Gold certificates are usually unallocated gold with an option to convert into allocated at the investor's option and cost.Because it is undelivered, and remains indefinitely as a balance sheet liability of the provider, we cannot recommend unallocated gold to any retail customer. The insolvency of the provider risks total loss to the investor.
Most gold certificates are nevertheless unallocated. They confer a right to allocate, but allocation and the resulting storage charges may be so expensive that the only time the right is likely to be used is when the supplier is in financial trouble, and then it could be too late.
Why do suppliers offer unallocated gold? It's because it is very profitable. They have the use of your unallocated gold so they can lend it for revenue, or otherwise put it to their use. In very few cases is that the intention of the private bullion buyer.
Before you choose a certificate program make sure you know if the gold is unallocated - it usually is - and make a conscious decision to accept the considerable long term risks.
Depending on the level of confidence which government backing of gold investments inspires in you there may be an exception to the wider pool of unallocated certificated gold schemes. Certainly the most well-known and most respected of the certificate providers is the Perth Mint Certificate Program.
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