Simit Patel

I'll be doing reviews of products and services I use to trade the world's financial markets. Below is my review of Bullion Vault, a service I use to buy and store gold (who is also an InformedTrades sponsor).

Bullion Vault. Bullion Vault is a way for you to buy gold and have it stored in a vault, so that you do not have to accept delivery. There are a few great things about Bullion Vault that have led me to use them:

1. You can buy in very small quantities -- 1 gram is the minimum amount (1 gram is slightly more than 0.03 ounces) at a price very close to the spot price for buying per ounce. This makes gold far more affordable for those on a much smaller budget.

2. Bullion Vault has vaults in London, Zurich, and New York. When you purchase through Bullion Vault, you get to choose which vault your gold is stored in. This is a key issue for those who are concerned about the potential of gold confiscation, or laws being altered to make it more difficult to buy and sell gold. There is a precedent for this in the United States, which was Executive Order 6102.

3. In addition to being a way to purchase and store gold, Bullion Vault also makes it easy for you to trade gold. Basically, you can hold cash with Bullion Vault, or you can hold gold -- and you can easily convert back and forth. So if you're into active trading gold, Bullion Vault can suit your needs as well.

Costs Associated With Using Bullion Vault

In terms of costs, Bullion Vault charges a commission of 0.8% for all gold purchases up to $30,000; commission rates decline after that. There is also a custody charge of $4 for each month you hold gold (if you have more than $40,000 in gold, than the charge is 0.12% of your gold account per year). Lastly, there is a bank wire charge of $30 (or the equivalent if you are withdrawing in another currency) when you withdraw funds. Custody charges are an important sign that the firm is a depository institution, and will not be lending or trading the goal you have purchased through them -- and that the gold is yours in the event the firm collapses (though Bullion Vault is very financially stable).

These charges are quite low relative to other legitimate gold holding services I have seen. In addition, Bullion Vault provides customers who open an account with them a free gram of gold.

Most importantly, I've withdrawn from Bullion Vault on a number of occasions, and have not had any problem in doing so.

Getting Started

In terms of validating your account, you need to send them a copy of a bank statement from the bank that you'll be having funds wired to when you make withdrawals. You'll also need to send a government issued photo ID. The good news is Bullion Vault makes this relatively easy, as they let you do it by uploading scanned copies -- you don't need to physically mail them (although that is an option if you prefer).

Competitors I Like

Bullion Vault's leading competitor is GoldMoney. As I am a security-conscious person, I recommend having multiple brokers so that your risk is diversified. GoldMoney is another company I am in the process of opening an account with, and is widely regarded as a reputable gold storage company. There are greater administrative hassles with GoldMoney -- you need to get forms notarized! -- so it's taking me a bit longer to get set up there. Once I have my funds deposited and am fully set, I'll write up a longer review.

Another key competitor is GoldSilver.com. GoldSilver charges a bit more and does not offer as small increments -- customers can only buy in 1/10th an ounce of gold, and pay a significant premium for doing so -- but they do offer delivery of small purchases, which many will find comforting. GoldSilver also has vaults in Canada, Hong Kong, and a number of cities in the US, so they do have some diversification options that other brokers do not. Mike Maloney is the man behind GoldSilver.com; we've compiled videos of his gold presentations here.

So ultimately, while Bullion Vault is my favorite and who I buy most of my gold with, I like GoldMoney and GoldSilver.com as well, and think they are good options for those who want to diversify across a number of gold brokers offering storage options.

As always, if you have any questions/comments, feel free to leave them in the comments below.

January 12, 2010 UPDATE: Bullion Vault is also in the process of offering silver trading. Click here for my review and announcement, with screenshots of the Bullion Vault platform.

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Unregistered

You say that the fee for stored gold is $4/month or .12% if $40K or more. That would be $48/month. Do you mean .12%/year? Thanks, Chris

Simit Patel

Hi Chris,

Yes, that is what I meant -- 0.12% per year. I've updated the post to make that more clear. Thanks for the heads up.

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olexiyb

Just wanted to warn everybody. do not use bullionvault.com they do not answer any questions. I have sent check using billpay, it was cashed and cleared. Month passed and I still do not have money on my bullionvault.com account. I do not have choice and have to start investigation from my side. Do not trust this company!!! You will just have problems with them. I just cross my fingers and hope to return my money back.

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Olexiy

Simit Patel

Hi Olexiyb,

Sorry to hear about your troubles, and hope you're able to sort them out. My signup process with BullionVault was very smooth. If you're able to resolve the issue or provide more details, please feel free to do so.

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Unregistered

So how do you know they actually have gold and will give backto you when things get tough? Who can vouch for their credibility?

Simit Patel

Hey unregistered,

In my research, I haven't found any real negative reviews of BullionVault, and all seem to suggest they are trustworthy. With that said, there is no guarantee; even if the company were filled with angels today, who is to say a change in management couldn't change things tomorrow? For this reason, I recommend diversifying. I wrote a guide to creating a diversified gold portfolio that you are welcome to look at.

With that said, I think doing research is a good safety measure, and based on the research I've done, I'm comfortable putting some of my gold portfolio with BullionVault.

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Pluto

Hi Simit:

I like many of the same things you do about BullionVault, and it's interesting to note that you can invest using your retirement funds, if you chose a custodian they work with. I do have an account there, but haven't quite got the swing of things. Apparently, there a lot of automated scalping which can change the prices very quickly -- bit not significantly. They provide programmable EAs, I believe.

Meanwhile, I've been looking at GoldMoney, as well. They seem to offer the opportunity to trade in and out of various currencies, as well, so that traders can move around laterally, chasing value. That idea is intriguing to me. And, as always, I like the vaulting outside the US.

I was wondering if anyone has traded at Monex? I spoke with a broker there who explained their strategy. You can buy and vault (inside the US), however, you can also use 4:1 leverage to trade. This particularly appeals to me because, as a trader, I consider gold a parking place and have no great expectations (generally) of it being an appreciating asset. It certainly is not income producing.

What do you think about trading physical gold with leverage?

How about gold on the forex? Any particular strategies or hedges there?

I've tried and failed on all my brainy ideas with forex gold and silver. The only one that works for me I trade through Oanda, where you can buy minute amounts of gold (or sell, in a different market) and hold and buy more tiny positions up and up. I use 20:1 for this trade and inch up a solid stop floor under the whole construct, leaving room for violent swings. So far so good.

Of course, crappy strategies can look good in a bull run. So, who knows?

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Simit Patel

Hey Pluto,

Everyone's trading strategy is different, of course, but I do not recommend it. The only time I use leverage is when trading assets that have very little volatility. Back in the good ol' days EURUSD had very little volatility, and so I enjoyed trading it with leverage. Gold can move significantly in the course of a day, though, so I am reluctant to use it with leverage. With that said, I know there are short-term traders who use leverage and tight stops to trade gold and commodities, so it depends on what your style is.

I do have an account with Oanda and I do trade gold there, although my positions are unleveraged and I have held them for a while (since last October). I do plan on closing out those positions over time and moving those funds to Bullion Vault -- this is mainly out of increased concerns of hyperinflation, which I'll do a post on shortly (I still do not think it is likely but it is becoming increasingly likely in my opinion).

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Unregistered

I can recommend using Bullion vault as well. The idea is great and the platform makes it very comfortable to deal with gold - even for beginners it is quite easy. Furthermore you needn't worry about storage and insurance what you would have to if you buy physical gold in a bank and take it at home.

Cheers
Frank