Including gold in your investment portfolio can help in diversification and bring balance by reducing its risk and volatility. Gold may be bought in any of its myriad forms – mining stocks, gold mutual funds, gold bonds, gold ETFs, gold futures and options, or physical gold itself.
Most of the intangible investment choices in gold do not reflect the whole price advantage of gold in the bullion market. It is only one of the factors influencing their value. However, with physical gold in the form of gold bullion bars and coins, investors get to reap rich dividends from a bull run in the bullion market.
Even as bars and coins mirror the fluctuations in the bullion market in their entirety, bars are a better choice as an investment due to their lower premium over the spot price.
Read on to learn more about the gold-buying process.
How and where to buy gold bars?
To purchase physical gold bars, you need not visit a gold dealer – though that is definitely an option. Buying gold bullion is made simple and easy by online portals like APMEX, JM bullion, and the United States Gold Bureau. In fact, most reputed bullion dealers have online portals.
Buying online not only simplifies the gold-buying process, but investors can also take advantage of the discounts offered in them. While physical stores may not have the bullion product of your choice readily available, it is easy enough to find an online portal selling it.
The other benefits of opting for online purchases are that you get to invest in gold bars any time of the day and lock in your purchase when the spot price reaches a specific point. As most online retail gold sellers offer discounts for paying for the purchase with a specific credit card or wire transfer, you may choose the option that is cost-effective and convenient.
Another way to purchase a physical gold bar is through auction portals like eBay. You can bid for the gold bars listed in them. However, investors are urged to exercise caution while choosing this method. Negative seller feedback, exorbitant shipping and handling charges, and failure to deliver are some of the risks you may encounter.
Gold ATMs are also available in select cities such as New York and Las Vegas. Even though the purchasing process is quick and easy, the premium above the spot price may be higher at these ATMs. The selection of bullion products may also be limited.
Whether buying gold bars from brick-and-mortar gold dealers, online portals, auction sites, or ATMs, you need to be aware of the pros and cons of including gold as an investment.
Here are some tips to help you with the gold-buying process.
5 tips for buying gold bars
1. Choose pure gold
When buying gold as an investment, you should stick to purity levels of 99.5% or above. The bullion product should have its purity imprinted on it, along with the mint and gold bar weight. A gold bar without these features would be harder to sell and may not fetch a good price.
Some of the mints producing investment-quality gold bullion are Credit Suisse, Royal Canadian Mint, Johnson Matthey, Engelhard, PAMP, and Valcambi, in addition to the government mints.
2. Bars or coins?
Even as all bullion products in pure gold are good investment choices, gold bars cost less as they offer the additional advantage of a lower premium. While bars are made with less attention to aesthetics and more consideration for compactness, coins are produced with more emphasis on appearance and value from a collector’s perspective.
In monetary terms, this translates to more gold in bars for the same price. When comparing bars and coins, you should also pay attention to the purity levels. It indicates the content of gold in the bullion product. Most popular gold coins come with a low purity level.
Again, when buying gold as an investment, care should be taken to avoid numismatic coins. They come with a very high premium, are less easy to sell, and often have a lower gold content.
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3. Select the right size
Care should be taken when choosing the size of bullion bars. Instead of buying the largest bar for the money set aside for investment, it should be split up into smaller ones for easy liquidity.
For example, if you are planning to purchase 10 ounces of gold, instead of buying a 10-ounce gold bar, opt for 10 numbers of 1-ounce gold bars. Smaller bars are easier to sell. And, you can avoid selling the entire 10 ounces of gold when you want to cash in only one ounce.
On the other hand, buying too small bullion bars is counterproductive, as the bigger the bars, the lower the premium. It is crucial to find gold bars with the right weight and size to suit your needs.
4. Compare options
Buying gold is relatively easy whether shopping offline or online. Whichever method you choose, you should shortlist at least three options for more extensive research.
Comparison of gold bar prices by sellers is vital in getting a good deal. Above the spot price, online and offline dealers charge numerous fees for the bullion products they sell. Premium, markup, authentication fees, shipping and handling fees, and payment processing fees are the notable ones.
5. Beware of scammers
Whether buying online or offline, it is important to check the ratings and feedback of the dealers. Ratings and reviews are offered by ratings agencies and websites such as Better Business Bureau, Trustlink, and Ripoff Report. Their ratings are based on customer reviews.
Transparency about charges is an important aspect that buyers should look for in dealers. If considering buying bullion from overseas dealers, the authenticity of products needs to be confirmed. Ensure that the charges are reasonable and customs-clearance will be hassle-free before buying bullion from abroad.
Owning physical gold entails a host of extra expenses on storage and insurance. Investors need to be aware of this before buying bullion. Or else, you can always choose paper gold – that is owning gold without holding it.
The best strategy for gold investors would be to choose physical gold or ETFs. Though both reflect the market price of gold directly, physical gold comes with the extra benefit of no counterparty risk, making it the best way to buy gold. Read our Gold IRA guide for more information.