Protect Your Wealth: A Step-by-Step Guide to Buying Gold

Protect Your Wealth: A Step-by-Step Guide to Buying Gold

Why Humans Love Gold

Humans have coveted gold for thousands of years, and today’s investors are no exception. Whether you plan to buy the metal in its physical form as coins or bars, or as gold-backed securities like gold stocks and gold exchange-traded funds (ETFs), there are plenty of reasons you may want to consider adding the precious metal to your portfolio.

Why Gold Is a Safe-Haven Asset

Gold has long been considered a safe-haven asset because when prices of other investments — like stocks or real estate — drop sharply, gold historically retains its value. In some instances of market volatility, it may even significantly gain value while other investments decline in value, as panicked investors rush to buy what they consider a safer store of value.

Why Gold Is a Good Hedge Against Inflation

Some experts also see gold as the ultimate hedge to protect your savings against inflation since it’s retained its value for centuries and recently appreciated to all-time highs. Due to its inverse relationship with paper currency, gold tends to rise in value when the U.S. dollar weakens. So during periods when people experience eroded purchasing power, the precious metal tends to increase in worth.

When to Buy Gold?

But when does it make sense to buy gold? And what’s the best method? In this review, we share everything you need to know about how to buy gold, including the benefits and downsides of buying physical gold or investing in different types of gold-backed securities.

Table of Contents

Gold Bullion

Bullion is physical gold of high purity and usually comes in the form of ingots, bars, coins, or rounds. Rounds are often confused for coins — like the U.S. Mint’s American Gold Eagle — because of their circular shape, but they’re closer to gold bars in that they don’t have value as legal tender and don’t differ in design from one year to the next.

Pros of Buying Gold Bullion

  • When you own gold, you own a physical, valuable asset that can be easily passed on to others.
  • Gold bullion provides stable value.
  • You don’t need to watch it closely like you would with a portfolio of stocks, mutual funds, ETFs, and bonds.

Cons of Buying Gold Bullion

  • You may need a secure vault or insurance to protect it, especially if it’s held in a gold IRA.
  • There are many reputable dealers, but scams are commonly committed by fraudulent online gold dealers. Read about the best online gold dealers to learn more.
  • It could be difficult to determine gold purity on your own.
  • Gold dealers typically charge a markup — known as the spread — from the precious metal’s spot price when you buy or sell it. In some cases, the markup could be 10% or more of the gold’s value.

How to Buy Gold Bullion

There are many retailers that allow you to buy gold online and feature a variety of gold coins, rounds, bars, and ingots. Sellers routinely mark up the price of physical gold from its current spot price, so be prepared to pay more than the actual value of the gold itself.

Where to Buy Gold Bars

For investors interested in purchasing these physical gold assets, our guide on how to buy gold bars includes a comprehensive breakdown. Some well-known, reputable dealers that sell gold bars include:

  • APMEX
  • American Hartford Gold
  • JM Bullion
  • Provident Metals
  • Westminster Mint
  • Money Metals Exchange

Where to Buy Gold Coins

Several governments, including the U.S., as well as many private mints currently manufacture gold coins. Some of the most well-known government gold mints in the world include:

  • The United States Mint
  • The Royal Canadian Mint

Gold and Diversification

Diversification — which entails owning a mix of different assets — aims to help shield investors from dramatic losses. In a well-diversified portfolio, when prices for one type of investment decline, you’re insulated by the prices of others, which can potentially offset losses.

The Ethical Concerns of Buying Gold

Investors have increasingly been looking for investments that align with their viewpoints. That has been coupled with the emergence of environmental, social, and governance (ESG) investing. Gold mining can have significant environmental impacts and mining practices have raised concerns about labor practices and human rights, as many gold mines are located in conflict-affected areas and impoverished nations.

Gold FAQs

How to Buy Gold FAQs

The price of gold fluctuates daily, but the precious metal hit its all-time high in December 2023. Price fluctuations can be attributed to multiple factors, some of which include the monetary policies of various nations’ central banks, the value of the U.S. dollar, and overall market conditions.

Is Gold a Good Investment?

Gold is considered a hedge against inflation and can be used to diversify your portfolio. It’s also a highly liquid asset, so you’ll be able to find a buyer for your gold when you need to sell. However, don’t expect high returns with gold compared to other asset classes like stocks. It is a considerably stable investment, but over the long term, gold is likely to be outperformed by securities.

How to Buy Gold

You can buy physical gold from dealers like JM Bullion and APMEX, as well as pawn and jewelry shops. Keep in mind that purchasing gold from jewelry stores and pawn shops could be riskier as it could end up being a lower karat and have a higher markup. You can also buy gold-backed securities — like gold stocks, gold-leveraged ETFs, and mutual funds as well as gold futures — through a brokerage or online trading app.

Do You Have to Pay Taxes on Gold?

Profits from trading securities (e.g., stocks, ETFs, mutual funds, CDs, and bonds) are considered capital gains and are taxed at special long-term and short-term capital gains rates. Short-term capital gains taxes can range anywhere from 10%–37%, while long-term capital gains taxes are 0%, 15%, or 20% depending on your taxable income. One exception is for ETFs backed by physical gold (not gold mining companies), from which gains are taxed as collectibles rather than capital gains.

Summary of How to Buy Gold

Gold investments are considered a hedge against inflation and, historically, a store of value. They also offer the benefits of portfolio diversification. However, consider the risks of investing in gold before adding the precious metal to your portfolio.

Most financial advisors recommend not investing more than 5% to 10% of your overall portfolio in alternative assets like gold. Because the price of the precious metal remains relatively stable — unlike speculative investments like cryptocurrency — it offers a safe haven for investors. But because the physical metal doesn’t generate income, gold is unlikely to produce the large gains that other asset classes like stocks and real estate are capable of.

If you decide to invest in gold, you can purchase the physical metal (i.e., gold bullion ingots, bars, coins, or rounds) or invest in gold-backed securities (i.e., stocks, ETFs, mutual funds, and futures).

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