In today’s economic climate, adding gold and/or silver bullion to your portfolio as a defensive asset is increasingly accepted as a smart move. Many individual investors are moving funds into precious metals, mirroring the accumulation by central banks—and increasing numbers of Australians are purchasing bullion through their SMSFs.
But with so many options available, how do you choose the right vendor to trust with your silver or gold bullion investment?
We’ve compiled a comprehensive checklist to help you navigate this decision with confidence.
1. Ownership
Does the vendor offer direct ownership of physical gold and silver? How is this regulated?
You would want to own investment-grade gold or silver bullion, safeguarded under Australian property law, mitigating counterparty risk effectively.
2. Liquidity
How liquid do you need your investment to be? Consider opting for a vendor that allows you to buy or sell your bullion whenever you need. Some vendors will only be open during work hours, or only when international gold markets are open.
Ideally, you should be on the lookout for seamless liquidity, with 24/7 access to an app facilitated by the vendor. This will enable you to buy, sell, gift, send and spend gold whenever suits you.
3. Storage and security
What do you intend to do with your bullion once you have purchased it? If you want physical ownership of the metal, think about the costs of secure storage and insurance. Alternatively, if you want to outsource the vaulting of your gold or silver, evaluate the vendor’s storage and security measures and look for options with secure vaulting facilities at competitive fees.
Remember, reliable insurance for your vaulted gold and silver is key. For example, having your bullion insured by Lloyds of London and vaulted in Brinks Vaults in Australia with comparatively low vaulting fees would offer you peace of mind for your investment’s safety.
4. Portfolio diversification
Some investors choose to buy and hold bullion, whereas others want more flexibility in portfolio management—approaching silver or gold with a trading mindset.
If you would like to have more control over balancing your portfolio, look for features that allow users to buy one asset with the other, instantly, without any funds leaving the app.
5. Utility
Consider the practical utility of your silver or gold bullion investment. Many investors worry that when investing in bullion, they would sacrifice the flexibility of holding cash.
Features to look out for include allowing you as an investor to use gold like cash, spend gold anywhere that Mastercard is accepted, and be able to pay, remit, or gift silver or gold through an app 24/7.
6. Earning power
Unlike many investments, bullion does not return dividends (although the price has kept pace with inflation over time), so when investing with most vendors, you only earn capital gains.
A referral program which rewards you when you successfully spread the word about the app could be a feature that you might find appealing to accumulate more value over time.
7. Transaction fees
Investigate the transaction fees charged by the vendor, especially for larger transactions, as small percentages can add up to large fees as they scale.
An ideal limitation for might be a capped buy and sell fee so the more you transact, the cheaper the fees are as a percentage of the value.
8. Purity verification
There are horror stories about bars of gold-plated copper sold as solid gold – which is discovered only when the owner tries to sell.
Make sure all gold and silver is tested, audited and certified for purity by reputable third-party organisations, providing transparency and reliability in your investment. This is especially important if you are planning to sell the bullion in the future.
9. Environmental and socially responsible
Sadly, many gold supply chains do not optimise their environmental and social impacts. If this is important to you, check whether the vendor offers LBMA (London Bullion Market Association) gold.
All LBMA gold meets the Responsible Gold Guidance ESG requirements, which is currently the most stringent framework for environmental and social impact in gold and silver supply chains.
10. Investment strategy
Traditional gold and silver vendors require you to purchase a whole bar or coin—in other words, a predetermined amount of metal. There is no flexibility to choose to purchase a fractional amount or to purchase the whole bar over time.
Opt for a vendor that allows investors to purchase (or sell) any amount of metal that they choose with fractional ownership of gold and silver bullion bars. This allows investors to choose to employ a DCA (Dollar Cost Averaging) approach, setting up recurring payments and purchases over time, providing flexibility tailored to their investment needs.
Be diligent with your silver or gold bullion investment
Investing in gold and silver bullion can be a cornerstone of a defensive investment portfolio. By considering factors like counterparty risk, liquidity, storage and security, portfolio diversification, utility of gold, transaction fees, purity verification, and flexibility in investment amounts, you can make an informed decision when choosing the right vendor for your silver or gold bullion investment.
