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June 1, 2010
Alert 42-2
Two Important Questions about Your Gold
For those of you who already own Perth Mint Certificates, congratulations! I’ll bet you’ve enjoyed seeing the price of gold hit new highs this year.
For those of you who are still thinking about buying, you’re on the right path. Let me see if I can persuade you to step through the gate. In this article, I want to address two of the most frequent questions we receive about Perth Mint Certificates. Perhaps you’ve wondered the same things.
1. Are unallocated metals as safe as allocated metals?
2. How do I get my hands on my metals – especially if there’s some sort of worldwide calamity or financial collapse?
Unallocated vs. Allocated
An allocated metal is one that is held for you separately and apart from other metals, under whatever name you designate. Sometimes you will hear the term “segregated” used to describe the process. Both mean that your metals are stored under your name; they are not mixed with any other holdings in the depository.
Conversely, unallocated metals are stored with metals held by other investors. It is a specific but undivided interest in a pool of metal. You own a specified number of ounces of gold or silver, but not any specific bars. The metals are stored in your name and identified by an issued certificate.
The advantage of owning allocated metals is that these metals are immediately ready for delivery. They are held off the Perth Mint’s books, so that in the unlikely event of insolvency, you are not considered a general creditor of the Mint. Rather, your metals are ready for you to arrange for delivery or pick-up.
Unallocated metals have many benefits as well, especially unallocated metals held in The Perth Mint Certificate Program. The biggest advantage for the client is that the annual storage is free. Also, the client does not encounter the one-time fabrication charges. Over time, these savings can really add up. But this plus creates a concern for some people. “Why would the Perth Mint offer free storage?” they ask. (We don’t blame them for their caution. Many inquirers can remember when a “buy below spot and we’ll store your gold for free” scam cost investors hundreds of millions of dollars in the 1980s.)
But the explanation is simple: It saves the Mint money. They save leasing costs and the client saves storage fees. It is a mutually beneficial relationship. Because they are allowed to store the unallocated metals in whatever form they wish, they are able to reduce their operating costs. They do not need to lease metals to fill The Mint’s production pipeline. You can rest assured that your unallocated metals are there. For the record, I personally hold unallocated metals at the Perth Mint.
Not only are all of the metals, allocated and unallocated alike, inventoried annually by both PriceWaterHouseCoopers and the Government of Western Australia, but we have seen them for ourselves. Michael Checkan, the president of ASI, has visited the Perth Mint to review the program’s safeguards and “eyeball” the metals. Here’s just one photograph of that experience. Does he remind you of Uncle Scrooge in his vault?
 When ASI helped design this program for the Perth Mint 13 years ago, our goal was to make it the best storage program in the world. We believe we succeeded.
An important part of that plan was for unallocated metals to be treated exactly like allocated metals. Whether your metals are allocated or unallocated, they are both covered by the same government guarantee and the same insurance from Lloyd’s of London.
Regulations that govern the Mint absolutely prohibit fractional reserves, derivative exposure, leasing to third parties, or any other practice that would jeopardize your investment. But there is one problem with unallocated metals … they can’t be delivered to you. They can be sold and the funds sent to you; but unallocated metals have to be fabricated into coins or bars before they can be delivered. This takes time and adds to the cost.
If you want the most bang for your bucks – that is, the most number of ounces of metal for your money – buy unallocated gold (or silver or platinum). Your metals are safe. And when you do decide to sell, your proceeds can be sent to you anywhere in the world you wish, in whatever currency you designate.
And remember, it is relatively easy to liquidate your unallocated metals, receive the proceeds, and then use them to purchase metals (or anything else) wherever you are in the world. The flexibility of the Perth Mint Certificate Program is one of the reasons why it is so popular.
If you do decide to have your unallocated metals fabricated, the process will take a few weeks. You will need to surrender the certificate that lists the unallocated metal (for example, 30 ounces of gold), along with your instructions of what to do with it. In return you will receive a new certificate listing the form of the allocated metals (for example, three 10-ounce gold bars).
Delivery can also take a week or two, as the Mint will need to arrange secure international shipping by a bonded agent. Plus, they must fulfill any customs requirements.
You don’t need to wait for a financial crisis (or perhaps I should say, a worse financial crisis) to liquidate your holdings, to change them from unallocated to allocated metals, or even to schedule delivery. Those are matters for you to decide as you shepherd your assets towards the future.
But you can trust in the fact that ASI is here to help you no matter which course of action you decide to take. We want every investment you make through us to give you “sleep at night” comfort. If it keeps you awake, it’s wrong.
A Perth Mint Certificate could turn out to be the best sleeping potion you have. Try one and see.
Steve Emerick
Please let us know if you have any questions about the Perth Mint Certificate Program -- or any other precious metals or foreign currency needs. Just call 800-831-0007. Or click here to send us an email us and tell us the best time to call you.
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