You’ve decided you’re going to add gold to your portfolio. Hooray! 💰
But now what? Where do you buy gold? What kind of gold should you buy? Should you be buying gold stocks?
The best way to own gold is to buy physical gold bullion bars. We’ve covered the reasons in a previous article, where we compare gold ingots to gold stocks. In this article we’ll be covering the advantages of buying physical gold, what to look out for when getting started and where to buy gold.
The advantages of buying physical gold
You most likely already understand the benefits of buying gold in the first place (if not, here are five advantages). Having said that, you may still be confused as to what type of gold investing you should get into. There are many ways to invest in gold, including gold ETFs, mutual funds, gold mining stocks and gold futures. We believe the best way to invest in gold is to buy physical gold bullion.
When investing in gold, you want to be investing in the inherent value of gold. This is because you are investing in gold to diversify your portfolio, insure yourself against financial crises and preserve wealth. Gold has maintained its value throughout the centuries, and was once used as a currency. When you buy physical gold, you are holding a tangible form of money, something you can feel and touch with your hand. When you invest in ETFs, futures and gold stocks, your investments are a few numbers on a screen, like an electronic book entry. Investing in the stock market is still essential and a valuable way to grow wealth. However, it’s always good to have something that puts your eggs in a different basket – like gold. 💰
The other advantage of buying gold is that you have complete control over your gold bars. No bankers or politicians will be able to heavily influence the price and value of your gold. By having assets outside of the international monetary system, you can rest assured you will always have some form of wealth in case things get ugly.
Buying gold: what to look out for
When you start buying physical gold, it’s important to do your research and educate yourself on the gold buying process. Here’s what you need to look out for when getting started:
Cost per gram:
The price of gold varies day to day and month to month. This is just like any other market: the more demand for gold there is, the higher the price. The less demand there is, the lower the price. 📈
The day to day price of gold is called the spot price, and you can stay up to date with prices on a gold chart website.
To give you a bit of an idea of the price range, in March 2000 one gram of gold cost £5.57. At the time of writing, April 2020, one gram of gold costs £40.49.
It’s important to know the cost of one gram, since this will give you an idea of how much you can afford, whether you should buy bars or coins and how much you’re paying in fees. Units of measurements vary between grams, ounces and kilograms. You can also choose to buy gold coins or gold bars. Buying gold coins for investments means you’re able to buy smaller amounts of gold, however the fees are generally much higher. The bigger the investment, the smaller the premium (goldspeak for “fee”). That’s because it’s less expensive to create a gold bar of one kilo.
At Minted, we’re able to buy kilos of gold on behalf of our investors, so we have access to the lowest gold bar prices – and so you do!
Level of quality/purity:
Different gold bars and coins have various levels of purity, and therefore different values. The value of gold works with a carat system of 24 points. Carats are basically the percentage of gold that a specific piece of metal may contain. For example, if a piece of jewelry has 14 carats out of 24 parts of gold, that means it is 58.33% gold.
Gold quality is also measured according to its fineness. This is the same as carat, but is expressed as a percentage in parts per thousands – which makes it much more accurate. For example, most dealers will say their gold is 999.9 gold, the purest form of gold – that’s because it’s actually not possible to create 100% gold bars.
When buying gold as an investment, you’ll want to buy the highest quality of gold. That way, you know you’ll always be able to sell it at its real value.
The London Bullion Market Association (LBMA) is the world’s authority on precious metals. They set the standards of gold, and ensure gold is being refined and distributed correctly. They do gold testing and have their own “Good Delivery List” with the standards set for gold carats and fineness.
We’re proud to say that our gold at Minted comes from an LBMA Good Delivery partner. 💁♀️
Insurance and premiums:
When buying gold, you’ll want to be aware of all the fees you’re paying.
The premium fee is the extra amount that a dealer will add to the spot price of gold. Think of it as a commission that the dealer takes when selling you the gold. This is the add on cost of mining, refining and delivering the metal.
You’ll also have to pay insurance and storage fees. These vary depending on where you plan on storing your gold, but fees usually start from £10 per month and increase according to how much gold you’re holding.
Finally, you’ll have to pay delivery fees if you’re planning on delivering your physical gold to your home. You’ll usually have to deliver a minimum amount of gold, with delivery fees starting at around £25.
Where to buy gold
There are two main ways to buy gold: online and in brick and mortar stores.
Brick and mortar dealers are just what you would imagine: physical stores that sell physical gold. Do a quick search of physical gold dealers in your area and you’ll see if there are any close. This is how people used to buy gold before the internet existed – they are less popular now, but some have stuck around.
Buying in a brick and mortar store is not ideal. This is because physical stores have higher overheads and you are therefore likely to pay a higher premium when buying gold. The main advantage of buying in store is that you’ll be able to see with your own eyes whether they are a scam or not.
The best way to buy gold is online: it’s much faster and easier, you can do it at any hour of the day and you can even pick exactly at what price you want to buy your gold. Most online dealers will have lower premiums and will be able to insure and store the gold for you.
When picking an online dealer, be wary of scams and fake gold shops. Here are a few things to look out for when comparing gold dealers:
Shop around and check various dealers for their premiums. Check the current spot price of gold and see what various gold dealers are charging. If it’s too cheap, it may be a red flag. If it’s too expensive, it may be a red flag too. Look for something that has a fair range. Check Minted’s pricing range to get a good idea of what premiums should be.
Make sure to do your research on the dealer itself. Are they on the list of LBMA’s partners? Who are their partners? Check out their customer reviews on Trustpilot and you’ll quickly be able to tell whether they are a scam or not.
At Minted, our partners (Nadir Metal Rafiner) are on LBMA’s Good Delivery List. We’ve also got some great star ratings on Trustpilot!
Finally, a great way to check whether a dealer is a scammer or not is whether they have a buyback policy. Will they buy your gold back once you buy it from them? You want to make sure that every gold dealer you buy from has this policy. This means the dealer will still be working when you want to sell, and you won’t be stuck without a buyer (although you should always be able to sell gold to a different buyer). The other benefit is that dealers with buyback policy offer the best resale price.
At Minted, we buy your gold back whenever you are ready to sell, no questions asked. You won’t need to set up a contract, or pay for an account; selling is as easy as clicking a few buttons.
Where can you buy physical gold? You can buy gold both offline in a brick and mortar store, or at an online dealer like Minted. We always recommend doing your research and educating yourself on the process of buying gold. We know that getting started with gold can sometimes feel intimidating, which is why it’s important to feel prepared before getting started. At Minted, we work hard to make the process as seamless and transparent as possible.