Public Bank Gold Investment and The Hotel California

Among the different gold storage programs out there, the Public Bank gold investment, also called the Gold Investment Account, is hugely popular. The Public Bank gold investment was started when the Malaysian bank began this program in April 2008 in order to satisfy the increasing interest in the individual to use gold to ward off inflation, and it was promptly well-received by folks all over India and China who were already displaying an insatiable appetite for tangible assets.

In the nutshell, the Public Bank gold investment operates like a passbook, and it’s designed to track gold purchases. To start an account, you make a 20 gram purchase, although you can make additions in smaller increments after the initial investment. Keep in mind that the account will not pay interest, since the purpose is to actually piggy-back on the increases in the price of gold instead, and you are ultimately intended to eventually cash out in the native currency. You can infer this from the reality that taking physical delivery of actual gold through the Public Bank gold investment requires settlements of 100, 500, and d1,000 grams, which reminds me of that Eagles song called Hotel California which went “you can check out any time you like, but you can never leave [with your precious metal]!”.

In any event, one of the main things to ponder is what might occur if folks with the Public Bank gold investment want to claim their gold. Interestingly, in the Spring of 2010 an advisory was released stating that physical delivery with the program suspended for a time. Physical delivery was eventually reinstituted, but the temporary ban on getting your gold causes one to pause and wonder how tough it would be to get gold in your hands if you wanted it.

All of this points to what I see as a very clear solution. I believe that, if you want to own precious metals, there’s simply no safer way to do so than to actually get it in your possession. If you ever want to have, there is truly no time like the present. If you really want the actual bullion, the only way to know you own it is to put your eyeballs on it. On the flip side, if you see no end to the funny money system governments around the world fund by slaying forests and firing up the printing presses, then you may simply see precious metals as the next great investment sector and therefore may not really care about holding the stuff in your hands.

In any case, there are some things to keep in mind to help things go well for you. See, note that there will always be an implicit trust you place in any institution supposedly holding onto your precious metal for you as custodian. As a result, I would recommend using a series of different custodians, and selecting among various countries as well. So, what am I getting at? Frankly, if you have a Public Bank gold investment, consider putting any potential future additions to that account into other options. That way, if Public Bank puts redemption on pause again, you’ll have some goodies elsewhere you might be able to access. In the extreme, if a given custodian goes out of business, or simply absconds with your gold and silver, you won’t lose your entire pile.

You have some different options to choose from, none of which compare to owning shares of the mining companies, but at least give choices to those who insist on custodial arrangements. With most of them, keep in mind that you’ll often be able to decide on either a pooled account or allocated account. With a pooled account, your bullion is warehoused in a conglomerate pile. There is no actual batch of metal with your first and last name on it. Oppositely, as you might guess, the allocated accounts operate by having your bullion set aside and accounted for precisely according to your purchase.

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