What to Know about Buying Gold
There are a Variety of Ways to Acquire this Valuable Metal
Feb 8, 2009
With its eternal shine it's more stable than real estate (real but not liquid) and company shares (liquid but not real since it's nothing more than a piece of paper). Gold will likely rise in value now that the economy has gone south and because gold production is either flat or falling around the world. When paper currency takes a kicking from the effects of inflation and recession, gold remains as valuable as ever. Not only this, but it's simple to store and to transport, making it an ideal investment.
Now, there are some important questions to consider when thinking about getting into the gold game. First of all, where can you get your hands on it? Secondly, how much will it be? This article will answer these questions when deciding to acquire this rare metal.
Where Can Gold be Bought?
If you've never bought gold before, the safest and easiest way to purchase it is from a mint. You can buy American Eagle coins from the U.S. Mint, or Maple Leaf coins from the Royal Canadian Mint. Australia, Mexico and South Africa also have their own mints.
Gold jewelry is also a readily available form of buyable gold, but the problem is that it has the least liquidity. Selling it later on will never garner as much money as it did when it was first bought. And the reason for that is because the quantity of gold can't be guaranteed -- it could be mixed with other metal alloys or the actual gold content might be extremely low.
Gold Bars
There are two types of gold bars, cast and minted. The former variety is made by pouring molten gold into molds, called ingots. The bars are quite rough and the foundry/manufacturing mark, the purity of the gold and a registration number are pressed into the metal.
Minted bars are manufactured from gold that has already been poured into a mound and then drawn out into strips.
Where to Buy Gold Bars
They can be bought from mints, foundries or independent gold dealers.
What are the Weights of Gold Bars?
All gold bars are denominated in varying units of weight to accommodate cultural preferences and geographic locations.
- Grammes - Used all over the world
- Ounces - This unit of measurement is favoured in countries like the U.S. and Britain
- Tolas - This is used in the Middle East and South Asia
- Taels - Prevalent in the Far East, i.e. Taiwan and mainland China
Prices for Buying a Gold Bar
To illustrate how valuable this metal is it's important to consider the price. At the end of the first quarter of 2008, the price of gold was at $930 per troy ounce (equal to 1.1 ounces). That's more than double of what it was five years ago. A one kilogram gold bar would cost tens of thousands of dollars today.
The way it works is the more gold a person buys at one time, the lower the premiums. The premium costs are the packaging, shipping and insurance fees and these can add up fast. Of course, to pay less of these extras would entail paying for a kilogram of gold and there are few people who can do this easily. Newly minted gold coins also carry premiums.
Be Careful Where You Buy Gold
Investment opportunities and hucksterism go hand in hand. Look for trusted and reputable dealers. Gold bars from an independent seller should have a refiner's mark, the gross weight in troy ounces, the purity percentage and a serial number stamped on the surface of the gold.
Where to Store Gold
Banks can do this for you, in a safe deposit box. You will of course be charged for this every month. If, on the other hand, you've got gold bars, a vault would be a good idea.
Take your time and do lots of research before jumping on the gold wagon. There are risks involved but if you start small gold will make a nice addition to any investment portfolio. Your financial planner can also offer advice about buying gold.
References:
NuWire Investor: How to Buy Gold Bars and Protect Your Investment, Barbara Zigah, April 14, 2008
