The MGS Precious Metals Blog

Manhattan Gold & Silver is an industry leader in precious metal pricing and refining with more than 30 years of experience. During our time in the business, we’ve found the topic of precious metals to be a vast and interesting one. Here on our precious metals blog, we write in-depth posts about the science of precious metal refining, historical and modern uses for precious metals, market news, and much more. Subscribe to our RSS feed to stay current, and discuss the latest posts on our Facebook page.

How ETFs Are Different from Bullion

August 14, 2019 07:00
How ETFs Are Different from Bullion

There are all kinds of investment vehicles for gold, but the two most popular are arguably bullion, and bullion-backed exchange traded funds (ETFs). In this post, we’ll go over the basics of how gold-backed ETFs work – and the differences between owning ETF shares vs owning physical bullion.

An ETF is a type of investment fund that works similarly to stock in public companies. In a gold ETF, shares of the fund are backed by a stockpile of physical bullion, and the fund’s share price directly correlates with gold's market performance. When the price of gold goes up, the value of the ETF's shares does too.

A common misconception is that investing in gold ETFs is just like investing in physical bullion but with extra steps. However, that’s not technically accurate. Most ETFs were never intended to work as a substitute for physical gold ownership. Investors own shares in the fund – the fund and its administrators own the bullion. So, you can’t access the gold your shares represent. A small number of gold ETFs allow investors to take delivery of physical bullion in exchange for shares, but only if the investor meets certain requirements – such as owning a minimum number of shares or paying additional fees. This investment structure also exposes ETFs shares to different risks that don’t apply to direct ownership of physical gold, like custodial fraud, fund mismanagement, or bank system failures.

None of this is to say bullion-backed ETFs are bad – they just work differently than physical bullion. Depending on the investor, gold ETFs can be a low-cost way to invest in the direction of the gold market that’s more convenient to own and acquire than bullion. It all depends on the circumstances and goals of individual investors.

Sovereign vs. Private Bullion

August 7, 2019 07:00
Sovereign vs. Private Bullion

Investors who want to buy gold bullion may be faced with a choice to buy either sovereign or private bullion. Each have their own advantages and disadvantages regarding risk, price, and liquidity that can influence which is the “right” choice for certain types of investors. In this post, we’ll explain the differences between sovereign and private bullion – and why some investors may prefer one over the other.

For bullion products, the terms “sovereign” and “private” refer to the affiliation of the minting authority issuing the bullion. Sovereign bullion is issued by a government, usually via the country’s national mint. Unlike sovereign bullion, private bullion is minted by a private company and not backed by any government.

So in terms of precious metal content and intrinsic value, private and sovereign bullion are the same. However, there are key differences between the two – starting with the purchasing process. Sovereign bullion coins and bars are designated as legal tender that is guaranteed by the issuing government. This assurance improves liquidity, but carries an increased cost in the form of seigniorage fees. Plus, sovereign bullion features limited-run designs and serial numbers that add to the bullion’s collectability, which subsequently adds to its price via demand.

Private bullion does not carry these value-added costs, so it’s almost always cheaper to acquire. Some buyers prefer the security and peace of mind of buying bullion backed by a major government. Other’s – mindful of geopolitical risk and historical precedent (e.g. the Gold Reserve Act of 1934) – actually prefer the opposite.

Ultimately, each investor must decide whether sovereign or private bullion aligns with their investment philosophy and strategy best. Here at MGS, we sell both government-issued coins and private-issued bars from LBMA-verified mints, like Valcambi and PAMP Suisse. For help finding bullion products that match your investing preferences, contact us today!

Types of Bullion and Their Uses

May 22, 2019 07:00

Purchasing bullion is a great way to diversify a hard-asset portfolio. Of course, the amounts and types of precious metals you buy are important factors in investment diversification – but what about the types (i.e. form factors) of bullion?

One of the common questions first-time investors ask when they see all of the ingots, bars, coins, grains, rounds, and other types of bullion available is “what’s the difference?” Since the inherent value is the same, there is no strategic advantage to owning, say, coins instead of bars. But, there are some reasons why investors may prefer one form factor over others.

For example, bullion coins’ smaller sizes and difficult-to-counterfeit designs give them better liquidity compared to ingots, bars, or rounds. However, seigniorage fees typically push the cost of bullion coins over the spot price for their metal content. So if you can afford to purchase more metal at once, and you have a secure space to store that amount, you’d save some money upfront by purchasing bars instead of coins.

In the infographic below, we’ve outlined the key differentiators for the most popular bullion products: bars, coins, and fractional.

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