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Humans have always been fascinated with gold and the story continues. The modern man is no different. If you still do not have it in your portfolio, you need to do it now. It could be bought in a variety of forms including gold-backed securities, bars, or coins.
It’s a safe asset when it comes to portfolio diversification as gold never loses its value. When the prices of other assets such as real estate or stocks are dropping sharply, gold either increases in value or retains its value.
Also, it is seen by experts as the best way to protect the value of your savings against inflation as gold has retained its value for centuries.
However, you must be wondering how you can invest in gold bars and what is the best method to buy gold.
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If you are an investor who wants to hold tangible security in your hands, you would do well by buying gold bars instead of putting your money in gold exchange-traded funds. You can also buy investment-grade gold or gold bullion at the spot price.
This price is the cost of un-fabricated gold and some additional costs which depend on the seller. Physical gold is a good investment as you can liquidate it quickly if there is a complete economic collapse.
Process of Buying Gold
It’s not that difficult to buy gold bars online. You can use the services of online licensed retailers. There are also several reputed retail websites where you can buy gold.
Some examples of these websites include Wholesale Coins Direct, JM Bullion, and American Precious Metals Exchange also known as APMEX. You can buy the kind of gold bars you want by quantity, weight, and price.
Significant discounts are available for buyers interested in buying huge quantities of gold.
Some online retailers also provide discounts for buying gold with a credit card whereas other retailers offer discounts for wire transfers which means you have the option to choose a payment option that is most cost-effective for you.
After getting the gold, it is important to keep it in its original packaging to avoid any scratches. Also, keep them safe in a bank safety deposit box or a home safe. On top of the retail price of gold, you would also have to pay for insurance and delivery.
There are also auction sites such as eBay where you can buy gold bars. If you are using an auction website, don’t forget to check the seller’s ratings.
If the seller has a negative rating regarding shipping and handling fees, authentic products, or failure to deliver, stay away from such sellers.
Some cities such as Dubai and Las Vegas also allow visitors to buy gold bars through ATMs. You need to be extremely careful when buying gold through such ATMs as the spot price of gold in such ATMs is well above the price set by most retailers.
Benefits of Holding Gold Bars in Precious Metals IRA
You can also buy gold through an individual retirement account. It is a special vehicle that is designed to help individuals save money for their retirement.
Typically, IRAs are for holding assets such as bonds, stocks, and cash. The investment market first started offering gold IRAs in the late 1990s.
These are self-directed IRAs which means investors can choose to invest their money in gold as well as certain other precious metals including palladium, platinum, and silver.
Self-directed IRAs can also be used for buying cryptocurrency, real estate, or art.
It works similar to traditional IRAs which means your contributions to a gold IRA are made on a pretax basis and the investments keep growing in value with the tax-deferred.
When it comes to the maximum contribution, liquidation regulations, and income limits, there is no difference between the traditional and precious metals IRA.
These precious metal IRAs have a bit more complex as compared to the traditional individual retirement accounts. The Internal Revenue Service requires precious metals including gold to meet certain standards regarding purity.
You cannot buy any kind of gold product. Only certain bullion, bars, and coins that meet the IRS standards can be bought through an IRA. Jewelry isn’t allowed even if it has significant value.
The precious metal bought through IRA needs to be held in a special depository just like you don’t have physical possession of your stock certificates. These depositories need to be IRS-approved.
If you store gold in a storage facility not approved by the IRS, it may not qualify for a gold IRA.
Gold IRA is not only more complex to manage but also has higher fees as compared to the traditional IRA. It is important to choose a company capable of handling these unique products.
Providers offering gold IRAs typically charge several fees including administrative, setup, and storage fees and on top of that, they also charge commissions.
One of the biggest advantages of a gold IRA is that it helps in guarding against inflation and offers a way to diversify the retirement portfolio. You can use a proper gold IRA company to get the most out of your alternative investments.
Only Invest in Pure Gold
Gold bars rated for investment need to have 99.5% purity. The remaining metal is an alloy which could be copper or silver.
This alloy is necessary to ensure smelting.
If you are planning to buy gold bullion for investment purposes, it is important that you only choose a bar that has the manufacturer’s name, the weight of the bar, and purity levels stamped on the face of the bar.
The purity level is typically 99.99%.
Some popular mints that sell gold bars include Perth mint, Royal Canadian mint, and Valcambi.
Difference Between Coins and Bars
Gold in all forms carries significant value but not all gold is created equal. As an investment asset, investors should stay away from gold coins if they are interested in adding a physical product to their portfolio which closely tracks the price of gold.
Gold coins often have historic value and attractive designs but the quantity of gold in a coin is low. In short, you are usually paying for numismatic value rather than the value of gold inside.
Gold coins not only cost more but also affect the portfolio value. Take the example of the American Eagle coin. This coin holds 91.67% gold but its cost is more than the gold bars as it is a collector’s item.
While some investors may be interested in a collector’s item for their portfolio others might only want pure gold such as it is extremely liquid and retains its value long-term.
This is why investors who want to add gold to their portfolios tend to prefer plain gold bars.
Buy Gold Bars in Usable Sizes
The important thing buyers of gold bars need to keep in mind is the size of the bar.
If you have $15,000 with you for investing in gold and the price of gold is $1500 per ounce, it would be better for you to buy 10 gold bars of one ounce each instead of buying a single bar of 10 ounces.
It will be easier for you to liquidate a 1-ounce bar as and when you need the money as compared to selling a 10-ounce bar at once. In short, the size of the gold bar also affects its liquidity.
On the other hand, you also need to stay away from really small gold bars as those don’t hold a lot of value.
In addition to the coins and bars, you could also buy jewelry. Keep in mind that jewelry has additional costs as you are also paying for retail margin as well as craftsmanship. This is why jewelry isn’t recommended as a method of investing in gold.
Get Estimates
As an investor, you need to know about the spot price of gold when you are researching the bullion market. There are a lot of finance websites with stock tickers and these tickers usually also carry the price of gold.
It’s not that difficult to buy gold but the price of gold varies greatly among sellers. Each seller has a different price as they have different margins and they ask for additional money for shipping, handling, payment processing, and authentication certificates.
If you want to get the best price for your gold bars, it would be better to compare the prices charged by different sellers.
Don’t Get Scammed
As a buyer of gold bars, you should also check out review websites such as Ripoff Report and Better Business Bureau before placing an order with the seller. Generally, all the reputed gold sellers are transparent about the fees every buyer is required to pay.
If you’re based in the US and you plan to buy gold from sellers abroad, it is important to do your due diligence. Even if the gold bars are completely authentic, you also need to inquire about other charges as they may be exorbitant.
You also need to understand that getting the gold cleared through customs might result in some issues though it typically depends on the amount of gold you have bought.
You need to understand that gold always performs well when there is an economic recession. When the economy isn’t doing well, there may be a huge demand for gold as many investors start looking at gold.
However, this is also the time when gold scammers are the most active.
Advantages of Investing in Physical Gold
There are several benefits of choosing physical gold as an investment asset.
One of the biggest reasons is that the yellow metal has been and will remain the most in-demand precious metal.
This shiny metal has always been a prized possession of man ever since human beings learned how to mine it and there are no signs of any slack in appetite for this metal.
The second reason is that it is inflation-proof. You buy gold at today’s price and sell it tomorrow at a greater price which takes care of inflation. There is no other asset like this as inflation slowly eats away at their value.
Take the example of a car which was bought for $400 in 1960. If you sell it today, you might get only $400 today for that car but you won’t have any such problem with gold.
Gold also has an intrinsic value that never goes away. It is always going to be in demand as history has shown. Also, you wouldn’t have any problem liquidating it regardless of any domestic or international crisis.
It won’t be wrong to say that gold is the only true international currency. Whether you are in Zimbabwe or Alaska, you will find value in your gold.
In addition to these reasons, another huge advantage of gold is that you can possess it physically which makes it a highly secure investment.
If there is a stock market collapse or an electronic blackout, your investments may vanish as they are only stored on a computer but that is not the case with gold.
You can hold it in your hands and protect it if there is an emergency. There are hardly any other investment assets with such characteristics.
Important Things to Know
Think of Alternatives
If you’re looking at gold as an investment asset, you should also know about other ways to invest in gold such as mutual funds, gold focus ETFs, gold-mining stocks, and futures contracts in gold.
All these assets are related to the performance of gold at a broader level but also allow you to diversify your portfolio.
Another way to diversify your portfolio is to invest in other precious metals such as silver.
Conclusion
Owning physical gold also has several costs such as cost of storage, cost of insurance, sales markup as well as transaction fees when you buy or sell this commodity.
Smaller investments may also be accompanied by additional small lot fees and processing fees.
However, these costs may not be significant enough for someone who wants to diversify their portfolio by investing a small part of it in gold.
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I started BMOGAM Viewpoints as a way to compile all my views on investing in one place. I own my home, have some real estate, and own a few stocks like most people, but what really drives my interest in investing is I have a strong love of precious metals, especially gold.
