Gold is considered one of the best investment options. The yellow metal has retained its value for millennia, and many investors think it’s a good long-term hedge against inflation.
This post will discuss some of the best ways to buy gold. But before we do that, let’s take a minute to understand why people have continued to hold gold and placed such a high value on it for thousands of years.
“The desire for gold is the most universal and deeply rooted commercial instinct of the human race.”
Gerald M. Loeb, American stockbroker and investment guru
Buying gold is an excellent way to conserve your wealth
There’s a story that perfectly illustrates the primary advantage of investing in gold. About 2,000 years ago, a Roman citizen could buy a toga (a woolen garment wrapped around the wearer’s body) for the equivalent of one ounce of gold.
Today, the value of gold is about $1,800 per ounce. And that buys you a high-quality woolen suit.
An Ounce Of Gold Has Always Cost The Same As A Suit, Here’s Why
Listen to the video at 0:51, and you’ll realize that gold can be the ideal inflation-beating investment.
There is another significant advantage to buying gold.
In times of economic uncertainty, geopolitical tension, and war, gold is the go-to investment for people who want to keep their wealth safe. As demand rises, prices go up. And you need to remember that the supply of gold is limited. It isn’t easy to ramp up gold production when investor demand for the precious metal spikes. According to Investopedia, a new mine can take up to 10 years to produce gold commercially.
Now let’s look at the best ways to buy gold.
Best ways to buy gold
Here are five of the best ways to buy gold.
Buying gold in its physical form is a popular choice. That’s because buyers get to own a tangible asset. If you buy gold in this form, you can hold something worth tens of thousands of dollars in your hands. Your investments aren’t just numbers on your computer screen or a paper document. Gold bars, also known as gold bullion, are also portable. A one-kilo bar of gold is worth about $60,000.
Of course, you don’t need so much money to invest in gold. APMEX, one of the biggest online sellers of precious metals in the United States, sells gold bars and rounds by weight. You can order 1-ounce gold bars and rounds, or if you want to invest a larger sum, you could opt for a 50-gram gold bar or even one that weighs 500 grams.
What’s a gold round? Everybody is familiar with gold bars, but rounds are less well known. Think of a gold round as a coin minted by a private mint. A round’s gold content determines its value. On the other hand, gold coins have a face value, and their worth could be far more than their “melt value”.
If you’re planning to purchase gold bars, it could also be a good idea to check the website of JM Bullion. Based in Dallas, TX, the company has been in business since 2011 and ships over 60,000 orders monthly.
When you’re buying physical gold, make sure that you don’t get cheated. You can protect yourself by following a few simple rules:
- Buy only from a trusted source. We’ve already mentioned APMEX and JM Bullion. You may also want to look at this article–Best Online Gold Dealers.
- If you’re buying gold bars from a local dealer, check the price of gold before making a purchase. A gold bullion dealer will typically charge 1.5 percent to 10 percent more than the spot price of gold. It should be a red flag if the seller asks you to pay outside this range.
- Consider carrying a digital scale when you go to buy gold bars. You should also know that gold and other precious metals are weighed in troy ounces and not in standard ounces. The two are different:
– A troy ounce is equal to 31.10 grams
– A standard ounce is equal to 28.35 grams.
In other words, a troy ounce is a little heavier than a standard ounce.
- You may also want to conduct a magnetic test. Gold will not get attracted to a magnet.
Gold coins share many similarities with gold bars. They are easy to carry and store, and when you buy gold coins, you have the assurance of having purchased a tangible asset that you can hold in your hands.
But there are several dissimilarities between gold bars and gold coins.
As a general rule, gold coins will cost more than gold bars of the same weight. Why? Because coins have a numismatic value. A government mint has issued them, and collectors are willing to pay high rates to acquire these coins.
A 1933 “Double Eagle” gold coin with a face value of $20 sold for $18.9 million at an auction in 2021. That’s an extreme example, but you should expect to pay much more than the value of gold when investing in coins made of the yellow metal.
The 1933 Double Eagle Gold Coin
Source: Rare “Double Eagle” gold coin sells for a record $18.9 million
Again, as with gold bars, you need to be careful about getting scammed. Consider buying gold coins from a United States Mint bullion coin seller. The United States Mint is a bureau of the Department of Treasury and is the government agency making the coins we use every day. It also provides investors with a convenient and cost-effective way to buy gold.
Be careful if you intend to buy gold coins from a local coin shop. One of the precautions you can take is to check the coin’s characteristics with the details on the official mint site.
For example, consider the Gold American Eagle. This is one of the most popular coins in the investment market. The United States Mint issues the Gold American Eagle.
If you go to the American Eagle Gold Proof Coin page on the Mint’s website, you’ll find a wealth of details about the coin, including its weight and dimensions (the one-ounce coin of $50 face value weighs 1.0909 troy ounces and is 1.287 inches in diameter). The webpage also describes the coin. You can check these details before buying and even consider carrying a set of calipers to the shop to measure the coin.
Gold jewelry can seem to be an excellent option when you’re considering an investment in gold. You’re buying a tangible asset that could appreciate in value over the years, and you will own something beautiful that you can wear.
But there’s a catch.
When you buy gold jewelry, the markup on the value of gold can be as high as 20 percent to 35 percent or even more. So when you liquidate your investment, you could get a far lower sum than you expect.
There’s something else you need to know. Gold jewelry is usually made with a combination of gold and some other metal. If 24-karat gold, which is pure gold, is used, the jewelry will be excessively soft and malleable. Consequently, the jewelry you buy could be made with 12-karat gold (50 percent purity) or 18-karat gold (75 percent purity).
If the gold jewelry you buy is only 75 percent pure, what about the other 25 percent? Jewelers typically combine silver, copper, and zinc with gold. This hardens the gold. It also serves another purpose. Mixing gold with other metals changes the color of the gold. Here’s how gold gets its different colors:
Yellow gold jewelry is usually a mix of gold, silver, copper, and zinc.
Combining gold and copper in the ratio of 75:25 creates rose gold.
White gold is gold alloyed with nickel and silver. It’s usually plated with rhodium, a metal that helps to give the jewelry a white appearance.
So far in this post, we’ve been discussing ways to invest in physical gold. But buying gold bars, gold coins, and gold jewelry involves the hassle of storing the precious metal and keeping it safe. This could mean buying an expensive safe to keep your gold in or renting a safe deposit box at your bank.
What if you want the benefits of owning gold without the trouble of taking care of it?
Gold exchange-traded funds (ETFs) provide an answer. An ETF is a fund that trades on the stock exchange. When you buy a gold ETF, you’re effectively investing in gold without actually buying or storing the metal.
The ETF invests on your behalf. When gold prices rise, the value of your investment increases. Of course, the reverse will happen when prices fall.
Which gold ETF should you invest in? There are several gold ETFs you can choose from.
SPDR Gold Shares is a large gold ETF. It listed on the New York Stock Exchange in 2004. Today it has an AUM (assets under management) of over $62 billion. Its gross expense ratio, or the amount you need to pay the fund for annual operating costs, is 0.4 percent. Although this will reduce your return, it’s a far lower sum than what you would pay to buy and store physical gold.
If you’re planning to invest in a gold ETF, remember that you will need to open an account with an online broker first. There are several to choose from, with Charles Schwab, Fidelity Investments, and TD Ameritrade being among the most popular.
At that point, buying a gold ETF is just like buying a stock. It’s really that simple.
You can even own gold ETFs in an IRA. And if you’re at the point of needing to do an IRA rollover, check out this gold IRA rollover guide.
This option is more of a high-risk, high-reward approach to buying gold. Instead of purchasing physical gold or investing in a gold ETF, you buy stock or options for a company that mines gold.
Let’s take a moment to understand the implications of investing in gold mining stocks. When you buy stock in a company like Barrick Gold, one of the world’s largest gold mining companies, you can expect your investment to appreciate if the price of gold increases.
But gold prices aren’t the only factor that could influence the price of Barrick Gold stock. The stock’s market price could rise (or fall) when market conditions change. An economic recession could drive all stock prices down. Or changes in the top management could affect stock prices. So, there are multiple factors other than the price of gold that could influence a mining company’s stock price.
Barrick Gold Corp stock price
Source: Google Finance
If you had invested in Barrick Gold stock in October 2015, when its price had fallen to $6.57, your investment would have grown three-fold in less than seven years. That’s a handsome return. But if you got the timing wrong, you would have made far less money and possibly incurred a loss.
Should you invest in the stocks of gold mining companies? Do it only if you can stomach the risk. You may make large returns, but you can also lose heavily.
The Bottom Line About How to Buy Gold
Gold is a precious metal that’s been highly valued for thousands of years. And peoples’ fascination with gold will likely continue well into the future.
“Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race. A person may not like someone’s religion, but he’ll accept his gold.”
Robert Kiyosaki, American author and businessman
Think about it this way.
Gold is a commodity that’s in short supply, but everybody wants to own it. According to the U.S. Geological Service, all the gold in the world would form a cube about 90 feet high. So, you have enormous demand and a limited supply. Prices can move in only one direction in the long term–upwards. That’s the best reason for investing in gold.
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Best ways to buy gold.
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