The marketing is shady as hell. People are trading money for a promise of silver or gold in the future, on demand, and the Perth Mint makes it sound like they have the silver ready to go.
What a good deal, no storage fees and you get to be invested in silver!
If it sounds too good to be true it’s because it is.
What you are really holding is a gift card to Perth mint.
You aren’t a customer, you are an unsecured creditor, just like the holder of any gift card to anywhere.
This means if the mint defaults and gets tied up in some sort of drawn out legal dilemma you aren’t owed anything. If there is something left over you might get a piece after years of litigation.
Think about how great a deal gift cards are to companies.
They get a 0% interest loan, and they get to pay back that loan at some point in the future with merchandise that has been marked up however much they’d like to mark it up.
The TV store can mark up all of their TVs tomorrow 100% and you still have a gift card that can only be used to their store. What else are you going to do with it? They get a loan collateralized by the marked up value of their inventory, not the actual value.
The Perth mint has fabrication and other fees that aren’t guaranteed. What if they just decided that fabrication fees are now $20 oz? Where else are you going to redeem your Perth mint gift card?
When they take your money they secure a warrant for metal from a bank, on which they likely pay a small interest rate for.
When the auditors come in they see 1 liability (unsecured) of silver to you, and 1 asset (secured) of silver from a bank. All is well and balanced!
In the meantime Perth Mint gets to use your money however they’d like, which is very nice for Perth mint.
But what happens when too many people try to use their gift card to the TV store all at once? They run out of TVs. How can you get a TV from the store using your gift card if they don’t have enough?
You can’t, and it looks bad and now the CEO is mad that his customers are finding out what shitty deal this all is for them. He starts to redeem his warrants to bring in more TVs from the bank but overall he’s throwing a fit because his deal where he gets 0% unsecured financing is coming to an end.
Profitability will be hurt if he has to actually borrow money like every other business.
The bank is also mad. They have 1 silver unit that they loaned out to 10 different entities because they ran some models and know that only 1% or so will actually come and get their metal at any given time.
They can collect fees on all 10 because you’re too dumb to actually take your metal into your own possession (or make it allocated).
By loaning out 10x more silver than is in their possession, the price of silver is reduced. This creates silver inflation. Just like how more lending in dollars creates dollar inflation.
You taking out silver from an unallocated account is the same as taking your money out of a bank. They can’t lend that dollar 10 more times if you take it away from them.
Converting to allocated, getting a refund and buying PSLV, or getting the metal itself into your own hands has a multiplier effect that is incredibly powerful because silver uses a fractional reserve system.
Stop holding a gift card. Don’t be a schmuk. The Perth Mint CEO hates you and talks down to you because you loaned him money and you are trying to collect. You’re his landlord not his customer. Get your silver!
Imagine investing thousands or hundreds of thousands into gift cards from the silver store that aren’t secured and the merchandise can change price at any moment. People need to realize how dumb this is. If you were fooled by deceptive marketing, don’t feel bad. Just get your house in order