The Perth Mint Gold Certificate Program (PMCP) is a scheme owned by the Government of Western Australia that allows investors to buy certificates giving them legal title to gold.
While owning a piece of paper might not feel as safe as having a gold coin or bar in your possession, the fact the certificates are backed by the Government of Western Australia should give pretty good peace of mind.
There are two types of certificate, unallocated and allocated. In both cases physical gold is set aside to back your certificate - unallocated gives you a share of a general pot while allocated certificates ensure a specific piece of gold is stored for you.
But while allocated certificates are in theory a bit safer, you must pay for the privilege. There's an initial fabrication charge (worryingly, the actual amount is not disclosed anywhere on the Perth Mint website) followed by a 1% annual storage charge (based on the purchase value). These charges don't apply to unallocated certificates, but there's a US$50 certificate fee when purchasing either.
So while allocated certificates look rather expensive with their added fees, unallocated certificates appear a very cost effective way to invest in gold.
But there's a drawback. UK investors must buy these certificates via an authorised dealer, called Goldcore, which takes a cut by charging more for the certificates than they're really worth. For example , at the time of writing the gold spot price is $1,404.45, but Goldcore is selling Perth Mint Gold Certificates for $1,459.79 - effectively a 4% charge.
When you come to sell you'll need to return your certificate to Goldcore then wait up to 10 working days to receive your money. This is slow compared to gold shares and exchange traded funds, which should normally settle within 3 days after sale. If you make a profit then gains are subject to UK capital gains tax.
The minimum investment amount is US$10,000, with a US$5,000 minimum for further purchases or when you sell.
The Perth Mint Certificate Program looks a good idea on the surface, especially if you're happy to opt for the unallocated certificates which don't attract extra fabrication and storage charges. But forcing you to buy through a regional dealer who charges a hefty mark-up spoils the idea somewhat. Perhaps 4% isn't a crime, but it looks high when you consider a gold exchange traded fund typically charges 0.4% a year with a minimal spread between the buying and selling price. The certificates might come out better value long term, but will probably end up being more expensive over just a few years.
If only the Perth Mint could join the 21st century by offering a direct lower cost dealing service via the Internet - then it would have a really exciting proposition on its hands.