Gold how to buy gold

Investing in Gold

In general, investors looking to invest in gold directly have three choices: they can purchase the physical asset, they can purchase shares of a mutual or exchange-traded fund (ETF) that replicates the price of gold, or they can trade futures and options in the commodities market. Average investors, for example, might buy gold coins, while sophisticated investors implement strategies using options on gold futures.

Key Takeaways

Buying Gold Bullion

Compared to other commodities, gold is more accessible to the average investor, because an individual can easily purchase gold bullion (the actual yellow metal, in coin or bar form), from a precious metals dealer or, in some cases, from a bank or brokerage.

Bullion bars are available in sizes ranging from a quarter-ounce wafer to a 400-ounce brick, but coins are typically the choice for new investors. Not to be confused with vintage numismatic coins, these are new issues priced on their gold content, plus a premium. For maximum liquidity, most buyers stick with the most widely circulated gold coins, including the South African Krugerrand, the American Eagle, and the Canadian Maple Leaf. Whatever you prefer, be sure you are buying from a reputable dealer, either in person or through the internet. Gold coins obviously require safekeeping—either a home safe or a bank safe deposit box. Be sure to insure them, too.

Gold jewelry also allows the investor in gold to also experience the enjoyment of wearing it. Gold is often combined with other precious gems and metals to enhance the overall value and appearance of the jewelry. Pieces are often passed down to the next generation as family heirlooms, adding sentimental value beyond that of the piece itself. Jewelry is not typically the best option if it’s strictly an investment, because the retail price will usually far exceed the meltdown value. This is due to the workmanship involved and the retail markup. Always determine the purity of the gold before buying jewelry, so that you don’t pay for 18 karats when you are only getting a 14-karat piece.

Jewelry is covered by most homeowner insurance policies, which is an advantage should it be lost or stolen.

Buying Gold Funds

Although it’s more feasible than, say, a barrel of oil or a crate of soybeans, owning physical gold has its hassles: transaction fees, the cost of storage, and insurance. Investors interested in a more liquid and low-cost entry into the gold market might instead consider mutual funds and exchange-traded funds that replicate the movements of the commodity.

Generally, gold stocks rise and fall faster than the price of gold itself. Individual companies are also subject to problems unrelated to bullion prices—such as political factors or environmental concerns. So investing in an ETF that owns gold stocks is a higher-risk way to play, but it does offer appreciation potential—which investing in bullion does not.

Buying Gold Futures Options

More experienced investors who don’t want to risk a lot of capital might consider options on gold futures or options on a gold ETF. These contracts represent the right—but not the obligation—to buy or sell an asset (gold in this case) at a specific price for a certain amount of time. Options can be used whether you think the price of gold is going up or going down. If you guess wrong, the maximum risk associated with buying options is the premium you paid to enter the contract.  

Available in the U.S. through the Chicago Mercantile Exchange, put and call options on gold futures can be bought and sold through a futures broker. Options on SPDR Gold Shares ETF are also available to investors and can be traded in a standard brokerage account that has received approval for options trading.   Meanwhile, some traders buy and sell gold futures contracts—which trade on CME under the symbol GC—to speculate on short-term moves higher or lower in the yellow metal.  

Buying Gold Mining Stocks

If you can’t get your hands directly on any gold, you can always look to gold mining stocks. Keep in mind however, that gold stocks don’t necessarily move in concert with bullion prices, because mining companies succeed or fail based on their individual operating performance and how they deploy their capital and generate profits. You don’t have the security of physical possession of the metal if the companies you buy are unsuccessful.

The Bottom Line

If you’re buying gold as part of a portfolio diversification strategy, ETFs are the best way to go. If you want protection in the event of a system-wide crisis, you’d want to own the physical metal.

How to Buy Gold – The Ultimate Guide for Beginners

Gold is praised throughout the globe for its value and rich history, which is prevalent in different cultures for thousands of years.

As a new Bitcoin investor, you have probably heard a lot about gold as well. Very often, the two are compared for their returns and praised for their ability to store value.

Generally speaking, precious metals aren’t the “go-to” investment of the millennial generation. The majority do not even know how to buy gold. Don’t blame the rise of digital currencies – young people were simply less exposed to it. This doesn’t mean that gold is any less valuable.

In fact, the market cap of gold is worth more than 7 trillion USD. And with many people hedging against the current uncertainty of fiat currencies, this number is expected to increase.

So, in this article, we set out to learn more about gold. This guide will cover everything you need to know and teach you how to buy gold in the safest and fastest way. So let’s delve in.

Topics we’ll cover

Why invest in gold?

The main reason people buy gold is to preserve the value of their money during an economic downturn (crisis). Gold is one of the best “safety nets” against a crash in the stock markets since it has both high demand and an element of scarcity.

More specifically, here are the main reasons to buy gold:

Different ways to buy gold

The liquidity of the gold market is very high. As such, there are several ways to own the precious metal. This includes buying physical gold (in a form of coins or bars), cash-settled futures contracts, and ETFs (exchange-traded funds).

Physical Gold

Physical gold is the best way to own gold. It offers direct exposure to the precious metal, making it a safer option compared to the alternatives.

Gold in its physical form is better known as bullion. When purchased in bulk, it is usually formed as bars or coins. These objects will all have a fluctuating price, depending on the market value of gold and their purity (gold content).

Owning physical gold also includes several costs. The most obvious ones include the insurance of your bars/coins, the storage location, commissions, markups, as well as processing fees.

Depending on the amount of gold you are buying, this can quickly turn into a large amount, especially for those looking to invest significant amounts of money.

Gold ETFs

ETFs are more commonly known as paper representations of gold. They can be purchased in the same way one buys shares in the stock market.

This method helps investors gain exposure to gold without paying all the additional costs described above. It is also a favorable option when it comes to security, since you won’t need to have the gold in your possession.

That being said, ETFs do have a fee structure. Investors will lose a % of their value on an annual basis (expense ratio) to cover the management expenses and administrative costs of the funds they bought from. This expense ratio is different for every fund but is usually fluctuating between 0.35% and 1.8% per year.

All in all, there are many different gold-related exchangeable options available today. Since this is just a basic guide, you will need to do more research on the different options. This is a great overview that can help you get a better understanding.

When it comes to ETFs, remember that you never really own the physical gold that your ETF represents. You will not be able to sell your shares or redeem them in exchange for actual physical gold. As such, these should never be viewed as a substitute for physical gold ownership.

Gold futures contracts

If you are somewhat experienced in the world of crypto, you may have heard of the term “futures contracts” before. These are paper contracts that investors can purchase in order to speculate on the future price of the precious metal.

They are generally considered to be one of the riskiest areas in the investment game and are purely used for short term profit gains. The exposure of the buyer is leveraged, meaning that both increases and decreases in price are multiplied many-fold.

An investor can either take a “long” position, meaning that he expects the price to increase in the future or a “short” position. The latest means that the investor expects a drop in price to occur. Depending on the expiration date of the contract, one will either make or lose money through their bet.

Overall, we do not recommend this type of exposure to gold for beginners since the majority of investors end up losing money.

Where to buy gold

You can buy physical gold from precious metal dealers, private or governmental mints, or jewelers. Each seller will offer gold at different price points, so it is important to clarify the reason you are buying gold and find the best deal.

For example, if you are buying gold as an investment, you might want to avoid jewelers. It is well known that retailers add enormous markups on gold jewelry. This makes it impossible to sell at the same price or get a return on your investment. There are, of course, exceptions to this rule, but these only apply if you know what to look for.

An easy way to start is by looking into trusted wholesalers that deliver gold worldwide. Websites like APMEX and JM Bullion (the latest ships to the US only) are good places to start but you should definitely search for the most trusted websites in your region/country.

As far as managed Gold ETFs are concerned, you will need to create a Demat account and a trading account. Opening a new account requires ID verification, which is done by providing the following:

Once your account is created, you can proceed by placing an order. Similar to cryptocurrency exchanges, buy orders are automatically matched with sell orders and executed instantly.

Finally, if you want to test your luck with futures contracts, you might want to research the best digital exchange platforms that support this feature.

Generally speaking, non-US residents will have many different options available, since the regulatory framework is looser. As for US residents, the most trusted platforms are eCBOT and COMEX. These also offer futures contracts for other precious metals.

How to buy gold online – A step-by-step guide

While buying ETFs and Futures contracts is a pretty straightforward process, getting ahold of physical gold is a little tricky. There are many factors that need to be considered before making an actual purchase. Therefore, we will give you a short walkthrough to the process.

Step 1: Start by determining the % of your overall portfolio that will be committed to gold.

Generally speaking, it’s good to remember that you should diversify your funds as much as possible. Traditional investors tend to not place more than 10% of their portfolio in any asset. However, there are also those that don’t believe in the long term survival of their FIAT currency. Those may invest a larger percentage of their portfolio in gold, to protect their wealth.

Step 2: Decide on the type of gold you wish to invest in.

In this article, we focused on physical gold, ETFs, and futures contracts. Obviously, owning actual gold bullion and gold coins is the best way to start. Therefore, we will focus our guide on this option.

Step 3: Choose the right gold firm.

This is the most important step. Make sure you do a lot of upfront research and don’t trust blog posts that will offer lists of “trusted gold dealers”.

Ideally, you’d not only want to check the dealers by popularity but go through reviews from respectable platforms. Check the few complaints of the top dealers and how these were handled by the firm. Make sure you are certain of the choice you are about to make.

Here is a list of trusted gold dealers:

If you are able to find an actual “brick-n-mortar” store that sells gold in your area, it might be an alternative idea for those scared to make such large online purchases. This is the most important step in the process.

Step 4: Reach out and make an informed decision.

At this point, you will make the actual purchase. Usually, the firm you choose will put you in direct contact with an expert gold ownership consultant, who will help you out with all your questions and doubts. Once you feel confident in your decision, you can proceed to make the payment.

Step 5: Receive your gold.

Depending on the location of your dealer, you should receive your gold within 1-3 business days. Of course, this timeframe may vary depending on your dealer/broker.

And that’s it. You are now a proud gold owner. If you are interested to also learn how to invest in ETFs and Futures contracts, the process might look different depending on the platform of your choice.

Therefore, start by checking the educational resources of the exchange you end up using or contact their customer support team.

Buy gold with Bitcoin

In recent years, several companies have started to sell gold for Bitcoin. This goes for both bullion and paper gold, both of which seem to be in high demand by Bitcoin investors.

Therefore, if you want to sell BTC, gaining some exposure in gold might be a good idea.

Where to store gold

Unless your home includes a vault, owning gold can be a risky practice. Accidentally losing your physical gold or having it stolen is a real possibility. Therefore, you might want to consider your options when it comes to storage.

Brokers and banks offer different ways to protect your precious metals. Before doing so, however, there are several things you should consider.

Costs of storage

Depending on the amount of gold you buy and where you buy it from, you may be able to store your gold in a secure location by paying a small fee. Some gold dealers will charge you based on the weight of your gold, while others prefer a sort of “subscription-based payment” in monthly or annual increments.

Insurance

If you decide to hide gold in your home, or at a private secure location, you might want to invest in additional insurance. When it comes to your typical home insurance, you will generally have options that protect your precious metals.

Before you are able to get an insurance policy on your gold, you will need to get a current valuation for your collection. This is a simple process. Gold is measured by multiplying the ounces or grams in your possession with the current market price of gold.

Once a valuation has been made, you can start exploring the different policies that will offer the type of protection you need. Insurance of this type can be quite pricey and should be reserved for investors living in countries where the risk of loss or theft is considered to be high.

if you are buying gold as a long-term investment, insurance will most likely be more expensive than the potential ROI that you are expected to receive. As such, you will need to weigh the pros and cons, especially when living in a country were criminality is low.

Certificates of storage

This option looks a little like ETFs, with one main difference. At any point in time, you can use your certificate to redeem your gold from your dealer. This makes a great alternative to storing gold at home since each certificate is linked to particular gold bars, which are numbered and stored away safely.

When storing gold in this particular way, dealers will provide insurance for the funds. The policy will usually cover amounts up to the total value of their vault, which they use to store all the gold in their possession.

Conclusion

Buying gold is certainly not difficult. However, for those that are experienced with cryptocurrency investments, the process may seem a little more complicated.

The different types of gold investments, as well as the additional costs attached to the purchase, should be explored more before you make a decision.

In this article we discussed the following:

Frequently Asked Questions

Since you are dealing with large amounts of money, you will probably have many questions when researching how to buy gold. Here are some answers to your most common questions.

Is it safe to buy gold online?

Buying gold online is certainly not the safest option available. Ideally, you’d want to buy gold after you ensure its purity and weight. This is unfortunately not possible when you buy gold online. That being said, with a little bit of research, you will find several trustworthy gold dealers with a good reputation. It is best you contact them to discuss your questions and concerns before proceeding with your purchase.

Is gold taxable?

This depends on your location. Different countries have different rules and regulations. In most countries, buying gold is free of Value Added Tax (VAT), as well as tax imposed on Goods and Services (GST). If you sell gold at a profit, you will most likely have to pay Capital Gains Tax (CGT), an amount that will look different depending on your residential location. It is best to start researching how gold is taxed in your location.

When to buy gold?

Many people want to know when to invest in gold, in order to maximize their long-term profits. As discussed above, many people will seek “safe haven assets”, such as gold, during periods of economic collapse or geopolitical uncertainty. During these periods, the demand for gold will usually increase, and so will its price.

A great way to determine when to buy gold is to look at historical patterns. During the economic downturn of 2008, as well as the one we are experiencing in 2020, the price of gold initially dropped massively due to fear and uncertainty. After a few weeks, the price of gold saw a steady increase in price, returning to its pre-crisis levels.

How to buy and sell gold bars?

Gold bars are very expensive, and there are many risks when dealing with them. While you can buy physical gold bars online, we generally recommend not to do so for safety reasons. Ideally, both buying and selling should happen at your local gold dealer, given that the price point matches the market valuation of gold.

What does a gram of gold look like?

One gram of gold is very small in size. It is similar to your phone’s SIM card, only much more valuable. The following photo will give you a better idea of its size:

Gold coins vs gold bullion. Which one is best?

We get this question quite often. As discussed above, gold bullion refers to both gold bars and gold coins. As such, for the most part, this question is wrongly phrased. That being said, there are certain golden coins that are more valuable than the market price of gold. This happens when the coin’s print is of a limited edition, or simply more in demand than other coins. In this case, golden coins may be more valuable than golden bars on a gram-to-gram basis.

How to invest in gold: 5 ways to buy and sell it

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When economic times get tough or international conflicts such as what’s happening with Russia and Ukraine throw the markets for a loop, investors often turn to gold as a safe haven. With inflation spiking and the stock market trading well below its highs, some investors are looking for a safe asset that has a proven track record of gains, and that’s gold.

Investors like gold for many reasons, and it has attributes that make the commodity a good counterpoint to traditional securities such as stocks and bonds. They perceive gold as a store of value, even though it’s an asset that doesn’t produce cash flow. Some see gold as a hedge against inflation, as the Fed’s actions to stimulate the economy – such as near-zero interest rates – and government spending have sent inflation racing higher.

5 ways to buy and sell gold

Here are five different ways to own gold and a look at some of the risks that come with each.

1. Gold bullion

One of the more emotionally satisfying ways to own gold is to purchase it in bars or in coins. You’ll have the satisfaction of looking at it and touching it, but ownership has serious drawbacks, too, if you own more than just a little bit. One of the largest drawbacks is the need to safeguard and insure physical gold.

To make a profit, buyers of physical gold are wholly reliant on the commodity’s price rising. This is in contrast to owners of a business (such as a gold mining company), where the company can produce more gold and therefore more profit, driving the investment in that business higher.

You can purchase gold bullion in a number of ways: through an online dealer such as APMEX or JM Bullion, or even a local dealer or collector. A pawn shop may also sell gold. Note gold’s spot price – the price per ounce right now in the market – as you’re buying, so that you can make a fair deal. You may want to transact in bars rather than coins, because you’ll likely pay a price for a coin’s collector value rather than just its gold content. (These may not all be made of gold, but here are 9 of the world’s most valuable coins.)

Risks: The biggest risk is that someone can physically take the gold from you, if you don’t keep your holdings protected. The second-biggest risk occurs if you need to sell your gold. It can be difficult to receive the full market value for your holdings, especially if they’re coins and you need the money quickly. So you may have to settle for selling your holdings for much less than they might otherwise command on a national market.

2. Gold futures

Gold futures are a good way to speculate on the price of gold rising (or falling), and you could even take physical delivery of gold, if you wanted, though physical delivery is not what motivates speculators.

The biggest advantage of using futures to invest in gold is the immense amount of leverage that you can use. In other words, you can own a lot of gold futures for a relatively small sum of money. If gold futures move in the direction you think, you can make a lot of money very quickly.

Risks: The leverage for investors in futures contracts cuts both ways, however. If gold moves against you, you’ll be forced to put up substantial sums of money to maintain the contract (called margin) or the broker will close the position and you’ll take a loss. So while the futures market allows you to make a lot of money, you can lose it just as quickly.

In general, the futures market is for sophisticated investors, and you’ll need a broker that allows futures trading, and not all of the major brokers provide this service.

3. ETFs that own gold

If you don’t want the hassle of owning physical gold or dealing with the fast pace and margin requirements of the futures market, then a great alternative is to buy an exchange-traded fund (ETF) that tracks the commodity. Three of the largest ETFs include SPDR Gold Shares (GLD), iShares Gold Trust (IAU) and Aberdeen Standard Physical Gold Shares ETF (SGOL). The goal of ETFs such as these is to match the price performance of gold minus the ETF’s annual expense ratio. The expense ratios on the funds above are only 0.4 percent, 0.25 percent and 0.17 percent, respectively, as of March 2022.

The other big benefit to owning an ETF over bullion is that it’s more readily exchangeable for cash at the market price. You can trade the fund on any day the market is open for the prevailing price, just like selling a stock. So gold ETFs are more liquid than physical gold, and you can trade them from the comfort of your home.

Risks: ETFs give you exposure to the price of gold, so if it rises or falls, the fund should perform similarly, again minus the cost of the fund itself. Like stocks, gold can be volatile sometimes. But these ETFs allow you to avoid the biggest risks of owning the physical commodity: protecting your gold and obtaining full value for your holdings.

4. Mining stocks

Another way to take advantage of rising gold prices is to own the mining businesses that produce the stuff.

This may be the best alternative for investors, because they can profit in two ways on gold. First, if the price of gold rises, the miner’s profits rise, too. Second, the miner has the ability to raise production over time, giving a double whammy effect.

Risks: Any time you invest in individual stocks, you need to understand the business carefully. There are a number of tremendously risky miners out there, so you’ll want to be careful about selecting a proven player in the industry. It’s probably best to avoid small miners and those that don’t yet have a producing mine. Finally, like all stocks, mining stocks can be volatile.

5. ETFs that own mining stocks

Don’t want to dig much into individual gold companies? Then buying an ETF could make a lot of sense. Gold miner ETFs will give you exposure to the biggest gold miners in the market. Since these funds are diversified across the sector, you won’t be hurt much from the underperformance of any single miner.

The larger funds in this sector include VanEck Vectors Gold Miners ETF (GDX), VanEck Vectors Junior Gold Miners ETF (GDXJ) and iShares MSCI Global Gold Miners ETF (RING). The expense ratios on those funds are 0.51 percent, 0.52 percent and 0.39 percent, respectively, as of March 2022. These funds offer the advantages of owning individual miners with the safety of diversification.

Risks: While the diversified ETF protects you against any one company doing poorly, it won’t protect you against something that affects the whole industry, such as sustained low gold prices. And be careful when you’re selecting your fund: not all funds are created equal. Some funds have established miners, while others have junior miners, which are more risky.

Why investors like gold

“Gold has a proven track record for returns, liquidity, and low correlations, making it a highly effective diversifier,” says Juan Carlos Artigas, executive director of research at the World Gold Council.

These qualities are especially important for investors:

In addition, gold offers other potential advantages:

Those are a few of the major benefits of gold, but the investment – like all investments – is not without risks and drawbacks.

While gold performs well sometimes, it’s not always clear when to purchase it. Since gold by itself doesn’t produce cash flow, it’s difficult to determine when it’s cheap. That’s not the case with stocks, where there are clearer signals based on the company’s earnings.

Moreover, because gold doesn’t produce cash flow, in order to make a profit on gold, investors must rely on someone else paying more for the metal than they did. In contrast, owners of a business – such as a gold miner – can profit not only from the rising price of gold but also from the business increasing its earnings. So there are multiple ways to invest and win with gold.

Bottom line

Investing in gold is not for everyone, and some investors stick with placing their bets on cash-flowing businesses rather than relying on someone else to pay more for the shiny metal. That’s one reason legendary investors such as Warren Buffett caution against investing in gold and instead advocate buying cash-flowing businesses. Plus, it’s simple to own stocks or funds, and they’re highly liquid, so you can quickly convert your position to cash, if you need to.

It’s easy to get started buying a fund – here are the best brokers for ETFs.

Learn more:

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

How Do You Purchase Physical Gold Bars?

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Investors looking to enjoy the touch, feel, and security of owning gold may wish to buy gold bars instead of intangible investments such as gold exchange-traded funds (ETFs). Physical, investment-grade gold, also referred to as gold bullion, can be purchased at spot price, which is the price of unfabricated gold plus additional costs, which vary depending on the seller. Physical gold can be liquidated in the unlikely event of a total economic collapse.

Key Takeaways

The Gold-Buying Process

Buying physical gold bars online is a fairly simple process. One common way to purchase gold bars is through licensed retailers online. Browse gold bar products on reputable retail websites such as the American Precious Metals Exchange (APMEX), JM Bullion, and Wholesale Coins Direct. Select the gold bars you wish to buy by weight, quantity, and price.

Online gold retailers typically give discounts to customers who buy larger quantities. Certain retailers give discounts for purchasing by credit card, while others do so for wire transfers, so be sure to choose the most cost-effective payment option. When you receive the gold bars, keep them in their packaging to prevent scratches and store them in a home safe or safety deposit box at your bank. Note that you will likely be responsible for paying for delivery fees and insurance.

You can also bid on gold bars on eBay and similar auction sites. When shopping for gold on the auction website, it is important to review the seller’s feedback. Avoid buying from sellers with documented negative feedback on authenticity, exorbitant shipping and handling fees, and failure to deliver.

Gold-to-go ATMs are available if you wish to buy gold bars in cities such as Las Vegas and Dubai. Consumers are advised to be especially aware of the spot price of gold because such ATMs sell the precious metal well above this price and above the prices of most other retailers.

Buy Pure Gold Only

Investment-quality gold bars should be at least 99.5% (995) pure gold. The rest is an alloy, usually silver or copper, that makes smelting possible. People who purchase gold bullion as an investment should only buy a bar that features the name of its manufacturer, its weight, and its purity, usually expressed as 99.99% stamped on its face. Popular mints that produce gold bars include the Royal Canadian Mint, Perth Mint, and Valcambi.

Know the Difference Between Bars and Coins

Though all forms of pure gold have significant monetary value, not all investment-quality gold is equal. From an investment perspective, investors who want to add the physical product that tracks the price of gold may wish to avoid gold coins. These coins often feature attractive designs, have historic value, and contain a lower quantity of gold but still cost more due to their numismatic value.

In addition to costing more, gold coins sometimes skew the value of an investor’s portfolio. For example, the highly regarded American Eagle coin produced by the U.S. Mint contains 91.67% gold but costs more than plain gold bars because of its value as a collector’s piece. Some investors may want collector’s items, while others may want plain gold bars, which typically are the easiest to hold long term and convert to cash. For this reason, plain gold bars tend to be a popular choice among investors seeking gold as a safe haven investment.

Buy Gold in Workable Sizes

Gold bar buyers should consider the ease with which they can liquidate the bars as part of the buying process.

Aside from bars and coins, it is also possible to buy physical gold in the form of jewelry. Generally, gold jewelry tends to be sold at a significant price markup because of craftsmanship and retailer costs. For this reason, jewelry is not commonly seen as a strong method of investing in gold.

Shop Around

Investors should be aware of gold’s spot price when browsing the bullion market. Finance websites that display stock tickers usually display the daily price of gold.

Gold is fairly easy to buy, but prices vary greatly as sellers include their desired profit margin plus additional costs such as authentication certificates, shipping and handling, and payment processing fees. A price comparison including the different sellers’ charges is key to getting the best price on gold bars.

Avoid Rip-Offs

Gold bar buyers should review websites such as the Better Business Bureau and Ripoff Report to learn more about a gold seller’s reputation. In general, reputable gold sellers must disclose all the fees required to close a transaction upfront.

Buyers in the U.S. should also do their due diligence before buying gold from sellers abroad. Even when the gold bars are authentic, seller charges may be exorbitant, and buyers might face issues clearing the gold through customs, depending on the quantity purchased.

Investors should be aware that gold as a commodity tends to perform well during economic recessions. During periods of economic turmoil, a larger number of investors may be inclined to look to gold as an investment opportunity. These are periods in which potential gold scammers may be most active as well.

Consider Alternatives

Investors looking to benefit from a gold investment may also wish to consider indirect access to gold through investments in gold mining stocks, gold-focused ETFs or mutual funds, or gold futures contracts. Each of these investments may be tied to the broader performance of gold, but provides a way of diversifying a portfolio beyond physical bullion.

Investments in other types of precious metal bullion, such as silver, provide another means of diversification beyond gold bars.

The Bottom Line

Physical gold ownership involves a number of unique costs, including storage and insurance costs, and the transaction fees and markups associated with buying and selling the commodity. There can also be processing fees and small lot fees for investors making smaller purchases.

Though these costs may not significantly affect someone looking to invest a small portion of their portfolio in gold, they may become prohibitive for investors seeking to gain larger exposure.

How to buy gold to diversify your portfolio and help shield against market downturns

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Investing in gold can be a smart way to diversify a portfolio — especially one that includes stocks, bonds, and mutual funds.

Not only is gold largely immune to inflation, instead hewing closely to the cost of living, but gold also serves as a hedge against economic disaster. When the rest of the stock market falls, gold often goes the other way, appreciating in value and protecting the canny investor against major losses in other financial assets.

For those reasons, many finance experts suggest investing 5% to 10% of your portfolio in gold, potentially going as high as 15% in times of political or economic crisis.

There’s the option of investing in gold securities, but purchasing physical gold is appealing for many investors because it represents the «purest» way to invest. You own the actual, yellow metal — a commodity that can’t be erased or hacked, and survives catastrophic events that destroy paper currency and/or digitized financial accounts.

Physical gold basics

For investment purposes, physical gold can be bought in two basic forms: coins or bullion.

Gold coins

Coins (sometimes called bullion or mint coins) are created and issued by the governments of different countries, specifically for the purpose of investment. That makes these coins different from collectible, numismatic ones — those in your uncle’s antique coin collection.

While several nations mint them, not all gold coins are created equal as reliable investments. The most common and universally recognized ones currently in circulation are:

Gold bullion

Bullion is gold in its bulk form. It comes in either ingots, which are pressed, or bars, which are poured, and is stamped with relevant details like purity, origin, and weight. To be traded on the market, investment gold must have a purity of 99.5%, and bullion can range in weight from quarter-ounce wafers to 430-ounce bricks.

For the novice gold investor, coins tend to be more appealing for their liquidity and ease of storage. But if you’re buying in larger quantities, bullion has the advantage of lower premiums because it requires less processing than coins.

To keep gold holdings as liquid as possible, it’s generally wise to purchase in smaller quantities — 10 one-ounce bars instead of one 10-ounce bar, for example — to improve your odds of finding a buyer if need be.

How to buy physical gold

Gold is priced by the troy ounce, a special unit 2.75 grams higher than a traditional ounce. The amount it’s fetching on the open market is known as the «spot price.»

But equipping yourself to purchase gold means knowing more than just the price. Here are some tips:

1. Know when to buy: Since the price of gold moves in opposition to the stock market, the best time to buy gold is when a recession or financial crisis is looming. That advice is so popular, however, that demand tends to shoot up in such moments, depleting gold reserves faster than they can be refilled.

So another good rule of thumb is to buy gold when things have calmed, at least temporarily — the eye of the storm, so to speak. But many think the long-term outlook for gold remains good, so now might be the time to jump in.

2. Understand how gold prices are determined: The price of gold is determined by the cycle of supply and demand, so if you’re buying at a busy time, all that competition drives up the price. Also note that when you purchase gold, you’ll be paying for the asset itself, plus a premium of 1% to 5%, so make sure you budget for the full amount.

3. Find the right dealer: Your regular brokerage or financial services firm probably doesn’t deal in gold. Bullion is typically only sold at banks and gold dealers, while minted coins can be purchased at coin dealers, brokerage firms, and precious metal dealers as well. Wherever possible, try to purchase from a bank first, as they often offer lower markups than dealers.

Banks won’t always have the exact coins or size bars you’re looking for, however, so if you do turn to a dealer, do your research to find someone reputable. That means looking closely at online ratings in trade journals and sites and checking the dealer for complaints.

4. Have a storage plan: Stashing large amounts of gold in your home leaves you vulnerable to theft, so insure it, and locate an off-site storage location where you can rest assured it’s protected. In fact, if you want to hold gold in an IRA account, the IRS mandates that it be stored with a metals-specialist custodian.

Downsides of physical gold

Whether bullion or coins, gold is valued for its permanency and physicality. But those aspects can be a double-edged sword. Because gold in your possession isn’t invested, it can’t return any dividends or interest. In fact, you will likely lose some money on it, as gold is costly to store; most commercial storage facilities will charge you between 0.5% to 2% of the value of your holdings, which can really eat away at your bottom line.

And while it’ll retain its value, it won’t appreciate either — unless you’re lucky enough and fast enough to sell when the spot prices start to soar.

Even if you do see a spike in the price of gold that you’d like to take advantage of, your physical gold holdings are surprisingly illiquid. Selling transactions and arrangements can drag on for days or weeks. Before initiating a sale, make sure you’re in agreement about who will pay for shipping and insurance costs, and ask about any potential hidden fees.

Other ways to own gold

There are other ways to scratch your gold itch, however — a plethora of financial assets that are not only easier to buy and hold, but can also appreciate in value.

First up: gold stocks, shares in companies involved in mining, refining, and other aspects of gold production. These stocks respond to movements of the price of gold. But they trade on public exchanges like other equities, with all the advantages of liquid sales and transparent prices. And of course, you can buy them through regular brokerages and trading platforms.

Then there are gold-oriented ETFs and mutual funds. These give investors a slice of a wide swath of the gold market either through investing in the precious metal itself or through shares in companies involved in gold production.

They’re lower-cost, more diversified, and more liquid than individual stocks, making these funds a popular choice for the more conservative investor.

More sophisticated investors might consider purchasing an option on a gold futures contract. An option gives its owner a window in which to buy or sell a particular asset at a particular price (it’s an opportunity but not an obligation). Buying an option is basically a bet at which way an asset — in this case, the price of gold — will move. Correct guesses trigger a payout. And if you guess wrong, the option just expires worthless and all you’re out is the option cost.

The bottom line

Purchasing gold can be a great investment for those who want to hedge against an economic or socio-political collapse or a financial crisis. If you’re truly worried about the apocalypse and want the purest play, you’ll want to get physical with bullion or coins.

But if your goal is simply to diversify your portfolio, and perhaps gain some appreciation, gold-backed securities (stocks, funds) are likely a better option. It can be reassuring to hold a physical asset instead of an intangible share, but make sure you’re getting what you want out of the investment.

Either way, the goal is to make gold work for you, not the other way around.