It should be stated from the outset that purchasing gold as an investment is not for everyone. Unlike bank or P2P products it pays no interest. And unlike equities, it pays no dividends either. Its price has also varied tremendously in the past. In the past 15 years, the value of one ounce of gold would have returned your money almost six times over. Not many equities can match that record. However, much of this depends on the entry time. Anyone investing in gold in 2012 for instance would still be in profit now but would have had to suffer some hard drawdowns. At one point their investment would have lost a third of its value.
So, if you are considering investing in gold please do your own research. Some ‘safer’ portfolios call for a gold allocation of 25%, but in reality much will depend on your own circumstance.
What is BullionVault?
BullionVault was created in 2003. It allowed users to buy gold, but also offered a service to store the gold as well. The gold was real: backed by real metals in their vault. This had many advantages for users. Firstly, they could buy smaller denominations of gold. Secondly, their gold could be stored, thus taking out the risk of storing at home. Another benefit was that selling the gold back was easy: there was no waiting for physical deliveries as in the past.
The company was profitable from the start, making its money in a variety of ways: custody fees, commissions, the spread and interest. Since their start they have become much stronger. You can read more on their history on their website.
BullionVault Promotional Offer
BullionVault do not offer large inducements for users to sign up. The current sign-up offer gets you 4 grams of silver, and a single unit of each currency (dollars, pounds and euro). The value of this is very small – at the current time of writing, under £5. The real intention is that this money can be used to experiment with the interface.
Is BullionVault Profitable?
BullionVault is a trading name of Galmarley Limited. Their last accounts were filed on 18 March 2021, and cover the period of 12 months to 31 October 2020. The accounts paint a picture of a great business who are in a position of strength in the UK market and also one which benefited from the rise in metal prices. Their turnover really shows the extent to which metals became an important investment; the value of sale of goods rose almost threefold from £300m to just under £879m.
Profits for the year after tax rose to £8.7m from £4.2m the year before. The business appears on a very stable financial footing, with cash reserves in excess of £25m.
BullionVault Operating Model
In some ways the way it works is straightforward. BullionVault own gold, to which you can purchase a claim to. Minimum transaction sizes start from one gram. The metals are real. Should you own enough, and are willing to pay a fee, you can withdraw your purchases in physical format at any time.
Signing up is easy, although security is taken rather seriously. You will have to provide proof of identify and address within 14 days of signup. There are also more measures you can take to protect your money, such as an SMS alert if a withdrawal is made on your account.
Currently you can purchase gold, silver or platinum for s
torage (or gold/silver coins for delivery). The storage locations can vary: London, Zurich, New York, Toronto, Singapore for gold. Furthermore, there are different currency markets: US dollars, pounds sterling and Euros (and yen, for gold).
The choice depends on your circumstances. If you are planning to take physical delivery, it may be better to store your purchase in a location close to you. If not, then you may simply wish to take the cheapest option. It may be the case that some locations offer a smaller degree of political risk than others. The choice of currency is also something to consider and holding in different currencies may reduce the risk of currency devaluation.
The buying and selling system is notable at BullionVault. Anyone familiar with Betfair may be at home here. The main screen looks like this:
This allows you to enter in buy or sell orders: these may or may not be matched depending on market movements. In this way you can create a better price for yourself. There is also the possibility for traders to scalp the markets, taking advantage of the spread between buy and sell prices. In practice this is unlikely, as spreads usually narrow.
How is my money protected?
Safety is paramount, as your money is tied up in physical metals. There are a number of steps BullionVault takes to ensure that things run smoothly. Daily audits of their gold take place, and it is possible to see who owns how much of it, as the audit list is published on their website. Metals are stored at specialist vault companies, and the holdings are insured for loss. This insurance is included in the fees, and a copy of the certificate is available on the website.
The withdrawal mechanism also offers more protection. Funds can only be returned from the source of deposit. Deliveries of bullion can only be made to the registered address and come with a stringent list of conditions.
What are the fees for BullionVault?
Fees are an important consideration. I would consider BullionVault’s to be on the lower side, particularly for gold. The fees a user is most likely to encounter is a transaction fee for purchasing or selling. This is set at 0.5% (discounts for higher amounts). A £1,000 purchase of gold therefore attracts a £5 fee, which is comparable to buying shares of a similar amount.
There is also a storage fee attached. These are currently 0.12% per year for gold, 0.48% per year for silver, and 0.48% per year for platinum. Gold has a monthly minimum charge of $4, and silver and platinum $8.
From this, we can see that there is a minimum yearly charge of $48 to store gold, and $96 for silver and platinum. This almost mandates that any holdings should be on the larger side. A $500 holding of gold would incur the same fees as one of $20,000. As the holding fee would be almost 10% of the notional value, it is not very efficient for smaller sizes.
BullionVault Review Pros:
Transparency: Their operations appear very safe. Metals are audited, and you’ll be able to see your holdings in public on their website.
Track Record: The company has a long record of profitability and with over 70,000 customers is also one of the more popular platforms. Their help system is very good as well, and they are easy to contact.
Low Custody Fees: The fees for storage compare well to others, and you have a choice on where your metals are kept.
Great interface: The exchange-type system allows you to place bids for both buys and sells.
BullionVault Review Cons:
Not for everyone: Investing in gold is not for everyone. Whilst this is no fault of the site itself, some caution needs to be applied. Although seen as a defensive asset, gold can be volatile.
Minimum investments: The minimum custody fees make small holdings here quite inefficient, and in those cases you would better off holding physical metals. For platinum and silver the larger fees make an even larger holding necessary.
Large spreads: There can be relatively big spreads between the buy and sell price at times. Despite having many registered users, it is best to think as the markets as relatively illiquid and unsuitable for scalping.
Taxation: This may vary in your jurisdiction, but crystallised gains are subject to capital gains taxes. BullionVault holdings can be held in a SIPP (pension), but other products may offer easier exposure inside an ISA, although arguably at higher fees.
My BullionVault Investment Strategy:
Strategy will vary dependent on circumstance. BullionVault offer a ‘investment plan’, which simply purchases gold every month much like a Direct Debit. I have not sought to utilise this and have simply purchased gold on any dips (although what constitutes a dip is open to interpretation). Long-term I am bullish on gold (your view may vary) so these are long-term holdings and make up a small part of the portfolio.
BullionVault Review: Conclusion
I am a fan of BullionVault. I like their easy to use interface, and their track record and transparency gives me confidence they are a sustainable business. It should be noted that a minimum investment is required to avoid fees becoming inefficient, and below this holding physical coins or an ETF offers better value.
Disclaimer: This BullionVault review represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically gold investments are not covered by the Financial Services Compensation Scheme (FSCS) in the way bank deposits are, and there are no guarantees that you will receive any returns at all.