Penny-Wise and Pound-Foolish: A Guide to Buying Gold with Your Hard-Earned Cash

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Why Invest in 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 investment portfolio.

What is Gold’s Value?

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.

Investing in Gold

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 times when people experience eroded purchasing power, the precious metal tends to increase in worth.

Buying 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.

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How to Buy Gold

If you’re interested in buying gold, there are principally two ways to do it: (1) purchasing physical gold or (2) investing in gold-leveraged securities like gold stocks, mutual funds or ETFs. Depending on your investment strategy, expertise and the level of risk you’re willing to take, you may find one or the other more appealing.

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 are closer to gold bars in that they don’t have value as legal tender and do not 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.
• 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

• 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.
• You may have difficulty determining the purity of your gold.
• Gold dealers typically charge a markup, or 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 a variety of ways to buy gold bullion, including online and over the phone, and some of the more reputable dealers offer coins and bars, while others only offer standard bars. Some dealers may offer a discount if you purchase a larger bar, while others may offer the same price for all sizes. It’s essential to research and compare prices before making a purchase.

How to Buy Gold FAQs

What is the Price of Gold Today?

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. In the U.S., the COMEX is the primary exchange for gold futures, and therefore the place where the most-widely quoted gold prices are set. The London Bullion Market Association also provides a twice-daily fixed gold price used as a benchmark for large market participants.

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.

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.

More from Money:

Best Gold IRA Companies

Best Online Gold Dealers

Beginner’s Guide to Investing in Precious Metals

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