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How to find and buy physical gold from legitimate dealers

By Vikas Shukla. Originally published at ValueWalk.

How to buy physical gold

Gold is often considered a hedge against inflation and an insurance against the financial crisis. Over the last six months, the yellow metal’s price has shot up 18% while other asset classes are struggling due to the coronavirus pandemic. Hedge fund titan Ray Dalio of Bridgewater Associates has said that every investor should have some gold in their portfolio. Here’s how you can buy physical gold for investment purposes.

Gold has been around for thousands of years, and it’s still considered a safe haven investment. If our existing economic system collapses and paper money loses its value, we could use precious metals such as gold to facilitate trade.

There are a number of ways to invest in gold. You can buy gold ETFs (exchange-traded funds), gold mining stocks, or physical gold coins and bars. In our physical gold vs gold ETF comparison, we looked into pros and cons of each and found that gold ETFs make much more financial sense than physical gold. You can easily buy and sell gold ETFs without having to worry about purity of the metal. You don’t have to worry about theft either.

But for some investors, it’s more important to have physical gold that they can hold in hand and feel the security of owning a tangible asset. If you are one of them, you should understand the following aspects to invest in physical gold aka gold bullion.

Know the spot price

Gold prices fluctuate constantly. The spot price reflects the current market value and is used as the basis for pricing gold bullion. The spot price includes the price of pure gold plus some additional costs. Once you have the latest spot price, look for dealers that offer prices closest to the spot price.

Decide whether to buy bars or coins

How do you decide whether to buy gold bars or coins? You evaluate them based on a few factors such as liquidity, additional costs, and storage.

If you think of liquidity, coins are better than bars because you can sell them in small amounts. If you have 100g of gold in 10 coins of 10g each, you can easily sell two coins to liquidate 20% of your holding. But if you have a single bar of 100g, you don’t have the same flexibility.

The coins also have attractive designs and historic value. But they are more expensive due to their numismatic value. What’s more, they also contain a lower quantity of gold than bars. For example, the US Mint’s American Eagle coin contains 92% gold but is more expensive than gold bars.

Gold bars are relatively less expensive because they don’t need intricate design like coins, which dramatically reduces the machining and labor costs. Gold bars are also easier to store because they occupy less space than the same ounces of coins.

Determine the size

You can buy gold bars in denominations of 1g, 10g, 20g, 50g, 100g, and 1,000g or 1, 10, and 100 troy ounces. On the other hand, coins are made in 1/20, 1/10, ¼, ½, and one troy ounce denominations, according to the World Gold Council.

If liquidity is your primary concern and you don’t want to incur the extra costs that come with coins, you should consider buying smaller, one-ounce gold bars. You can easily sell small bars when you need money. Finding a buyer for a large gold bar could be challenging. If you are a multi-millionaire, you can choose to have a combination of both large and small bars.

Do your due diligence before buying physical gold

You don’t just go out and buy gold from any dealer. Do some background research to ensure that the dealer has the license to sell the yellow metal. The licensed dealers are less likely to sell you counterfeit gold or gold that they obtained illegally. You don’t want to be ripped off.

Don’t forget to compare prices from different sellers. Look into the shipping charges, insurance, taxation, and customs. Avoid sellers that charge ridiculously high shipping and handling fees. Reputed dealers are transparent about their fees and charges.

Make sure that the gold bullion you are buying has proper stamping and a recognized hallmark. The bullion should have its registration number, weight, name of the manufacturer, and purity stamped on it.

Some of the world’s most popular mints that produce gold bars and coins are:

  • Valcambi
  • PAMP Suisse
  • Perth Mint
  • Royal Canadian Mint
  • US Mint
  • Johnson Matthey
  • Argor-Heraeus
  • Sunshine Mint

 Buy the physical gold

Now it’s time to buy the gold bullion online or at the local dealer of your choice. Some popular online platforms for buying physical gold are JM Bullion and APMEX. If you are interested in buying coins, you can get it directly from the US Mint. Some sellers offer a discount if you buy in large quantities.

Storing your gold

Once you have the gold bar or coin in your hand, keep it in its packaging to avoid any scratches. Now you have to store it such that it’s safe but easily accessible. You can keep it in your home in a secret storage. A safe will protect it from theft as well as natural disasters. Alternatively, you can store it in a safety deposit box at your bank.

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