Investing in Solid Gold: A Step-by-Step Guide to Buying Gold Bars
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Buying Gold Bars
When the stock market continues its volatility, investors often consider adding gold to their portfolios as a safe haven investment and a hedge against inflation. For some investors, the idea of holding physical gold — as opposed to gold companies’ stocks or ETFs — is appealing in part because it gives them more control over their investment.
What Are Gold Bars?
Gold bars — also referred to as gold ingots when they’re large — are one of the most common forms of investable gold, along with gold rounds and coins. You can purchase them from precious metals dealers, many of whom conveniently operate online, as well as from other types of retailers.
What Is Gold Bullion?
Gold bullion is high-purity gold that has been melted into bars, ingots, rounds or coins. It’s important to know the spot price — the price at which gold can be bought or sold on the marketplace at any given time — when you set out to buy gold.
Gold Bars vs. Gold Rounds vs. Gold Coins
Gold rounds and gold coins are often referred to interchangeably, but there is an important difference between the two. Rounds are more similar to gold bars in spite of their shape: While gold coins are distinguished by distinctive patterns, rarity and condition, gold rounds and bars derive their value from their weight.
Are Gold Bars a Good Investment?
For gold investors, buying gold bars can offer some advantages you might not get from paper assets such as stocks, mutual funds, ETFs or bonds.
Inflation Hedge
When inflation is high, investors use gold as a hedge against rising costs of goods and services, since the value of gold generally rises in tandem with that of other commodities. Gold acts as a store of value even when the strength of the U.S. dollar comes under pressure.
Cushion from Market Volatility
Gold is considered a safe-haven asset, meaning that it retains its values even when the values of other assets fall. Gold generally moves inversely to stocks, with prices typically rising when the market plunges.
Enhances Diversification
Investment advisors recommend a diversified portfolio to grow wealth and mitigate risk. Gold, as well as other precious metals like silver, platinum and palladium, can contribute to diversification because they behave differently than other assets, especially during periods of economic uncertainty and geopolitical unrest.
Disadvantages of Buying Gold Bars
Investing in gold bars is appealing to some investors, but this asset also has drawbacks.
No Income Generation
When you buy stocks and bonds, you get the opportunity to earn income via dividends or maturity yields, respectively. Although gold is traditionally held because it is a store of value, without its ability to produce yield, you won’t earn income that can be reinvested to further grow your nest egg through compounding.
Value May Decrease
As with stocks or any other asset class, this key caveat remains true: Past performance is no guarantee of future returns. Gold can drop in value like any other investment, which is something you need to take into account if you expect to need to sell your gold at any point.
Pricing Can Be Volatile
Many financial advisors consider gold to be an unsuitable short-term investment because its price can be volatile. That’s why you should make sure that you have at least three to five years before you will need to liquidate your gold. This is especially true if you choose to invest in gold coins and gold bars, since there is less of a market for rare gold coins and therefore, less liquidity in that sector of the precious metals market.
What to Consider When Buying Gold Bars
Any gold investment should be conducted in the context of your broader financial circumstances. Buying physical gold is a bit different from purchasing paper assets because you need to make sure you’re purchasing from a legitimate seller.
Decide How to Store Your Gold Bars
For many, the biggest inconvenience of investing in physical gold is storing it, securing it and insuring it. If you plan to store your gold in your home, invest in a high-quality safe. Alternatively, you can keep your gold in a bank safe deposit box.
Where to Buy Gold Bars
You can buy gold bars from licensed online dealers in the bullion market. Although these kinds of vendors make buying very convenient, you should do your research before making even a simple purchase of gold bullion bars.
Research Companies and Check Reviews and Ratings
It’s critical to make sure you’re working with a legitimate seller if you plan to have part of your nest egg in gold. Resources like the Better Business Bureau and the Business Consumer Alliance are a good place to start your research as they offer tools like rankings and alerts about legal actions taken against the companies.
Compare Gold Bar Prices
As with almost anything you buy, it pays to shop around. Compare gold bullion bars of the same size made by the same manufacturer to be sure you can get an apples-to-apples comparison — just remember that the spot price of gold fluctuates.
Place Order
Many online gold dealers let you make your purchases right on their websites. Some might let you make your purchase with a credit card, but you might get better pricing if you agree to a wire transfer.
Summary: Should You Buy Gold Bars?
Buying gold bullion (most often in the form of bars) is one of the most straightforward ways to own physical gold. Gold bars are priced by their weight — unlike gold coins, which also derive value from their rarity or collectible status. The bars are stamped with the manufacturer, weight and purity.
More from Money:
FAQs
- Are gold bars a good investment?
- What size gold bars should I buy?
- What are the most valuable kinds of gold bars?
What Are Gold Rounds?
In the U.S., U.K., Europe and Australia, you are most likely to encounter gold bars that are denominated and priced in grams or in troy ounces. Two of the most common large gold bars are the London Good Delivery 400 oz bar and the COMEX Good Delivery 100 oz bar. (Keep in mind that concentrating so much value in a single multiple ounce bar could make liquidating it more challenging.) Small bars, on account of being easier to acquire and trade, come in many more denominations, so you’re sure to find a combination that suits your investment needs.
Most Valuable Kinds of Gold Bars
Many government mints and private mints make gold bars by casting or minting. Finished cast bars have more imperfections, but are cheaper to produce and don’t require careful handling, which some people might find more convenient to own. Minted bars are produced from gold “blanks” that are stamped with the name of the producer, weight and purity. Minted bars are often packaged in protective casings to prevent them from being scratched.
