Invest in Gold (II) — GoldMoney: Buy Gold and Use it as a Checking Account

This is the second part of the Invest in Gold series. In the first part, I compared several gold dealers, mainly from the angle of price (price of the gold, shipping fees, and insurance charges), and the direct outcome of that research was the purchase of a gold coin myself last week from Bullion Direct.

During the research, while I was more interested in finding a reputable dealer that can sell me physical gold (coin or bar) at a good price and get it delivered to my hands at a low cost, I also looked at other alternatives to buy gold and one of them is GoldMoney. With gold dealers, you can buy gold coins or bars, which are usually fabricated into fixed amount such as 0.1 oz, 0.25 oz, 0.5 oz, and 1 oz, then have the products delivered to you. In my opinion, there are two big concerns with taking possession of physical gold: safeguard of the medal and liquidation. Nobody wants to throw a $650 gold coin in a drawer and forget about it. If you have a larger quantity of gold, the easiest way to make sure the medal is safe is to rent a safe deposit box at your bank. However, getting a safe deposit box adds to the overall costs of owning gold. On the other hand, while owning the metal (as there are suggestions that the only way to invest in gold is owning the physical metal than paper gold) represents wealth, cashing it in case you need the money is not that straightforward. The conversion will be relatively easy if you can find a trustworthy local gold dealer to sell your coins. Otherwise, selling the metal to dealers you can only find online is more likely to involve other fees (not include the shipping and insurance charges you have to pay out of your own pocket).

With GoldMoney, however, the hassle of buying and selling gold is much reduced and the price is very competitive as compared to other dealers.

The way that GoldMoney operates is totally different from all the dealers mentioned in the first part. Instead of being a bullion dealer that sells coins and bars, GoldMoney is more like a bank account, though you still have the option to receive physical gold with some additional delivery costs. By default, the gold purchased from GoldMoney will not be delivered to the buyer, but is stored in an insured vault in London. The following picture illustrates how GoldMoney works:

goldm.png

That is, buyers don’t automatically receive physical gold, but have a recorder of how much they own in their accounts with GoldMoney, which charges a monthly fee equivalent to 1/10th a gram of gold ($2.05) to store the gold. As of prices, the gold price quoted at GoldMoney is the price of the spot gold plus an exchange fee, ranging from 0.98% to 3.74% above the spot gold price. At one time this morning, when I checked prices at different dealers against the spot gold, I found the price of one ounce gold at GoldMoney is very competitive:

Spot: $641.30, GoldMoney: $664.61, Bullion Direct: $671.10, Kitco: $678.89

Besides the pricing (here’s the full fee schedule), GoldMoney also offers:

  • Flexible purchase: Gold can be purchased in the quantity of goldgrams (one goldgram in weight is equal to one gram of gold and there are 31.103 grams per troy ounce) instead of the fixed amounts with coins and bars;
  • Direct funding: Purchases of gold at GoldMoney can be directly funded by a bank account in US with a maximum of 500 goldgram (special procedure needed for larger purchases);
  • Easy conversion: There’s no fee in converting goldgrams into cash, which will be deposited right into the bank account connected to the GoldMoney account;

Another key feature of GoldMoney is that users can actually use their GoldMoney account as a checking account to make payments. Anyone having an account at GoldMoney (free to sign up) can receive payment made by GoldMoney in goldgrams, though there’s no physical gold changing hands. In addition, after converting gold into some major currencies, goldgram can also be used to pay bills, a feature that’s not available at any other dealers.

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6 Responses to “Invest in Gold (II) — GoldMoney: Buy Gold and Use it as a Checking Account”

  1. The Digerati Life |  Mar 05, 2007 at 7:24 pm

    We’re still debating whether we should buy gold right now. Lots of people we know are hedging this way, but since we’ve never done this before, we’re kind of hesitant. I’ll be following your series on this to get some ideas! Thanks for this, Sun!

  2. Mark Herpel |  Mar 06, 2007 at 10:48 am

    GoldMoney is great for saving and safety in this crazy world. I also like that now I can buy Silver from them too. We also buy online from http://www.bullionvault.com (you should try them) and physical metal from http://www.kitco.com I’ve never tried Bullion Direct but it sounds like I should get one of those awesome Buffalo coins. Beautiful design.

    I just interviewed James Turk and he let us know in on a new product addition they are rolling out soon, which will provide a major convenience for GoldMoney clients when buying and selling. The published interview is here: Digital Gold’s Top Man, An Interview With Mr. James Turk of GoldMoney Just yesterday!

    Great blog and thanks for that intro to BullionDirect, I’m going to try them. Cheers and remember its never a bad time to be in gold.
    Mark

  3. Golbguru |  Mar 07, 2007 at 1:26 pm

    Sun, thanks for your gold posts…I am working on trying to buy some in a few days. I am doing some basic research on this stuff and your posts were very helpful. (I will post something on this subject soon and will link back to you).

    I am thinking of buying gold bars instead of the buffalo…just instinctively, for no specific reason (may be because it’s more gold for the money). The coins may have additional value, but they are not that rare…I think about 50,000 or so have been released in the last couple of months or so.

  4. The Sun |  Mar 07, 2007 at 10:08 pm

    Golbguru: I also search gold bars, but it seems that there are more dealers selling coins than bars, thus, I thought maybe I can have a wider selection and good price. As for the price, gold bar that I found at Kitco is priced less than Buffalo coin (and Eagle coin), though I am not so sure why the price difference. It probably has something to do with the purity (Kitco site didn’t mention the fineness of its gold bar) and how it’s made. I will be interested in your finding on gold bar.

  5. The Sun |  Mar 07, 2007 at 10:20 pm

    Mark: Thanks for the link to the interview with Mr. Turk. It’s a very interesting story and helped me understand GoldMoney. The one thing I like GoldMoney is the flexibility it offers in buying or selling gold. I never heard of Bullionvault (of course, there are many that I never heard of). What’s your opinion about price between Bullionvault and Kitco? When I compared BullionDirect and Kitco, I found Kitco charges much more than Kitco.

  6. Mark Herpel |  Mar 10, 2007 at 10:06 am

    Bullionvault is great and they have a very good discussion on their feed here:
    http://goldnews.bullionvault.com/
    I don’t really have an opinion on the difference in prices, I know they are both very reputable so I’d be confident buying from either. I definitely take a long long hold approach when buying so the small price differences or changes don’t sway me. It will be very nice when GoldMoney opens their new account open and can hold in Jersey buy or sell funds for clients. That is very convenient. Thanks.
    Mark