by David Kranzler
Investment Research Dynamics
“If you own gold, you have money. If you don’t own gold, you have a problem” – (James Turk). To that I’ll add: If you don’t have physical possession of your gold, you do not own gold
A significant amount of gold is held as “unallocated,” which is when an entity buys gold and establishes an account that is credited with value of the gold purchased. A gold bar is not actually stored on behalf of the “buyer.” Rather the buyer has a “promise” from the bank vault custodian to deliver the bar or its cash equivalent when the entity decides to either take delivery or “sell” the bar.
Because an actual bar in the buyer’s name is not sitting in the custodial vault, the buyer does not incur storage or other related fees. BUT, the buyer does not have legal title of ownership to anything other than an account showing the value of the “gold.” Like a checking account, the bank is entitled to use the proceeds from the gold “purchase” for its business operations.