Lately, there has been increased internet chatter about the Perth Mint’s unallocated silver pool account. Questions have arisen about the Mint’s ability to provide physical silver in a timely manner. I first raised the issue about the unallocated pool accounts at the Perth Mint some 14 years ago and followed up with a piece 7 years later. At the time of my 2014 article, the Perth Mint indicated it had just over $2 billion tied up in gold and silver pool accounts. As of their most recent annual report, June 2020, the total in their pool accounts appears to be around $5 billion.
My basic gripe with pool accounts is that all the metal supposed to be in the accounts may not be there. Since no storage fees are charged and no bars are identified, the likelihood is high of the pool operator cutting corners and not insisting that all the physical metal is deposited to back the accounts. In the Perth Mint, the metal in the pool accounts is supposedly used in their coin minting business. I never understood how the same physical ounce could serve as backing for investors in the pool accounts, while simultaneously being used in the minting business.
I know the Perth Mint touts some type of government guarantee insuring the safety of the pool accounts, but I question if the government knows the full extent of what it is guaranteeing. What happens if gold and silver prices take off and pool holders have massive profits and not enough real metal backs the pool accounts? Who is responsible for the profits that will accrue to the pool holders in that case? The Perth Mint or its government guarantor? I titled my original article, “Buyer Beware,” and that would go double today.
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