Buying Gold in Australia

We were a bit late to the party, but wanted to buy some gold. We investigated some of the different options of buying gold in Australia.

As in our buying silver article, one of the questions we need to ask ourselves when purchasing precious metals is do we want to buy physical metal and store it, or do we want to look at other ways of owning gold.

The Perth Mint has two interesting options to purchase gold we will start Their Online Depository and a gold ETF with the symbol PMGOLD on the Australian ASX market. There is also a different ETF on the New York Stock Exchange (NYSE) with stock ticker AAAU, but in US dollars and a different a higher expense ratio. They way the Online Depository and the ETF works is quite different, so let's take a look.

Perth Mint Online Depository

The Perth Mint has a savings plan that gives you a discount of 50% off the applicable transaction fee. We will look at the unallocated storage option that has no storage cost. This means you only pay fees on the purchase and selling amount. In the case of case was 1% taken down to 0.5% when you buy and sell gold.

The trade off is your purchase of a maximum $5,000 occurs on the first working day of that month. You are meant to have the funds in your Perth Mint Depository Online account by the 25th of the prior month, although our silver purchases in the same product have gone through with funds added after the 25th. This means you have less control over picking a time you think the price is best, but is meant to be for people who want to consistently add to their gold allocation each month. You can cancel the savings plan whenever you like.

Because we like low fees, there is an option of buying unallocated gold, which has no storage fees for Perth Mint Depository Online.

Perth Mint Online Depository Example Purchase

An example of a transaction showing how fees are calculated.

Order value: $4,975.10

Transaction Fees: $24.88

Contract Total: $4,999.98

Gold ETFs

Purchasing gold via an ETF can be very convenient as you can buy and sell quickly via the stock exchange.

PMGOLD ETF

The Perth Mint is owned by the government of Western Australia and they also guarantee the ETF.

Gold can be physically redeemed, but you will be required to pay fees to do so.

Management fee: 0.15%, making it quite cheap compared to the GOLD ETF mentioned below, but possibly less liquid due to the size of the ETF.

This management fee is taken each year by removing the number of shares required to pay for your fee. Unfortunately, this is not done fractionally, so you may end up paying more than 0.15% depending on how many shares you own.

As an example, if you had owned shares at close of trade on December 31st 2019, the fee was calculated as 1 share for every 667 shares held. This fee would work as follows:

• 2 to 1333 shares, 1 share was redeemed.
• 1334 to 2000 shares, 2 shares were redeemed.
• 2001 to 2667 shares, 3 shares were redeemed and so forth.

So in the most extreme case of owning 2 shares, your fee would actually be 50%! Potentially if might work out slightly cheaper to sell your shares and buy them back after this event. This is likely to have other implications however, like tax implications or a change in pricing when you buy back in. It is also likely to be quite a small account given using a cheap broker like SelfWealth would cost $9.50 fixed fee each way (so $19) and a share cost approximately $21.77 on that date. But we are always looking for ways to reduce our fees around here ;)

ETFS Physical Gold

https://www.etfsecurities.com.au/product/gold

We believe GOLD is the biggest gold ETF available in Australian dollars. Note: on the page linked above is a "Bar-List" link where you can see how much metal is associated with the ETF. The ETFS ETF is backed by physical allocated gold held by JPMorgan Chase Bank, N.A. (the Custodian) in London.

The ETF cannot issue new securities until new bullion has been delivered to the Custodian's vault. The gold is stored in a London, UK Vault and audited twice a year. The ETF is domiciled in Australia.

Management costs for ETFS at time of writing are 0.40% p.a. and the amount of fine troy announces of gold is reduced daily based on this rate.

You seem to be able to redeem physical metal at a fee of $1,000, which would not be very cost effective for small quantities.

Physical Gold Dealers

For those looking to take care of their own gold, here are some options for places to buy physical gold in Australia.

• Perth Mint
• ABC Bullion

Summary

These are some options we investigated for buying gold in Australia, but hope to flesh this out a bit more in the future as we learn more.