliverable form upon liquidation with no conditions. What is overlooked by most professionals?

One of the items that I read in the prospectus of the gold and silver ETFs that concerns me relates to the reported expenses of the fund. I am a professional expert in the storage and security of gold and silver. I run a fully segregated and insured storage program that is independent of the financial system. I also run a very unique physical gold and silver bullion fund that takes delivery of all physical metal, as well as, stores and insures the metal outside the financial system in fully segregated and armored vaults. I am very knowledgeable with the cost of insuring and securing physical metal.

The expense ratios for many of the ETFs and other funds are very telling. Many products want to have the lowest fee to attract today's cost conscious investor. However, there is an old saying, "You get what you pay for". I will take the SPDR Gold Shares "GLD" for example. They claim the custodian charges .10 % or 10 basis point to properly safeguard the gold. A qualified custodian must properly store the physical metal through the use of very specific security controls such as cameras, sensors, armed guards, etc. However just as important is the insurance which would protect the facility and owner of the metal in the event of a breakdown in the security controls of the vault.

What is fascinating is the unbelievably low cost the SPDR Gold Shares pays for this security and insurance. Lets forget about the cost of simply providing a secure facility to store the gold. At these level of assets, there is only one company in the world that insures physical precious metals in armored vaults. I have been told there is no way this insurance company would charge a meager 10 basis points annually for an "all risk" policy. That is equivalent to insuring a car worth $10,000 and its driver for ten dollars a year. No insurance company could ever make enough money to cover the risk of loss on that policy except maybe AIG. Even some of the largest custodians for valuable assets pay a minimum of 15 to 25 basis points just for an "all risk" insurance policy. Personally, I question any program that stores their metal at a financial institution. In many cases, the financial institution is internally insuring much of the gold it stores. The problem with that is, if the institution runs into financial trouble the owner of the metal has no protection against the loss or damage to the items being stored. And isn't the idea of owning gold and silver a hedge against a failure in the financial system?

That is why our programs store all physical gold and silver outside the financial system in independently insured vaults.

Comments

[Bob Coleman:]

our system is flexible and has studied that possibility. This is a concern that should not be taken lightly. However, no other program I know of offers a real plan for this scenario.


On Jun 02 01:32 PM ArizFlash wrote:

> In the event the Federal Government outlaws possesion of gold like
> what occured under the Roosevelt administration what would stop the
> government from taking the gold from your vaults?

Jun 02 02:06 PM

[5142152-337:]

Joe: Screw the non-believers! Appreciate the straight talk of your article. I have LEARNED some three years ago what you speak of today. If the sheeple out there want to stuff their money in ETF's thinking they are secure, then they will NEVER learn.

doubleguns: I cannot believe you have ETF's and are comfortable with that farce! I've read your comments by the handfuls in PM posts for a long time and you ALWAYS show solid common sense. I think here with this subject, you need to ponder getting the hell out of that paper drill (which YOU will be impaled on) called ETF's. Buy PHYSICAL, and sleep well!

Jun 02 02:08 PM

[Bob Coleman:]

As seen last year, what hapens when there is no gold available to buy?


On Jun 02 12:55 PM doubleguns wrote:

> I hold gold to protect against inflation or currency crisis. Eventually
> I expect to cash out my ETF at a much higher dollar amount. I can
> then buy assets with the increased cash.
>
> I do not see a problem since I also hold physical gold. If I wanted
> I could simply cash out my ETF take the cash and buy gold. The ETF
> simply preserves my cash for me. Inceasing in cash value as the gold
> increases.

Jun 02 02:08 PM

[5142152-337:]

Sorry Bob, called you Joe...don't know why, brain cramp, I guess.

Jun 02 02:09 PM

[5142152-337:]

Bob, I'm interested in purchasing PHYSICAL silver. Please enlighten me where I can obtain at .20 over spot....and minimum $$$ to invest? Thanks.

Jun 02 02:19 PM

[Bob Coleman:]

please email me at [e-mail]
please list amount, quantity, and size of silver holdings. My minimum account size is $50,000


On Jun 02 02:19 PM 5142152-337 wrote:

> Bob, I'm interested in purchasing PHYSICAL silver. Please enlighten
> me where I can obtain at .20 over spot....and minimum $$$ to invest?
> Thanks.

Jun 02 02:25 PM

[Whippet:]

You have what seems to be a good product and business plan; I commend you for that. And I agree with your premise that GLD and SLV are underinsured (I use them only as option-based swing trade vehicles, which they are wonderful for). If I were seeking that solution, your product would be highly desirable. However, it seems that the "value added" by your vaulting systems would prove irrelevant in any and all situations that would REQUIRE it. Government confiscation? You're a one stop shop. Hyperinflation "Weimar Scenario"? Total systemic meltdown? Good luck getting to Idaho, or anywhere for that matter. Government collapse? Possession is nine tenths when there is no law. What does the insurance even represent, if your counterparty was part of the collapse???

Jun 02 03:09 PM

[Bob Coleman:]

great points. However, physical metal has no counterparty. Planning an effective vaulting program, is the assurance against the insurance or financial system failing.


On Jun 02 03:09 PM Whippet wrote:

> You have what seems to be a good product and business plan; I commend
> you for that. And I agree with your premise that GLD and SLV are
> underinsured (I use them only as option-based swing trade vehicles,
> which they are wonderful for). If I were seeking that solution, your
> product would be highly desirable. However, it seems that the "value
> added" by your vaulting systems would prove irrelevant in any and
> all situations that would REQUIRE it. Government confiscation? You're
> a one stop shop. Hyperinflation "Weimar Scenario"? Total systemic
> meltdown? Good luck getting to Idaho, or anywhere for that matter.
> Government collapse? Possession is nine tenths when there is no law.
> What does the insurance even represent, if your counterparty was
> part of the collapse???

Jun 02 03:26 PM

[yellowhoard:]

I've got to agree with Whippet,

What is the advantage of your service over a safe deposit box at the bank?

Jun 02 03:59 PM

[Bob Coleman:]

Talk to anyone standing outside a bank when it is closed down. Look what happened in the United Kingdom last year when a large safe deposit company had all their boxes seized by the government. Also there is no insurance provided for precious metals stored in safe deposit boxes at banks. An insured armored vault is a very secure area because the vaulting company will control the level of access by individuals or the public. A bank safe deposit program allows all types of individuals into the secure room. How secure is that? How is responsible if your items are missing?

We provide insurance for to protect ourselves and the owner of the metal. If the insurance industry goes down, what will your brokerage or bank look like?


On Jun 02 03:59 PM yellowhoard wrote:

> I've got to agree with Whippet,
>
> What is the advantage of your service over a safe deposit box at
> the bank?

Jun 02 04:32 PM

[optionsgirl:]

How does your program compare to the Perth Mint, which Peter Schiff recommends?

Jun 02 05:08 PM

[Bob Coleman:]

Our program buys all metal in small deliverable form. We do not experience any delays for delivery out of metal. Our programs are fully insured. We do not lease or encumber the metal in any way. We can deliver throughtout the world and store without any VAT. Our storage fees are significantly less. Your metal is fully accessible and not half way around the world. We store all metal outside the financial and bullion dealer system.
The cost of purchasing the metal is significantly less. There is no upfront cost to get into one of our physical metal programs.
please visit goldsilvervault.com or contact us

On Jun 02 05:08 PM optionsgirl wrote:

> How does your program compare to the Perth Mint, which Peter Schiff
> recommends?

Jun 02 05:17 PM

[Trace Mayer:]

Whippet, Only underinsured? This is from my original article critically critiquing the GLD ETF prospectus that stirred up a lot of this talk:

"Just as you though it could not get any better, it states on page 9 of the Risk Factors, “The Trust does not insure its gold.""

www.runtogold.com/2008.../

Why the Trust is paying for insurance when it does not insure its gold may be a whole different issue .... (of course, that may be a little out of context but it is fun!)

It is important to consider the shady characters when deciding on where and how to buy gold or silver. A key issue is whether one can demand physical delivery at any time. I have some additional tips here:

www.runtogold.com/how-.../

Despite the author's bias I think the article hits on a material issue which potential GLD ETF owners should be aware of before choosing that vehicle and current GLD ETF owners should use in reevaluating their decision. Thanks Mr. Coleman.


On Jun 02 03:09 PM Whippet wrote:

>And I agree with your premise that GLD and SLV are
> underinsured (I use them only as option-based swing trade vehicles,
> which they are wonderful for).

Jun 02 05:19 PM

[grbn:]

what silliness. "don't buy ETFs because they may be under insured or have inadequate security". If you want to easily make money buy and trade the ETF. If you're thinking long term or want to hold metals because you fear the collapse of financial systems or the end of world economies, then buy the physical stuff. But if that happens, I'd bet precious metals would be hard to trade or not be worth much. Turnips and ammunition would have more value. I'd also love to watch you drag your gold bars into a store and try to buy groceries. Any ETF, like any company or stock, can fail. I think people understand the risk. Too bad you didn't ask SPDR to respond before publishing.

Jun 02 06:03 PM

[Bob Coleman:]

What is there for SPDR to respond to? I am simply observing and responding to their legal documents. I am sure they will simply reiterate what their legal documents are already telling us.


On Jun 02 06:03 PM grbn wrote:

> what silliness. "don't buy ETFs because they may be under insured
> or have inadequate security". If you want to easily make money buy
> and trade the ETF. If you're thinking long term or want to hold metals
> because you fear the collapse of financial systems or the end of
> world economies, then buy the physical stuff. But if that happens,
> I'd bet precious metals would be hard to trade or not be worth much.
> Turnips and ammunition would have more value. I'd also love to watch
> you drag your gold bars into a store and try to buy groceries. Any
> ETF, like any company or stock, can fail. I think people understand
> the risk. Too bad you didn't ask SPDR to respond before publishing.

Jun 02 06:26 PM

[grbn:]

it's an old journalism thing, like getting a second source to confirm the story before running it, or asking the "target" for a response thus validating it. SPDR maybe could have cleared up any misunderstanding or confusion on your part.

Jun 02 09:45 PM

[Bob Coleman:]

read the prospectus and 10k....what is the confusion? These are legal documents that disclose every item regarding a security.


On Jun 02 09:45 PM grbn wrote:

> it's an old journalism thing, like getting a second source to confirm
> the story before running it, or asking the "target" for a response
> thus validating it. SPDR maybe could have cleared up any misunderstanding
> or confusion on your part.

Jun 03 08:57 AM

[steele403:]

How does this compare to the purchase and storage of gold through bullionvault.com/
?

Jun 03 04:31 PM

[Bob Coleman:]

Again this program is a representation of gold or silver. They do not have to provide delivery. If they do deliver gold it is in 400 ounce bars of gold. I would not recommend these digital gold programs for investors wanting physical metal. And I am tired of the BS they proclaim about keeping the physical metal "in the chain of integrity" as a reason for buying their program. Gold is gold and silver is silver. An assay can be done without drilling a hole in the metal.


On Jun 03 04:31 PM steele403 wrote:

> How does this compare to the purchase and storage of gold through
> bullionvault.com/
> ?

Jun 04 12:02 AM

[Northstar10000:]

Just buy SDS and all of the above concerns and problems vanish.

Jun 13 08:20 PM