I've never considered it, what would you do with the certificates? Suppose they are lost in a fire or stolen? Suppose you go to sell them and the broker asks you to prove they aren't counterfeit? What if gold goes into a free-fall and you want to sell immediately, how long does it take to sell them? If you don't trust your broker, why are you using them? We cannot eliminate all risk. You have to be realistic about accepting some risk, even if you hold bullion you are taking risk. CEF is probably the most practical way to own gold and silver, they have been holding it for nearly half a century and nobody has been ripped off yet. If you can't accept that risk I would suggest buying something like a house or land.
If they are lost, there is a way to get new copies. It is not the end of the world. They still have you registered. On the other hand, if your shares are with your broker, you are not in their registered list of shareholders.
To sell them, you need to sign them on their backside, together with a witness signature and send them to Mellon and they will send new certificates to the buyer.
Physical possession is the best way to hold gold and silver. CEF is a distant second. In the investment climate in which we live, replete with counter-party risk and hypothecation, cast "practical" to the wind.
Agreed, if you do read the prospectus for GLD and SLV it might may you sick to your stomach.
There is a wonderful article on seekingalpha.com which highlights some of the concerns investors should have with GLD and SLV (http://seekingalpha.com/article/316261-is-paper-gold-a-safe-investment). Some of the highlights are:
- Shares are not redeemable for physical gold.
- ETF gold holdings are vulnerable to excessive leveraging by as much as 100:1.
- Custodianship of gold holdings is not audited.
ETFs don’t disclose their actual, physical gold holdings.
Gold holdings are regularly sold to offset management & other fees.
- The Trust may be required to terminate and liquidate at a time that is disadvantageous to Shareholders.
Redemption orders are subject to postponement, suspension or rejection by the Trustee under certain circumstances.
Shareholders do not have the rights enjoyed by investors in certain other vehicles.
- The Trust does not insure its gold.
After knowing this I would caution investing in either GLD or SLV unless for very short term trading purposes.
E*Trade charges $500+ per certificate and you have to take delivery. CEF has a Canadian transfer agent so that is probably why it is so expense. They are also likely strongly discouraging non street name ownership
my email exchange with CEF on this topic.
From: Central Fund [mailto:email@example.com]
Sent: Tuesday, December 13, 2011 1:41 PM
Subject: RE: Information Request from CFC
Hello Mr. xxxx:
Thank you for your interest in Central Fund of Canada Limited.
Central Fund does NOT participate in the DRS program. You can however request a share certificate from your broker which they will order from our Registrar & Transfer Agent, BNY Mellon Trust Company. The Depository Trust Company and Clearing Corp. in the U.S. currently charges investors $500 for such a certificate. In the next few weeks, we may have a solution to circumvent this fee as it is a deterrent to having share certificates but Central Fund is a Canadian company and still produces and respects share certificates.
Recent media discussions about share certificates and problems with MF Global have prompted investors to all request share certificates.
Marda Jeffrey, Investor Services
Central Fund of Canada Limited
Sent: December-12-11 6:40 PM
Subject: Information Request from CFC
Can shares of The Central Fund, CEF, be issued directly to the owner/stockholder for holding it the owner’s possession?
Or, are the shares held only in the street name of the owner’s/stockholder’s brokerage account.
Question comes to mind in case a brokerage company blows up and the brokerage clients get the response of “what account?”. (MFGlobal)
I can't fault you for selling. Nothing beats having physical possession of gold or silver although sometimes storage of a large weight of metal can be problematic.
An audited trust like CEF is the next best thing vs. vehicles like GLD and SLV. After thoroughly reading the perspectus' for both ETF's I concluded they probably hold no gold or silver and given the 'wording' and 'legalese' probably are under no legal obligation to have any physical metal backing the GLD and SLV.
Now I hold CEF, GTU, SIVR...
Regrettably, I am unable to do so since all retirement accounts must be in a financial instition's custody as required by regulations. Thus, Vanguard must act as custodian of my CEF shares that I hold in my IRA.
IMO, there's a big difference between CEF and funds at MF. CEF is an audited 'trust' that holds physical metal backing the units of the trust. MF account holders were playing the futures markets.
And what good would a certificate do anyway? A significant number of MF account holders had 'warehouse receipts' for physical silver that they already paid for and had requested delivery on and still got screwed. And the exchange has the balls to continue charging them for storage fees (on metal they cannot take possession of) on top of it all!
My guess is a lot of hedge funds and big money are going to exit the COMEx/NYMEX and put their money elsewhere and the US based futures markets are going to die a slow death over time. The will help loosen the banking cartels grip over pricing.
The message I get is we're going to steal your money and get away with it and in the end there's going to nothing you can do about it. Who wants to put their investment funds in a fixed racket?