Build your own shiny stash

Gold is so hot now that supplies are scarce. Here's how you can get in on the action

By Nick Rockel
Globe Investor Magazine online, February 19, 2009

At the main branch of the Vancouver Bullion & Currency Exchange, an elderly man asks for two gold coins as he hands a roll of bills across the counter. For VBCE sales director Kevin Ma, this type of transaction is a familiar sight. About two years ago, Ma noticed that more middle-income customers were buying gold. Retail demand at VBCE has since surged more than tenfold.

Dealers everywhere are coping with an unprecedented run on gold, which many investors regard as a safe haven during uncertain times. At a spot price of $840 (U.S.) an ounce last month, or $1,008 (Canadian), its value in Canadian dollars has never been higher. But these numbers don't tell the whole story of how hot a commodity the metal is. According to the World Gold Council, dollar demand for gold reached a record quarterly high of $32 billion (U.S.) in the third quarter of 2008. The biggest drivers were investments in ETFs, bars, wafers and coins.

Buying gold is as easy as walking into a bank or a precious-metals dealer. At VBCE, the most commonly available gold is the one-ounce Maple Leaf coin from the Royal Canadian Mint. Including commission and other costs, one of these 99.9999% pure disks would have set you back about $1,100 in January.

When you buy gold from VBCE, the teller will check your driver's licence. The firm must report cash purchases over $10,000 to FINTRAC, the federal money-laundering and terrorism-financing watchdog. There's no GST on gold if it's for investment purposes and is more than 99.5% pure. And in B.C. and several other provinces, PST gets waived too. But don't forget to fill in the taxman about your investment. (Certain investment- grade gold bars and coins are RRSP-eligible, as long as you purchase them from the producer or from a regulated financial institution.)

Rather go to a bank? Scotiabank asks gold buyers who are not clients for one piece of government-issued ID and their social insurance number or birth certificate. Its fees are subject to market conditions: Up to $5,000 (U.S.), there is a 1/4% commission; on larger transactions, the balance is charged a fee of 1/8%. A "bar charge" that covers manufacturing, shipping and storage applies to smaller bullion denominations. The less you buy, the higher the premium. In January, it ranged from $2 (U.S.) per ounce for a 100-ounce bar to $14 (U.S.) for a one-ounce wafer.

You can store your gold in a safe deposit box. If you decide to hoard it yourself (home safes cost less than $200), keep the receipt in case you're ever in a selling mood. Banks will only buy unfamiliar bullion after vetting it.