Usually when gold is converted into a fund and traded on a stock exchange there is a price to pay in terms of underlying weight.

With these funds - known as ETFs - charges are taken out by reducing the gold backing of the unit over time.

But they don't change the title on the unit, which still says - typically - that it's backed by one tenth of an ounce of gold, when it is not.

If the units were first listed 3 years ago then they have all had 3 years of charges taken out in gold (usually 1.2%).

It works out to be fair if you know how to do the sums. You simply multiply the time since listing by the annual management charge, and deduct it from the nominal one tenth of an ounce. This gives you the fair value, and after three years it turns out to be a dilution of about 1.2%.

The dealer knows about this, and too often his premium sits nicely on top of the diluted 98.8% price, making it look like you are paying almost exactly one tenth of the price of an ounce of gold, for a security which indeed purports to offer you one tenth of an ounce of gold.

This hidden cost will show up clearly enough when you sell.

BullionVault annual custody and insurance charges are less than a third of a typical gold bullion backed ETF style investment, but also we take out charges in cash. This allows all our gold to stay 100% fine, with no weight discount. On BullionVault you are not paying for the accumulated storage charges of the years before you bought.