Sunday, May 3, 2015

Review of Bullion Capital's MetalDesk 2 Platform

Note: For those who just want a quick summary and are looking for my views in brief jump down to the section titled 'Conclusion'. Otherwise read from the top for my detailed review of this platform.

PART 2: Taking Delivery: Bullion Capital's MetalDesk 2 Platform
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Over the last 12 months I've written about various ways of owning precious metals. I wrote about holding it at home, holding it in unallocated account and holding it in a safe deposit box. One form of holding bullion in that I haven't discussed a lot is allocated accounts. Today I'm bringing to your attention a new platform I recently became aware of from Bullion Capital, which allows you to execute trades in (& store) allocated metal. They describe it this way:

"MetalDesk is Bullion Capital’s web-based trading platform, specifically designed for the trading and inventory management of physical precious metal."

The platform has some unique features that are particularly useful for Australian investors or those overseas wanting allocated metal stored here (though you have the flexibility to store your bullion in various global locations and in AUD or USD).

Bullion Capital's MetalDesk Vault & Delivery Locations
Before I continue I want to highlight that if you visit Bullion Capital from links on my site, then sign-up and trade or store metals through their MetalDesk platform, I receive a commission. You don't pay more, I just receive a cut of the advertised rates. That said I've never been one to "spruik" a product simply to get referrals, I have signed up and am using this platform with my own cash because I liked what I saw. With that disclosure out of the way...

Signing up for an account at the Bullion Capital site was painless. From the sign-up page >>here<< (you can also open a free demo account if you just want to see how it all works) you select whether you want to open the account as an individual, company or Self-Managed Super Fund (SMSF). I can't detail the process for the latter two, but setting up for an individual was easy. Enter a few key personal details, upload a scanned copy of my drivers license, select the broker I wanted (will explain in a little more detail below), hit submit and 40 minutes later I received an email detailing my account details and how to fund my new account.

There's a range of brokers you can choose from when signing up, located in various countries including Australia, New Zealand, Hong Kong, China, UK, US and even Cyprus. The fees (particularly for storage) do differ a little between them, which you can see when choosing from the drop-down menu. I chose esuperfund as they had the most competitive storage pricing for my intended use of the platform.

Storage Fees using esuperfund as my broker
On logging in for the first time you are presented with some terms and conditions and also prompted to choose whether you want your broker to be able to act as your agent with ability to see your account balances and trade on your behalf. I selected 'I Do Not Agree', but can understand there would be situations where this feature would be particularly useful if you were relying on your broker to make decision on your behalf or just so they can monitor your account.

I found the MetalDesk platform very slick looking, but to someone who hasn't used an online trading platform before it might appear quite busy. The dark colour scheme works exceptionally well and I found it much more easy on the eyes than some other trading platforms I've used which are usually white with bright red and green text to indicate positive and negative price action. Any price changes in the metals on MetalDesk are reflected on the screen instantly with brief flashes of a dull red or green to indicate the direction of movement.

MetalDesk Trade & Invest screen
As pictured (on the Trade & Invest screen), the far left has a menu that allows you to access other parts of the MetalDesk platform such as transfers, help resources, news, reports and settings. The various contracts available to trade are next across, if you select a contract type it will bring up the details in the middle of the screen and under the 'sorting' menu you are able to select the city for storage. Changing the settings on your account between Australia and the Global Market changes both the currency (AUD or USD) and the cities available to store your holdings. In Australia (in AUD) you can choose between Adelaide, Brisbane, Melbourne, Perth & Sydney, changing to the Global Market offers 11 locations for trading in USD.



The centre of the Trade & Invest screen shows a chart of the mid price (between the buy and sell spread) for the contract you've selected. Any open orders are below the chart along with your holdings at the bottom (which are expressed at spot price rather than adding any premiums for the various coins or bars you might hold). The right hand side of the Trade & Invest screen is a watch list where you can add contracts of interest with a click of a button.

The exchange is open 6pm Eastern Time (ET) Sunday (8am EST Monday) until to 5pm ET (7am EST Saturday) for five days a week (excluding U.S. market holidays), the platforms Liquidity Providers typically use price aggregators out of the North American market (such as the Comex), as a reference price and for hedging purposes, so between 7-8am each morning there is no price feed on MetalDesk to execute a trade as well as over the weekend.

After spending some time getting accustomed to the layout and having read the MetalDesk Quick Guide I felt comfortable enough to fund my account and transferred some cash across to buy some metal (Bullion Capital holds client funds in a segregated trust account). It took around 1 business day for the transferred funds to appear in my MetalDesk account following which I was ready to trade.

A range of physical gold, silver and platinum bars and coins can be traded on the platform. Once purchased the legal title to the metal is held by the client, it does not appear on the balance sheet of either Bullion Capital or the vault provider. That is the beauty of an allocated product, you own a specific piece of metal (coin, bar or portion of) rather than having a claim on metal that a third party owes you.

Spot Physical Precious Metal Contracts Available on MetalDesk
Looking through my options I almost went with an 1oz Gold Australian Kangaroo Coin for my first purchase, but decided on a 1oz Gold Chinese Panda Coin given they aren't too common in Australia from dealers and can command a premium. Through the MetalDesk portal I purchase the Panda coin for the same price as the Kangaroo and I took a look around at dealers prices at the same time, while I couldn't find many with Panda's listed for direct comparison, the MetalDesk platform was selling Kangaroo's for around the same premium (+/- $5-10) as many other competitive dealers prices (including the 1% trade fee).

The resources section of the Bullion Capital account holds a document detailing the contracts available, listing the minimum contract specifications for each product type you can purchase through the platform.

1oz Gold Chinese Panda Coin
The pooled contracts (1/2oz Gold & 1oz Silver) are the only products that can't be delivered on a 1 lot basis, but are still an allocated position, just that they're backed by a portion of a larger bar.

I also purchased a 20oz Silver Contract listed as Australian Kookaburra/Koala Coins.

20 x 1oz Silver Australian Kookaburra Coins
Unlike a dealer you aren't going to know exactly what you have locked away if you keep the coins and bars you order in the vault, you might have different years or designs, but you can be sure they meet the minimum specification.

Putting the order through the site was straight forward, but you aren't going to bump a key and accidentally put through an order. With a contract selected on the Trade & Invest screen, once you hit the BUY button to the top right a little order screen slides out enabling you to choose whether you want a market (execute the trade right now) or limit order (execute the trade if a particular price is met) and the number of contracts, then clicking Review Order will bring up a summary of the entire cost (including the 1% trade fee) before you confirm the order and execute the transaction.

Once I put through each order I received emailed invoices instantly confirming the trades and information about delivery timing (in my case just over 2 weeks) of the bullion to my chosen vault location (Adelaide). Delivery occurs in a trade cycle allowing Market Makers and Liquidity Providers the ability to amalgamate orders over a 2-week period and deposit larger quantities into the vaults at one time.

I intend on taking delivery of these coins through the Bullion Capital platform, so that I can further review the process for readers (so watch out for part 2, now live read it here). Delivery comes at a cost of an additional $30 or 1% (greater of), plus associated freight and logistics charges. Withdrawal requests can be submitted on the MetalDesk trading platform under the ‘Transfer’ section and are processed within two working days. The bullion can be delivered to the clients business address (client pays delivery charges) or client can pick up from the vault (not available in Australia, due to Armagaurd policies). Delivery fees vary based on the amount of metal, a small amount can be sent by insured post ($30-50), a large amount can be delivered by an Armaguard truck and bodyguards who can deliver to any CBD address for approximately $150.

Most choose not to take delivery and leave it in the insured vaults, where fees are calculated daily and billed monthly in arrears, so if a client withdrew bullion mid-month they would only be charged for the exact number of days it was stored. Storage fees are withdrawn from a client’s cash account balance and if that's not sufficient Bullion Capital's admin team calls the client to notify them a top up is required.

Whilst the platform itself was very easy to use and worked well most of the time, there were a few bugs that I found when using it. A couple of broken links in the help menu were quickly fixed up when I identified them (specific to the broker I signed up through) and there is a glitch I am finding in the watch list where the sorting defaults back to Sydney (rather than All Hubs or Adelaide), which I have raised with Bullion Capital.

The biggest let down was that the platform is not yet mobile ready. While I was able to view the site and login on my Samsung Galaxy S5, the Trade & Invest screen becomes unusable with various components overlapping each other. Logging in on an iPad produces a much better result with the trading section useable, but there was still some overlapping text in non-critical areas. A Bullion Capital representative advised me there are plans for mobile compatibility in the future, but for now (on computers) the MetalDesk platform is optimised for Google Chrome and works well across all browsers as long as they are current versions (personally I've used it successfully in Chrome, Internet Explorer and Firefox).

Conclusion


This platform has been getting some air time in various media circles that I am usually skeptical of for providing accurate information (such as the often hyperbolic Keiser Report and TF Metals Report), that said from what I've seen Tom Coughlin (Bullion Capital's CEO) has conducted interviews and answered questions rationally without getting too carried away even when pushed to do so (about the potential for this platform to rock the status quo in the paper markets or London). That said it's obvious that he's excited about the potential for this platform and I share his enthusiasm.

I've been impressed with almost everything I've seen from the platform and those running it, from the ease and speed of signup, the slick appearance of the trading platform and the quick response from the team at Bullion Capital with any questions I've had. The platform brings together unique features and functionality for trading allocated bullion that I haven't seen anywhere else.

Many Australian bullion dealers offer the ability to buy allocated metal through their sites, but the problem is their description of the product is usually a couple of sentences long (doesn't exactly instill confidence in the veracity of it) and their platforms are much more limited in scope.

That said, MetalDesk isn't for everyone, it does have it's limitations.

While priced competitively, if you are looking for immediate delivery of physical bullion you would find it cheaper and faster through a regular dealer.

But Bullion Capital's MetalDesk does fill a niche and what it does, it does well. If you are looking for allocated storage, with a various range of bar and coin types available, with pricing in Australian Dollars and/or US Dollars, where your purchased metal is stored, insured, in a choice of vaults around the country/globe and with the ability to take delivery of your metal in small or large lots, then I'd highly recommend you take their platform for a test run:


I wouldn't endorse using this platform as a complete replacement for owning and physically storing some other bullion safely elsewhere (I think diversifying your bullion holdings is a prudent strategy), but it does take the pain out of buying, storing and insuring your metal and could in particular be a useful platform for buying bullion in a SMSF.

As always, do your own due diligence, but I am confident having used the platform personally, that once I have received delivery of the Gold and Silver I purchased through MetalDesk, I will be back to use it in the future for purchase and storage of allocated bullion.

PART 2: Taking Delivery: Bullion Capital's MetalDesk 2 Platform

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I'm sharing links and opinions daily on Twitter (@BullionBaron).

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