There is no need to turn your walk-in closet into a miniature version of Fort Knox if you are interested in purchasing gold. In point of fact, you might not need any other storage besides an investing account.

How to Buy Physical Gold

Gold Bars

People who are interested in purchasing gold often choose to do it in the form of bullion, which is another name for gold bars. The purity of the bullion, the manufacturer, and the weight should all be stamped on the front face of the bar. Bullion is typically sold by the gramme or the ounce.

When purchasing gold, purity is of the utmost importance: Gold bars that are suitable for investment are required to be at least 99.5% pure gold. This is of the utmost importance if you intend to keep bars in your gold IRA; less pure gold, unless it is a coin that has been properly pre-approved, is not permitted to be retained in an individual retirement account.

You can purchase gold bars from individuals, merchants, or internet retailers such as JMBullion, the American Precious Metals Exchange (APMEX), or SD Bullion. Also, bear in mind that in order to ensure the safe transit of your bullion, you may be responsible for payment of delivery fees in addition to insurance premiums.

Gold Coins

Collectible gold coins, such as the Canadian Maple Leaf or the American Gold Eagle, are favorites among coin enthusiasts. This indicates that you will likely pay a higher price than you would for the same quantity of gold if you purchased it in the form of bullion.

Gold bars almost always have a higher percentage of gold than coins do. For example, only 91.67% of the gold is contained in a one-ounce American Eagle coin. In point of fact, the coin has a total weight of 1.1 ounces and contains approximately one ounce of pure gold. The remaining weight is composed of silver and copper.

Coins made of gold are available for purchase from reputable dealers, pawn shops, and even private individuals. If you decide to purchase your gold coins online, you must ensure that you do so through a dealer who is included in the database maintained by the United States Mint. You don’t want to throw away your money on fake gold coins or gold that isn’t as pure as you were lead to believe it was, regardless of whether you make your purchase in person or online.

Jewelry

Another way to acquire gold is to do so through the purchase of jewelry, particularly vintage pieces. However, similar to the purchase of gold coins, you can expect to pay a premium for the amount of gold that you will actually receive. This premium can range anywhere from 20% to 300%, depending on the manufacturer.

In addition to this, keep in mind that not everything that looks shiny is actually valuable. In order to make their products more long-lasting or to alter the color of those products, manufacturers often turn to alloys that blend gold with other metals. The grade of gold, which is measured in karats, has a direct correlation with the metal’s purity.

When purchasing gold jewelry, you should exercise the same extreme caution as you would with coins. Check the seller’s reputation before buying anything from them, especially jewelry. You could begin your search with jewelers who are members of the Jewelers of America and have signed a code of professional conduct requiring them to be truthful and forthright about the characteristics of the pieces they sell. This could be a good place to start.

When you want to resell your gold, you will need to be able to vouch for its purity, which means you will want to make sure you have as much paperwork as you possibly can on hand.

Factors to Consider When Buying Physical Gold

If you choose to acquire gold in its physical form, there are a few things you will need to keep in mind.

• Gold that is held in its physical form needs to be stored in a safe place. Even though you are free to store your gold in your own house, the majority of investors choose to use a professional custodian. Before you purchase gold, you should make it a priority to investigate the availability of safe places to store it. However, you should be aware that this will increase the overall cost of your gold investment.
• If you plan to keep your gold at home and are concerned about the possibility of it being stolen or damaged by a natural disaster, you should consider purchasing insurance for it. Your homeowners or renters insurance premiums can end up being higher as a result of this. And even if you don’t keep your gold at home, you should still review the insurance policy of the company that stores it for you to see how well it protects your investment.
• Manufacturer: Because you are making an investment, you will want to make sure that you are purchasing from reliable sources that will assist in the growth of the value of your purchase over time. When investing in gold, it is important to purchase from reputable providers such as Credit Suisse, the Perth Mint, and the Royal Canadian Mint.
• Purity: The percentage of gold that is included in a coin, bar, or piece of jewelry has a significant influence on both the item’s value and its worth as an investment tool. Verify that the purity of any gold you buy for investment purposes is high enough so that it can withstand the passage of time. This indicates that you are probably aiming for gold items that have a purity of at least 91% and possibly even 99%.

Other Ways to Buy Gold

If all of that seems like too much of a trouble but you still want some bling in your investment portfolio, you might want to explore investing in stocks, mutual funds, or exchange-traded funds that are tied to the gold business.

Gold Mines and Mining Stocks

Purchasing shares in the firms that mine and refine gold is an alternative to investing directly in the precious metal itself. Firms such as Barrick Gold (GOLD) and Newmont Mining Corporation are among the most successful gold mining companies (NMC).

The values of their stocks will almost certainly be associated with the movement of the price of real gold, even though this may not happen perfectly. This provides you with exposure to gold as an investment, but shields you from the risks and hassles associated with physically touching gold.

Gold Exchange-Traded Funds and Mutual Funds

Investing in gold mutual funds or exchange-traded funds allows investors to purchase a variety of gold-related assets as opposed to investing in a single gold-related company. Gold funds may either follow the price of gold, include the stocks of multiple gold mines and refineries, or provide exposure to gold futures and options. All of these strategies have the potential to generate positive returns.

The following are some of the best gold mutual funds and ETFs:

• Gold investment company iShares (IAU)
• Franklin Gold and Precious Metals
• Fund Invesco DB Gold Fund (DGL) Invesco DB Gold Fund (FKRCX)

Contracts for futures and options

Futures and options may be appealing investments for investors who are willing to take on greater levels of risk. (If neither of those terms signifies anything to you already, it is probably best for you to steer clear of these gold investments for the time being because of the high degree of speculation involved.)

When you trade in gold futures, you are committing to either buy or sell gold at a certain price in the future. You have an agreement with the option to buy or sell gold under a gold options contract if it reaches a certain price by a predetermined date. The date for this event is also predetermined.

A successful purchase of gold futures or options involves both a brokerage account and a significant degree of prior knowledge of the relevant market. You will need to keep a close eye on both your account and the price of gold in order to ensure that you do not miss the opportunity to put your alternatives into action. Because futures and options trading typically involve taking on leverage, or using borrowed money to acquire securities, you run the risk of having any losses you sustain become significantly magnified.

Is Buying Gold a Smart Financial Move?

You’ve probably come to the wrong spot if you’re seeking to get rich quick in a gold rush that takes place in the contemporary day. The price of gold has climbed by around 36 percent over the previous five years, whereas the S&P 500 index has increased by 104 percent during the same time period. The question is, why all the fuss?

Because some people see gold as a refuge from inflation and extreme market drops, it is a popular investment. For example, the whole stock market fell by 33% during the bear market that occurred between 2007 and 2008. Gold, on the other hand, was only down 2%.

Having said that, the price of gold can be somewhat unpredictable, which indicates that gold is not a totally (or even largely) safe investment. In point of fact, it is not at all difficult to construct a diversified investment portfolio without including gold at all.

But if you want some of that golden shine in your investment account, you should aim to have it occupy only a small fraction of the dollars you invest in it.

When times are rough economically or when international conflicts such as the Russia-Ukraine War throw the markets into a loop, investors frequently turn to gold as a safe haven to protect their investment portfolios. Gold is a safe commodity that has a proven track record of growth, which is appealing to some investors at a time when inflation is surging and the stock market is trading at levels that are far lower than its highs.

Gold is popular among investors for a variety of reasons, including the fact that the commodity possesses characteristics that make it an advantageous alternative to standard securities such as equities and bonds. They believe gold to be a valuable asset, despite the fact that it is an asset that does not generate a steady stream of cash flow. Because the Federal Reserve’s efforts to stimulate the economy, such as maintaining interest rates at or near zero, and government spending have caused inflation to surge to new heights, some people view gold as a hedge against inflation.

Here is a look at some of the potential downsides associated with each of the five main ways that gold can be owned.

1. Gold bullion

Purchasing gold in the form of coins or bars might be one of the most emotionally fulfilling ways to own the precious metal. You’ll feel a sense of fulfilment from looking at it and handling it, but if you possess more than just a small bit, ownership comes with some significant negatives as well. One of the most significant disadvantages is the requirement to store, protect, and insure actual gold.

Buyers of real gold are completely reliant on an increase in the price of the commodity in order to turn a profit. In contrast, proprietors of a business (such as a gold mining firm), in which the company can create more gold and consequently more profit, driving the investment in that business higher, have the ability to increase both gold production and profit.

You have a variety of options available to you when it comes to purchasing gold bullion, including doing it through an online dealer such as APMEX or JM Bullion, or even through a local dealer or collector. It’s possible that pawn shops also sell gold. Take careful note of the spot price of gold, also known as the price per ounce that is currently being offered on the market, while you are shopping for gold so that you can strike a reasonable deal.

Because of the likelihood of paying more for a coin’s collector value in addition to its actual gold content, you might find it more advantageous to conduct business in bars rather than coins. (Even though they may not all be made of gold, the following nine coins are among the most valuable in the world.)

Risks: The most significant risk is the possibility that someone will physically remove the gold from you if you do not take measures to preserve your assets. If you find yourself in a position where you need to sell your gold, you face the second-biggest risk. It is possible, but not guaranteed, that you will not obtain the entire value of the assets you are selling, particularly if the holdings are coins and you need the money soon. As a result, you could have no choice but to accept a far lower price for the sale of your holdings than they could have otherwise garnered on a national market.

2. Gold futures

Investing in gold futures is a good way to speculate on the price of gold going up (or down), and if you wanted to, you could even take physical delivery of gold. However, taking physical delivery of gold is not what drives speculators to make investments in gold futures.

The enormous amount of leverage that you are able to use is the primary benefit that comes with investing in gold via futures contracts. In other words, for a relatively small amount of money, you can own a significant quantity of gold futures contracts. You stand to gain a significant amount of money very rapidly if you correctly anticipate the movement of gold futures prices.

However, the power that investors in futures contracts have can work both for them and against them. If the price of gold moves against you, the broker may close your position and you will incur a loss. Alternatively, you may be required to maintain the contract by providing substantial sums of money, which is referred to as margin. Therefore, although the futures market gives you the opportunity to gain a lot of money, you also run the risk of losing it very rapidly.

You will need a broker that will allow you to trade futures in order to participate in the futures market. Not all of the major brokers offer this service, but the futures market is typically reserved for more experienced investors.

3. ETFs that own gold

Buy an exchange-traded fund (ETF) that tracks the commodity if you don’t want the hassle of owning physical gold or dealing with the fast pace and margin requirements of the futures market. This is a great alternative if you don’t want to deal with either of those things. The SPDR Gold Shares (GLD), the iShares Gold Trust (IAU), and the Aberdeen Standard Physical Gold Shares ETF are three of the most popular exchange-traded funds (ETFs) (SGOL). The objective of exchange-traded funds (ETFs) such as these is to replicate the price performance of gold while minimizing the yearly expense ratio of the ETF. As of October 2022, the expense ratios for the aforementioned funds are only 0.4 percent, 0.25 percent, and 0.17 percent, respectively.

Another significant advantage of having an ETF rather than bullion is that it may be more easily converted into cash at the price determined by the market. Just like selling a stock, you are able to trade the fund on any day that the market is open at the price that is now in effect. Therefore, gold exchange-traded funds are more liquid than actual gold, and you can trade them without leaving the convenience of your own home.

ETFs provide you exposure to the price of gold, which means that regardless of whether the price goes up or down, the fund should perform similarly, once again minus the cost of the fund itself. Gold, much like stocks, is subject to periods of extreme volatility. However, investing in these exchange-traded funds allows you to avoid two of the most significant dangers associated with owning the actual commodity: the risk of losing value on your holdings and the chance of having your gold stolen.

4. Mining stocks

Having ownership in the mining companies that produce the precious metal is another method to capitalize on the growing price of gold. Due to the fact that investors can profit from gold in two different methods, this may be the ideal solution for investors. To begin, if the price of gold continues to climb, so will the profits of the miner. The miner also has the capacity to increase production over time, which results in a double-whammy impact.

When you invest in individual stocks, you need to have a thorough understanding of the company in which you are investing. You should proceed with caution when choosing a well-established company in the sector because there are quite a few miners out there that pose a significant level of risk. It is in your best interest to steer clear of small miners and those that do not yet have a mine that is producing. Last but not least, just like any other stocks, mining stocks can be highly volatile.

5. ETFs that own mining stocks

You don’t want to spend too much time researching particular gold firms, do you? Investing in an exchange-traded fund (ETF) might be a good idea in this case. Gold miner exchange-traded funds will provide you with exposure to the industry’s most significant gold miners. Due to the fact that these funds invest in a diverse range of companies within the sector, you won’t suffer as much from the poor performance of any one miner.

VanEck Vectors Gold Miners ETF (GDX), VanEck Vectors Junior Gold Miners ETF (GDXJ), and iShares MSCI Global Gold Miners ETF are three of the largest exchange-traded funds (ETFs) operating in this industry (RING). As of the month of October 2022, the cost ratios for the funds come in at 0.51 percent, 0.52 percent, and 0.39 percent, respectively. These funds provide investors with the benefits of owning individual miners in addition to the security that comes with diversification.

Risks: Although investing in a diversified ETF will safeguard you in the event that any one of your holdings performs poorly, it will not protect you from events that have an effect on the entire sector, such as prolonged drops in gold prices. Additionally, exercise caution when choosing a fund to invest in because not all funds are made equal. Some funds contain junior miners, which are associated with a higher level of risk, while others have established miners.

Why investors favour gold

According to Juan Carlos Artigas, worldwide head of research at the World Gold Council, “gold has an established track record for returns, liquidity, and low correlations, making it a highly effective diversifier.”

These characteristics are of utmost significance for those who invest:

Gold’s returns have been superior to those of equities and bonds over particular time periods, despite the fact that this is not always the case.

Liquidity: If you buy particular types of gold-based assets, you will have the ability to quickly convert them into cash if necessary.

Low correlations: The performance of gold is frequently distinct from that of stocks and bonds, which means that when stocks and bonds rise, gold may fall or vice versa.

Gold also has the ability to deliver the following additional benefits:

Diversification: Given that gold does not have a strong correlation to most other assets, including it in a portfolio can help reduce the total amount of volatility experienced by the portfolio as a whole.

Gold is a safe haven for investors because they frequently turn to it when they believe the economy is in danger; as a result, gold is considered a defensive investment.

These are a few of the most significant advantages of owning gold, but investing in gold, like investing in any other asset, is not without its share of dangers and disadvantages.

Although there are times when gold is a good investment, it is not always easy to tell when those times are. Because gold in and of itself does not provide cash flow, determining when it is available at a low price can be challenging. In the case of stocks, on the other hand, there are clearer signs to follow because they are based on the earnings of the company.

In addition, because gold does not provide a cash flow, in order for investors to make a profit from gold, they have to rely on somebody else paying a higher price for the metal than what they paid for it. On the other hand, owners of businesses, such as gold miners, have the potential to profit not only from an increase in the price of gold but also from an increase in the earnings of their own businesses. Therefore, one can profit from gold investments in a variety of different ways.

Bottom line

The purchase of gold as an investment is not suitable for everyone; hence, some people choose to place their money in enterprises that generate positive cash flow rather than relying on the possibility that someone else will pay a higher price for the precious metal. One of the reasons that great investors like Warren Buffett advise against investing in gold and instead suggest purchasing cash-flowing enterprises is due to the fact that this is one of the reasons. Additionally, it is easy to hold stocks or funds, and since they are extremely liquid, you may immediately convert your position to cash if you ever find yourself in a tight spot.