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Wachovia Securities won't broker precious metals anymore
3p ET Wednesday, November 19, 2008
Dear Friend of GATA and Gold:
Wachovia Securities this month alerted its brokers and clients that it no longer would purchase precious metals for brokerage accounts, only shares in precious metals exchange-traded funds. In an explanation given to its brokers, Wachovia said the precious metals markets "are illiquid with wide bid/ask spreads and minimal transparency."
Wachovia's letter informing clients of this change is appended, along with an elaboration given to the firm's brokers.
This implies that real metal is awfully hard to get these days, and maybe that some brokerages would prefer that their clients not get it.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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Wachovia Securities Letter to Clients
Dear [Client Name]:
Wachovia Securities strives to provide clients with the best investment options and products. Recent development of Exchange Traded Funds (ETFs) designed to mirror various precious metals provide a more efficient, transparent, and convenient method to gain exposure to this asset class.
Consequently, Wachovia Securities will discontinue opening new precious-metals positions in brokerage accounts effective Jan. 1, 2009.
If you have an existing precious-metal position in your account, you do not have to close your positions; furthermore, you will be able to hold the position in your account and may close that position at your
If you have questions regarding this matter, feel free to contact me.
[Financial Advisor's Name]
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Exchange traded funds (ETFs) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest.
Exchange Traded Funds seek investment results that, before expenses, generally correspond to the price and yield of a particular index. There is no assurance that the price and yield performance of the index can be fully matched.
Buying gold, silver, platinum, or palladium allows for a source of diversification for those sophisticated persons who wish to add precious metals to their portfolios and who are prepared to assume the risks inherent in the bullion market. Any bullion or coin purchase represents a transaction in a non-income-producing commodity and is highly speculative. Therefore, precious metals should not represent a significant portion of an individual's portfolio.
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Wachovia Securities Notice to its Brokers
Below are some talking points for you to use in discussing this with your clients:
Reasons for change:
-- The markets are illiquid with wide bid/ask spreads and minimal transparency.
-- The quoted markets may not always reflect the value of spot price of the underlying metal in the futures market.
-- Recent delivery times have frequently exceeded four weeks.
-- Precious metals should be considered more akin to collectables such as stamps and coins, etc.
Alternatives for the client (e.g.,ETFs):
-- ETFs are sold by prospectus and disclose charges, physical metal holdings, and historical pricing.
-- ETF prices are widely disseminated to the public and typically have narrower spreads than the physical.
-- ETFs may track more closely to the spot price for the underlying metal.
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