What is the difference between owning Physical Bullion vs the “Paper” options available?
Many people see “Paper” options as a simple way to invest in Gold, Silver or Platinum. These Paper options can include the following:
- Stock in gold, platinum or silver mining companies
- Gold or silver futures
- Precious metals backed exchange traded funds, or ETFs
- Gold or silver certificates
Paper options offer investors a few advantages, such as:
- Smaller amounts of capital required
- Low transaction costs
- No need for storage
Disadvantages of paper precious metals include:
- Counterparty risk. When owning shares in a mining company, for example, there is always a risk of the company going bankrupt, and your investment being wiped out.
- Stock market fluctuation could negatively impact your investment
- You may not be entitled to any actual, physical bullion
However, we believe that the disadvantages of paper is far outweighed by the advantages of holding physically bullion. Some of the advantages to investing in physical bullion include:
- Physical precious metals have zero counterparty risk. Bullion, for example, cannot declare bankruptcy, or default on its obligations.
- In the unlikely event of a global economic catastrophe, physical bullion can be used as currency to buy basic goods or services
- Bullion can be purchased anonymously, safely, and at your convenience
This is just a very brief summary of the difference between paper and physical bullion. To learn more about each type of investment, and the advantages and disadvantages of each, you can read our article on this hot topic here.
What is the difference between medallions and other bullion coins such as KrugerRands?
KrugerRands and coins from other mints around the world are known as sovereign coins. Each country determines how their sovereign coins are regulated. Gold and silver sovereign coins – like medallions – are physical bullion and a hedge against inflation. As a business these coins are “nice to have” but from our perspective remain the property of each sovereign nation. You only ever own the value of the coin, same as the paper money notes in your Wallet.
Because KrugerRands are considered legal tender in South Africa they carry a number of regulations associated with their status, such as strict limits on how many can be taken out of the country by a South African citizen.
Our medallions – gold, silver, or platinum – fall into the same category class as jewellery and collector coins, and as such do not carry the same restrictions. Medallions remain the only real physical bullion product that is geo-neutral and can be sold anywhere.
What regulations apply to the physical form of Gold, Silver and Platinum?
Regulations involving mainly gold and platinum require that, by South African law, a private citizen may only hold finished articles such as small bullion bars (which still require serial numbers, tamper-resistant packaging, etc.), KrugerRands and medallions.
Silver can be held in any form from granules to minted or cast bars and medallions.
Is it best to stick to one metal or to get a mix?
There are two main aspects things to consider; the value you want to purchase and what is your main reason for buying physical bullion.
On lower values under R50k, look at one of the bullion classes – Gold, Platinum or Silver. Then look to grow your bullion with regular purchases of the same class of bullion over time. This is known as stacking, and is very effective on lower value purchases. Buying the smaller sizes of
- silver 1oz and 100g
- gold 1/2-1/4oz-1/10oz
- platinum 1oz (only)
Over R50k to R100k – look to split it over 2 classes such as Gold and Silver OR Platinum and Silver.
- silver – a spread of 1oz, 100g and 1kg bars
- gold – 1oz and 1/2oz medallions
- Platinum – 1oz
Over R100k – look at a spread over the 3 types of bullion
- silver – a spread of 1oz, 100g and 1kg/ 2kg bars
- gold – 1oz and 1/2oz medallions
- Platinum – 1oz
Gold is rebuilding and based on normal conditions will grow steadily over the next 5-10yrs. Based on inflation and economic uncertainty both globally or local RSA. Gold has proven to protect one’s wealth over these times and over a long period.
Silver, like gold, is a hedge against inflation and economic uncertainty, but is also an industrial metal that over the next decade and beyond with continue to grow in demand. At the current prices for silver, it is undervalued and market consensus is that it should grow 3-4times in value over this decade.
Platinum is developing into an investing metal and over the last 18 months there has been a massive uptake for it as an investment metal of over 140%. Like silver it is an industrial metal and has massive growth of the next decade and beyond. Based on the current value, market consensus is that it should double in value over this decade.
Is it best to buy a number of medallions, or to get a bar?
This question would apply mainly to silver, and comes down to what you want to spend.
If you want to start small and commit to a monthly amount, go with our Monthly Medallion Club (MMC) where you buy 1oz medallions in gold, platinum or silver. This is the best way to purchase grams of gold, platinum or silver. Once you react a 1oz medallion, we can either send it to you or vault it with our security partner Fidelity Security Group (free vaulting & insurance on bullion to the value of R1m for MMC members).
You can also do the monthly buy on the smaller silver bars like the 100g and 500g bars and do the stacking approach to growing your wealth.
What is the Monthly Medallion Club?
We devised the Monthly Medallion Club (MMC) as a way of allowing our clients to buy actual physical grams of gold, platinum and silver at an affordable, set monthly cost. Your grams will be purchased on the day we receive your monthly payment, and held by until you have enough grams to manufacture a 1 ounce medallion (remember: it is illegal to hold gold and platinum in an unfinished form without a beneficiation license).
This allows you to start stacking bullion without the need for a large initial capital outlay. MMC members also enjoy free vaulting and insurance for bullion up to the value of R1 million. You can find out more about our MMC here, or you can sign up here.
Are the ounces quoted by DCX Bullion troy ounces?
A troy ounce is 31,1034g. Our 1-ounce medallions are 31,151g. When manufacturing there are always losses due to stamping/polishing. We always over-manufacture on the weight to factor in these losses, guaranteeing our clients the final weight of 31,151g, which is slightly above a troy ounce.
Where do I sell my bullion if I need to cash it in?
Great question. You can sell physical bullion almost anywhere in the world. Always look for a reputable bullion exchange that will buy your bullion at the best prices. We offer a buyback on all our bullion with money in your bank account within 72hrs.
If you buy back medallions or bars, do you pay back any manufacturing premium that was paid as well.
All physical bullion exchanges will buy back at spot price. In gold you may get spot plus 2-3% above.
Remember, physical bullion is about moving your wealth out of Fiat based currencies like the Rand and into something that will protect that wealth over the longer period. That’s why like any long-term investment, it’s the over a period of time where the real growth is made.
To illustrate this If, we look at the average annual gold price over a period of 5 – 10 – 30 years growth in US$.
- 5yrs – 54.17%
- 10yrs – 6.88%
- 20yrs – 553,93%
Gold has climbed from and annual average of US $271.19 per ounce in 2001 to US $1798,80 per ounce in 2021.
Physical bullion is about protecting wealth and in the uncertainty we currently live in, this is ever more critical. Physical bullion will also add greater growth when the Rand does start falling to the US$.
What other costs are involved in buying back?
We charge no other fees on buybacks of our products from our clients.
When buying/selling through DCX Bullion what information does the receiver of revenue get about me?
We are a Vat paying business and must comply to all FICA requirements. We would require your standard FICA information such as ID and address.
DCX Bullion is committed to long-term sustainability, and this is in our clients’ best interests. We do have Tax Consulting SA as an alliance partner and can always look to make sure we streamline any tax implications. It is best to discuss this question on a per case basis and see how best to meet your expectations.
What would your storage fee be for about R50,000 worth of bullion?
For bulk purchases we offer clients Secured Insured Vaulting (SIV) from as little as R220 per month to a bullion weight of 6kg, fully covered to the retail value to ensure your physical bullion is protected. This is in line with and very competitive to your commercial vaulting companies.
The great part with this is say you buy R50k worth of bullion you pay your 12 months SIV and when you purchase after that until you react the 6kg mark, your SIV is covered.
If my bullion is stored with you, what happens if I die?
We know that bullion is a generational wealth building mechanism where one may never realise the growth of their bullion. We do a full vaulting contract with every client, and it is important that our clients do note their next of kin.
We at DCX (through Fidelity) are the custodians of your bullion, but NEVER the owner. The bullion we hold remains your property.