Gold vs Unallocated metal account (UMA). Why is it profitable to invest in gold?


We've already told you that gold is a profitable investment. But did you know that there are several ways to invest your money in gold?

  • Buying gold bars is the easiest and most profitable option.
  • Investing in shares of gold mining companies. It is also possible, but it is more complicated and requires constant monitoring.
  • Using an unallocated metal account (UMA) is an investment not in the metal itself, but in its stock in a particular bank. Meaning, you get an account where the equivalent of the money you invested is kept in relation to the amount of gold. You don't physically receive ingots, and your gold remains virtual.

Previously, we have compared the prospect of investing in gold to investing in bonds or buying cryptocurrency. But how can we compare two investment options that make equal sense: gold and UMA? Let's try to figure it out.

Gold or UMA: a comparison of three criteria

We have chosen three main criteria by which we will compare the possibilities of UMA and gold bars. And they will be as follows:

  • Price and rate;
  • Liquidity;
  • Prospects.
  1. Price and rate. Although both seem to be about gold, the amounts involved in investing will actually be different. When you buy gold in bars, you pay the exact purchase day price set by the gold exchanges in London and New York. This rule works for all market players, because selling below or above the rate is simply not profitable and sellers are subject to sanctions. At the same time, when you open an UMA you depend on the rate of gold of a particular bank, and it may differ from the official rate of the London Stock Exchange. In addition, you will have to pay fees for the maintenance of your account. And this is an extra expense. Whereas purchased gold you will be able to keep in your own safe, without spending money for its storage.
  2. Liquidity is also questionable. It can be difficult to quickly operate with the assets of an UMA today. You are bound to the bank's working hours, peculiarities of its operating policy. It's easier with gold, especially if you're not storing it physically, but in an ETF. However, gold is always considered an investment asset with long-term profitability, so it makes sense to accumulate it, while choosing other assets for trading on the exchange.
  3. Prospects. And here we face the confrontation of two doctrines: gold bars are eternal value, which is not questioned by anyone. UMA is actually a bank service. But unfortunately, no bank is eternal, and there is a possibility that the account you opened will simply "burn out" if the financial institution goes bankrupt. This, of course, is not constant practice, but it occurs in our realities.

Besides, we should not forget about the psychological factor. People are much more confident in their well-being when they have physical assets, whether their own homes, money supply or gold ingots. A UMA account can not provide such psychological comfort, because it is completely virtual.

So UMA is positioned as an alternative to buying gold bars. But this tool has not been trusted yet as it has physical bullion. At Golden Way we make sure that our clients get the highest quality gold bars according to the LBMA standards. 

And of course, it's up to you what investment you make.