Gold

All that glitters


A really interesting guest post today from John. Something I haven’t really considered myself, although I did enjoy Andrew Craig’s book very much. Take it away, John!


“Why buy gold? That’s a question best answered by the book How to Own the World by Andrew Craig. The short answer is diversification.

As part of my financial plan, I am investing 10% of my money in gold. Like index funds that allow you to invest in a region or an industry, there are financial products that allow you to invest in gold. I am not doing that. I am buying actual gold and storing it in a bank vault in Switzerland like a pirate king.

To do this I use an online service called BullionVault.com. BullionVault.com is a website that allows you to buy gold and silver and store it (for a fee) in a vault in Zurich, London, New York, Toronto or Singapore. You can choose where. You can also choose to store gold in multiple locations. You can sell your gold at any time and the money will be wired to you the next business day. I chose this particular service because it was recommended in the book How to Own the World and because I can buy Swiss gold in yen without paying a currency conversion fee.

Setting up an online account was easy. They even front you a very small amount of silver so you can try out the trading process. The user interface was straightforward and the website is in English (it’s a UK based company). The next step was to fund the account. This is done by bank transfer. My plan was to transfer a lump sum and then use it to make small monthly purchases of gold as a further form of diversification. Their trading fees are extremely low so the number of trades I make matters less than if I were trading in stocks.

An important thing to bear in mind is that all transfers to and from your BullionVault account must be made from the same bank account. This is due to money laundering legislation. I decided to use a basic Japanese bank account that I have for making regular payments.

Transfer fees vary, my bank charged ￥8000. Japan Post would have been much cheaper, but I particularly wanted to use that account. 

To make the transfer I needed:

  • My zairyu card
  • My MyNumber card
  • My bank book
  • My inkan
  • Proof of my address
  • Payee’s bank details
  • Proof of my relationship with the payee
  • Proof of the amount payable

BullionVault supplies a link to its bank details which can then be printed out. However your bank will also ask for Bullion Vault’s address which is not included on that page. It can be found on the ‘Contact Us’ page of their website.

Proof of relationship is a little trickier. How do you prove that you want to buy something from a company? A specific amount all the more so. After a little discussion with my bank it was decided that hard copies of emails confirming I had opened an account with Bullion Vault would suffice.

You will also be asked for proof of the origin of the funds you are transferring. Again, this has to do with money laundering legislation. If the account you are using is where you receive your salary then a pay slip will do. If not, it depends on your bank. Due to my contract I receive my salary at a local bank nominated by my employer. In my case, a simple explanation sufficed.

Although it’s worth pointing out that my employer was known to the bank clerk I dealt with.

Banks will generally ask you to make this kind of payment between 10:30am and 3:00pm. This is because they don’t have their official exchange rate for the day until 10:30am. They will also be unable to tell you how long a payment will take to reach the UK. You can expect somewhere between 3 and 5 working days which could add up to a week or more when time differences, weekends and public holidays are taken into account. The actual process is rather involved.

Expect to spend half an hour or so at the bank. Longer, if like me, your Japanese is poor.

​When sending payments to BullionVault you will be asked to include your user name as a reference. You choose your username when you set up your account and it cannot be changed later. So, it’s a good idea to choose a name that’s comprised of unambiguous characters, not too long and not inappropriate in some way. As a former bank clerk, let me tell you, most things are still done with pen and paper. Make it easy for your clerk and your payment is less likely to go awry.

Once the payment arrives, which in my case took three business days, you’ll receive an email from BullionVault. You can then use the website UI to make trades. I found the whole process relatively straightforward. Once you begin making trades, you’ll need to validate your account within two weeks. To do this you’ll need your banks routing details for receiving payments. You’ll also need to upload some photo ID.

Routing (receiving payments from abroad) varies considerably between banks so you’ll need to contact yours for the specific details. The site has live chat customer support in multiple languages. I used it to double check that I wouldn’t need to pay currency conversion fees for yen in Switzerland and received a reply straight away. All in all I’m very pleased with the service offered by BullionVault so far and I recommend it to anyone looking to buy gold or silver.”
​


Wow, that’s really interesting. Thank you so much for taking the time to write this up, John. Love the pirate king image.

As usual, horrible amounts of paperwork and inflexibility from traditional Japanese banks. I wonder if it would be possible to send the funds using TransferWise or GoRemit? Another option would be to use a bank account in one of the host countries (like my one in the UK).

Now, I don’t think gold is for everyone. Most people will be fine with low-cost index funds. Only once you have your investments sorted out should you think about more advanced assets like gold, commodities, etc.

If you do end up opening an account, please consider selling the free silver they give you as soon as possible. There is an $8 minimum monthly fee on physical silver deposits.

The minimum monthly fee for physical gold is $4 a month, or an annual rate of 0.12%, whichever is larger. You need around $40,000 to make the $48 a year 0.12%.

Anyone else investing in physical gold or other alternative investments? Any more guest posts out there? Please get in touch, I’m always happy to hear from potential contributors 🙂

13 Responses

  1. Interesting stuff, thanks, John. I’m almost completely ignorant on commodities trading, so pardon if my questions are idiotic, but would appreciate your feedback on the following –
    1. The common idea is that gold trends high when the political landscape is uncertain – in recent years this has become the norm, and I’m wondering if this trend still holds, or if any more subtle trends can instead be determined?
    2. Perhaps tied up to the first question, a forex trader friend of mine warned me about the very sharp fluctuations in gold trade. As he put it, when he first started out, he fiddled a bit with gold trade, and was shocked to find that he lost thousands of dollars in a matter of mere minutes, something that hasn’t happened to him with any other form of trade. What has your experience been like?
    Cheers,
    Ziv

    1. Hi Ziv,
      Don’t want to answer for John, but as with stocks, for normal investors it will be safer to buy and hold gold as part of a diversified portfolio rather than attempting to trade it.

    2. Hi Ziv,
      As Ben mentioned I am buying gold as part of a diversified portfolio. I am not trying to trade it. I think that would be difficult, time consuming and risky. I don’t really intend to sell my gold, it’s a kind of insurance.

  2. Physical gold, at least a small amount, isnt a bad idea. The challenge is deciding how to store it since bank safety deposit boxes arent a regular feature of banks here.
    I tested out one of those selling places for when you need cash in a pinch (Yoshida, which has branches everywhere) and they offered a reasonable amount under spot price for a 1/10 ounce coin. I have never bought in Japan though, because I have yet to see a place that offers decent prices on the selling side when compared to thr US.

  3. Great article! I will check out BullionVault.com as I have never heard of it before. The fees seem very reasonable given the service.
    I also maintain an allocation in gold (for all the reasons stated above) in my portfolio but do so via en ETR run by the Canadian Mint (http://www.reserves.mint.ca/Gold/) which you can purchase off of the Toronto Stock Exchange. I like it because the ETR holds physical gold (unlike some ETFs which use other financial instruments to track the price of gold) and is run as a crown corporation by the Canadian government.

  4. I don’t see the benefit of buying physical gold (that you will most likely never see) versus trading it through an ETF or some equivalent stock… sounds like you had to go through lots of pain to set up the account, while it would have been easier using your existing broker to buy some sort of fund. What am I missing?

  5. I like gold, too, but I don’t like the idea of someone else storing it and all the paperwork. I have a [small!] stack of Krugerrand coins at home…well hidden.
    In Japan I’ve purchased .9999 gold bars at a local jewelry shop here in Akita, and when I wanted to cash them out it took about a week, since they had to be sent to Tokyo.
    One nice thing about physical gold is that it sells for a premium in Nepal and India, about 10-20% over the world market.
    Cheers,
    Steve

  6. “make small monthly purchases of gold”
    How does this not add up in fees? I try to only transfer money a few times a year. I use JP post. This last time they said it was only 2000 yen, then when got my bank statement, some unknown middle bank took 10$ out, and of course as expected my US bank took another 15$ out… because you know they hate having money so they charge you for accepting more of it. (Say what you will about the inflexibly of Japanese banks they don’t nickle and dime you like the terrible US banks do for EVERYTHING now, atm, checking, fraud protection, balance to low, any transfer, walking into a bank, thinking about a bank)
    But if you are making monthly deposits are you not loosing a ton to fees (I know you said none on the Switzerland side)

    1. Hi Bob. You are right, that would be an expensive way of doing it. I transferred a lump sum to cover my monthly purchases for the year. I make monthly purchases as a kind of diversification. The idea is that by spreading the purchases out over a year you get an average price rather than being lucky (or unlucky) on one day.

  7. Oh a post on gold. Really happy to hear some specifics about AU in Japan.
    A few points on the issue of precious metals, hereafter referred to as PM.
    1. Your account MUST be allocated. If it isn’t then you run the risk of having your holdings liquidated at “market” prices. Yes you will have the cash, but IMHO this defeats the purpose of buying and holding PM. Bullionvault run by Paul Tustain offer an allocated account which is a great feature of the service.
    2. An ETF are almost exclusively “paper” PM. It is a great way to speculate in the moving prices of PM, but it is not a core allocated holding. You have to do the diligence on which ETF, which offer allocated storage of your holdings and how much of the PM they have on hand, versus the number of holders who can claim the right to it. The fine print will often reveal that someone is ahead of you in line to claim the PM. Once again you will receive liquidated market prices in the form of currency in your account.
    3. Forex and other financial services offer so many PM based investment vehicles that it takes an advanced degree to understand the wide variety of them. Volume and price discovery are just the beginning of the assorted flavors of this option. Leveraged plays in the PM market can result in a margin call which is a common complaint from people who enter the market not having done their homework.
    Paper or electronic PM exceed physical holdings by a large magnitude. So when one wants their PM is often precisely when it is not accessible due to market forces. Nothing substitutes for having PM in ones possession, which is another issue in itself.
    Doug Casey among many others is a broken record on PM, but I think it bears repeating that AU is the only form of money that is not concurrently someone else’s liability. This is a major reason behind buying it. This is your emergency financing. One you hope to never use. At least that is how I view it. I buy it hoping to never have to access it and to will it to others who think I was crazy to own the stuff.
    Diversity indeed. James Rickards often refers to PM as a good choice for this exact reason. If you haven’t he has some great books on the subject as well as numerous interviews you can access on YT. He was just in Japan a year or three ago with Tres Knippa who is an investor gambling on the eventual default of the Japanese economy, but I digress.
    The issue is how you view PM. As something to trade and invest in, or as a reserve to access if things get bad in a hurry, or simply as a diversity hedge against currency price movements in the future. Answering this question will guide you towards the best solution FOR YOU.
    PM trends for many reasons. If it were simple then everyone would be trading it and making money from doing so. I think there are better ways to make money than in trading PM because of its volatility. The VIX comes to mind, but this is not a forum about investing, but rather a thread about AU right ?
    I buy it as “dry” powder in case of emergency. Its in my possession and buried, hidden. dropped in a stream, put somewhere safe etc. I would not buy from Bullionvault but can understand the attraction in having the service as most of the trouble is taken care of by BV. Tustain should be applauded for creating it, but there are a wide variety of services out there.
    If you want to buy gold in Japan I recommend Ishi Fuku in Kanda Tokyo. Well established, reliable and trustworthy.
    As Rickards says, when you need PM is exactly the time you cannot access it. I will never have that problem and wish you all the best in your PM investment decisions.