How To Beat A Gold Shortage

July 17, 2013


There are currently no shortages of gold and silver. Unless we go back to the gold or silver currency standard, with government demand for bullion locking massive new quantities inside central-bank vaults, I don't see any physical shortage to come.

But because of how coin producers, wholesalers and retailers need to manage their capital—as well as the physical logistics of putting metal into your hand—this corner of the market is subject to short-term shortages. Retail bars and coins are only a small corner of the gold and silver market, however. They represented less than 9 percent of supply last year in fact, based on World Gold Council and Silver Institute data.

So what of the excessive premiums being paid by some investors today to lock in their gold and silver prices? Could that cost be avoided?

Twenty years ago, the answer would have been no, because there were no other competitive products to offer physical gold and silver ownership. But modern technology helps offer the public alternative products today. You can buy ready-vaulted gold and silver from your laptop, desktop or smartphone, and sell them just as easily, using the precious metals exchange, for instance.

Unless you need to own gold coins and bars held in your home right now, there are better alternatives. Why pay a higher premium for a product you don't need at that moment? Even if you do want to buy those coins instead of holding gold or silver at low cost in professional, secure storage, then you could still buy vaulted gold or silver at BullionVault as a hedge, waiting until physical supply of the coins again meets demand and premiums retreat.

At that time, an individual could then sell their vaulted holdings and buy the coins, without losing money due to excessive premiums or to market moves in the price, all while paying the lowest costs in outright precious metals ownership.

Many times, of course, solutions exist that others would prefer you not to know about. In the end, the regular gold bullion coin and bar items will return to their normal premiums, when coin supply meets coin demand. Why not look at other methods to cut your costs or hedge your base commodity price risk through another vehicle? Remember, patience is a virtue and good things come to those who wait.

Miguel Perez-Santalla is vice president of business development for BullionVault, the physical gold and silver exchange founded a decade ago and now the world's No. 1 provider of physical bullion ownership online.

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