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 most standardized way of directly owning physical gold is by acquiring bullion bars.
Buyers should research reputable dealers and check the bars’ purity, form, size, and weight before purchasing.
Purchasing gold bars comes with extra costs including storage and insurance and a sales markup.
Online dealers may have a larger selection, but there are additional shipping and insurance costs.
Gold buyers should also be aware of the cost of storing gold safely, or paying for third-party storage.
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. Prospective buyers can browse gold bar products on reputable retail websites such as the American Precious Metals Exchange (APMEX), JM Bullion, and Wholesale Coins Direct. You can choose gold by weight, quantity, and price.
When you receive the gold bars, it may be a good idea to keep them in their packaging to prevent scratches and store them in a home safe or safety deposit box. Note that you will likely be responsible for paying for delivery fees and insurance.
Buying Online vs. in Person
Some investors prefer to buy gold from local dealers, allowing them to physically inspect the gold and pay for it in cash. However, local dealers tend to have higher prices than online retailers, as well as a smaller selection.
Online gold retailers can provide lower prices, due to their higher volumes. On the downside, it requires more research to find reputable dealers.
Online stores may also 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.
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. Look out for 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.
Factors to Consider
Storage
Potential investors should also consider how they plan to store their gold bars. While it is possible to keep gold bars in a safe at home, many investors prefer to keep their gold in a safe-deposit box or with a custodian. These services typically charge a fee but provide better security than a home safe.
Insurance
If you do choose to store gold at home, you should consider taking out an insurance policy. In the event of theft, flooding, or other disasters, you may be unable to retrieve your gold. Also, unlike bank deposits, safe deposit boxes are not federally insured.
Purity
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.
Size
Gold bar buyers should consider the ease with which they can liquidate the bars as part of the buying process.
For example, if gold is selling at $1,400 per ounce and an investor has $14,000 with which to buy gold bullion, they will usually have an easier time selling the gold down the road if they buy 10 bars that weigh 1 ounce, rather than one 10-ounce bar. They can sell the 1-ounce bars one at a time as needed, while they might have a harder time finding a buyer for the 10-ounce bar if they need to sell quickly. Conversely, considering the tiny size of -gram gold bars, investors sometimes save up to buy bars of a more substantial size.
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.
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.
Compare Sellers
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.
What to Look for in a Seller
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.
Is Gold a Good Investment?
While gold is a popular hedge against inflation, that doesn’t always mean that it’s a good investment. Physical gold incurs large additional costs related to transportation and storage. Moreover, the cost of authenticating a gold bar can add to your transaction costs.
However, gold bars do not produce dividends or yields, and they do not provide a passive income. So while gold bars are likely to maintain their value over the long run, an investment in the S&P 500 typically returns about 7% per year.
If you’re still looking for exposure to gold, you might 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.
How Much Does It Cost to Buy Gold Bars?
The price of gold bars is $1,743 per ounce as of Aug. 28, 2022.
How Do You Buy Gold Bars With Cash?
Most reputable coin stores and gold dealers will accept payment in cash. However, they are legally required to report any cash transaction of over $10,000. This includes collecting information about the customer, such as name, address, phone number, and social security number.
Is Gold a Better Investment Than Silver?
As precious metals, gold and silver have many common qualities and their prices often move together. However, they do have differences. Silver tends to be more volatile than gold, and its industrial applications mean that the price is more closely linked to commercial activity. Gold tends to be more stable, and has a better track record as an anti-inflation hedge.
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.
