How to Buy Physical Gold
Gold bars – better known as bullion bars – are a popular choice for people looking to buy gold. Gold bars are usually sold in grams or ounces, and the purity, manufacturer and weight should be printed on the front of the bar.
When buying gold, purity is very important: investment-grade gold bars must be at least 99.5% pure gold. This is especially important if you wish to store gold bars in a gold IRA; less pure gold cannot be stored in an IRA unless it is a particularly pre-approved gold coin.
You can buy bullion from traders, individuals, or online at sites like JMBullion, American Precious Metals Exchange (APMEX) or SD Bullion. Keep in mind that you may be required to pay shipping and insurance to ensure your bullion is transported safely.
Gold coins such as the American Golden Eagle or the Canadian Maple Leaf are popular collectibles. This collectible aspect means you pay the same premium as buying the same amount of gold in bar form. Also, coins usually have less gold content than bars. For example, a one-ounce American Eagle coin is only 91.67% gold. In fact, the coin weighs 1.1 ounces, of which about 1 ounce is pure gold; the rest is silver and copper.
You can buy coins from dealers, pawnshops and retailers you trust. If you decide to buy gold coins online, be sure to go to a US-listed dealer. Mint is listed. Whether you’re buying gold coins in person or online, you don’t want to waste your money on counterfeit coins or gold that isn’t as pure as you think.
Jewelry, especially antiques that may have a higher gold grade, can be another opportunity to buy gold. However, keep in mind that, as with gold coins, you may pay extra for the amount of gold you actually receive. (Depending on the manufacturer, it can be anywhere from 20% to 300%.)
Also, remember that it’s not gold that sparkles. Manufacturers use alloys to combine gold with other metals to make their pieces more durable or to customize their colors. Gold quality (measured in carats) is related to purity.
As with coins, extra care should be taken when buying gold jewelry. Make sure the person you buy jewelry from is reputable. You can start with a jeweler who is a member of Jewelers of America and has signed a code of conduct that requires them to be honest and forthright about the nature of their work.
You should ensure that you have as much documentation as possible so that you can prove its quality when deciding to resell your gold.
Factors to Consider When Buying Physical Gold
If you decide to buy physical gold, keep the following in mind:
Storage: Physical gold needs a safe place to store. While you can certainly store gold at home, many investors prefer vaults. Before you buy, research safe ways to store your gold and keep in mind that safekeeping adds extra cost to your gold investment.
Insurance: If you decide to keep your gold at home, you should insure your gold against theft or natural disaster. This can increase the cost of your homeowners or renters insurance. Even if you don’t store your gold at home, you should check your storage provider’s insurance policy to see how it protects your investment.
Manufacturer: Since you are making an investment, you should make sure to buy from a reputable source that will help your purchase increase in value over time. When buying gold, look out for reputable producers such as Credit Suisse, Perth Mint and Royal Canadian Mint.
Purity: The amount of gold in a coin, bullion or jewelry has a significant impact on its value and value as an investment vehicle. Make sure that any gold you buy as an investment is of the correct purity to stand the test of time. This means that your target may be gold items that are at least 91% pure, if not 99% pure.
Other Ways to Buy Gold
If all of this sounds like too much trouble, but you still want some light in your portfolio, consider investing in stocks, mutual funds, and ETFs related to the gold industry.
Gold Mining Stocks
Instead of investing in physical gold, you can buy shares in gold mining and refining companies. Leading gold miners include Barrick Gold (GOLD) and Newmont Mining Company (NMC).
While their stock prices may not move exactly in line with physical gold prices, they may be correlated. This allows you to invest in gold without the risks or headaches of dealing with physical gold.
Gold Funds and ETFs
Instead of investing in a single company tied to gold, invest in a basket of gold-related securities through a gold mutual fund or ETF. Gold funds can track the price of gold, include stocks in multiple gold mines and refineries, or provide exposure to gold futures and options.
- Top gold mutual funds and ETFs include:
- iShares Gold Trust (IAU)
- Invesco DB Gold Fund (DGL)
- Franklin Gold and Precious Metals Fund (FKRCX)
Futures and Options
Futures and options are attractive to investors willing to take on more risk. (If none of these words mean anything to you, you should avoid these gold investments right now because they are highly speculative.)
With gold futures, you commit to buying and selling gold at a specific price in the future. According to a gold options contract, you can buy or sell gold if it reaches a specified price on a predetermined date.
Successfully buying gold futures or options requires a brokerage account and a high level of industry knowledge. You need to closely monitor your account and the price of gold to make sure you don’t miss out on exercising your options. You may also end up magnifying any losses you suffer, as futures and options often involve the use of leverage or the use of borrowed funds to buy securities.
Is gold a good investment?
If you’re trying to get rich with the modern gold rush, you’re probably in the wrong place. Gold prices have risen about 36% over the past five years, while the S&P 500 has gained 104% over the same period. So why the hype?
Because some see gold as a safe haven from inflation and extreme market downturns. For example, during the 2007-2008 bear market, the entire stock market plummeted 33%. Meanwhile, gold fell just 2%.
However, the price of gold can be very volatile, which means that gold is not a completely (or even primarily) safe investment. In fact, you can easily create a diversified non-gold portfolio.
However, if you want some golden light in your investment account, the goal is that it’s only a fraction of your invested capital.
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