Fractional Ownership in Precious Metals

Today, we briefly explore a different topic – the merits of Fractional Ownership in Precious Metals

Do you legally own half a home with your spouse? Do you have friends “co-owning” a private yacht? That is fractional ownership, where the ownership of an asset is shared by several parties. This form of partial ownership allows them to share the benefit that comes with the asset. Typically, this occurs most often when a sole owner does not require usage of the asset 24/7. Simply think of “your yacht” in Singapore, it’s highly unlikely you will wish to sail 24/7. Of course, there are other reasons to pursue fractional ownership, such as inability / reluctance to own the full asset.

The application of Fractional Ownership to Physical Precious Metals (PM) is not new. A common form would be Pool Allocated Gold where the physical gold is set aside in a segregated pool and clients have the option to purchase smaller denominations. A group of PM investors coming together to co-own a pool of physical Gold. Sounds like Fractional Ownership doesn’t it? For eg, clients can purchase 0.1oz Pool Allocated Gold on our GSC Live! Platform and they will own 0.1oz worth of physical Gold (either bars or coins) within our GSC Vault Network.

So, if the concept of Fractional Ownership in PM isn’t new, what is the big deal then?  Well, the key is seeing how we can apply the concept of Fractional Ownership to our PM strategies. How does Fractional Ownership help a PM investor achieve his objectives? It is simple. By converting a specific piece of physical gold to a pool allocated format, we have taken that first step (and arguably a tough one) of converting your inflexible gold to a form that offers more flexibility. And this flexibility brings about more options. Let us explain what we mean.

Imagine being able to sell 0.1oz of gold at a time instead of the whole 1oz gold bar; and being able to set aside funds on a monthly basis to accumulate your gold bit by bit, without incurring the huge markup premiums of small denominated physical gold. (Of course, one can argue that you can achieve the same results and receive gold exposure by going into ETFs but that depends on its structure. You may not be really holding Gold after all. This is an exciting topic for another time!) Fractionalizing your Gold allows you to “enter/exit” the market at multiple price points and that itself opens a lot of options.

Clients multiply their single traditional option of “buy low sell high” to many more options on what to do with their PM assets. For instance, instead of only being able to sell 100% of my Gold bar at the current price, I could instead opt to sell 50% of my Pool Allocated Gold and leave the remaining 50% for continued price exposure. If I am on a monthly budget (setting aside $200 every month), I could also be applying a strategy to buy $200 worth of Gold monthly and accumulate up to 100g worth before taking delivery of 1 x 100g gold bar. This allows a PM investor to stack up their purchases at minimal costs. Previously, an alternative would be to buy a physical 2g gold bar monthly and incur huge premiums. (If you are interested, check out our GSC Savings Accumulation Programme where our clients perform minimal-premiums accumulations automatically on a DAILY basis!)

One thing to note though, just by fractionalizing your gold into tiny bits does nothing for you. It’s about how you use that ability of fractionally dividing up your assets that makes it powerful.

So that is it, a short discussion on Fractional Ownership in Gold. We have only touched the tip of the iceberg here. Stay tuned for more updates and discussions.

PS:

To keep this article short, we did not discuss the various differences between Pool Allocated and Allocated Gold. There are many online articles available but if you are interested in a deeper conversation, please feel free to approach us via email ([email protected]) or phone (+65 6222 9703).