The 3 Best Ways To Buy Gold
This comprehensive beginner's guide will walk you through all of the steps in a potential gold purchase.
Gold has a long and impressive track record as an investment, yet the vast majority of investors still don’t include precious metals in their portfolio. Coin collectors also buy gold, but it is likewise in relatively modest numbers.
This guide will briefly explain the most compelling reasons to buy gold in 2022. Then we will walk through how to buy gold, examining the pros and cons of each option to arrive at the best ways to buy gold now.
Gold coins and gold bars.
Here are the main reasons why people invest in and buy gold:
- Gold is a safe-haven asset used for long-term wealth preservation.
- Gold is a valuable commodity with special chemical and physical properties, such as being the most malleable metal on earth, and thus the yellow metal has many important uses.
- As a financial asset, gold is akin to a reserve currency or an inflation-resistant savings account.
- Gold has sentimental and historical value.
For a more in-depth explanation of what makes gold valuable, follow the link at the end of the article.
Let’s look at your best options for buying gold. Many, if not all, of these guidelines will readily apply to buying silver, as well. (You can check out our guide to the best way to buy silver for more specifics.
The 3 Most Ideal Ways to Invest In and Buy Gold
1. Physical Gold Bullion
As you will find out below, you don’t always have to buy physical gold in order to include gold in your portfolio. Many “paper” investment products can give investors (or any financial institution) exposure to the gold price.
Nonetheless, there are clear advantages to owning the real metal rather than an investment on paper.
Gold and silver bars
Gold bars are often the most cost-effective way to buy physical gold. They are traded around the world in major hubs like London and Hong Kong. Bars are categorized as bullion as long as they are about 99.5% pure gold or higher. You can read more in our Gold Bars Buyer's Guide.
Physical gold can come in many other forms, but it is always a tangible asset. It’s an investment you can hold in your hand. Why is this important?
First, it eliminates the possibility of counterparty risk. In other words, when you own gold as a physical metal, you never have to worry that another party will default on a trade or fail to deliver your assets. By contrast, this issue does crop up on occasion with stocks, bonds, and other financial vehicles.
Holding physical gold is also a way to help diversify one’s investment portfolio. It’s always smart not to “put all your eggs in one basket,” which does tend to happen with any paper assets or digital bank ledgers.
2. Modern Bullion Coins and Gold Bars
Today, governments issue gold bullion coins specifically for investment purposes. Bullion coins, just like gold bars, are made from investment-grade (highly pure) gold. Bars and bullion coins are usually the preferred manner for buying gold for an individual retirement account (IRA), as well.
Several different countries mint their own gold bullion coins, including the United States Mint with its American Eagle coin series. Here’s a quick rundown of the most popular of these modern gold coins:
- American Gold Eagle
- Canadian Gold Maple Leaf
- Chinese Gold Panda
- South African Gold Krugerrand
- British Gold Britannia
- Austrian Gold Philharmonic
- Australian Gold Kangaroo (formerly called Australian Gold Nugget coin)
Another reason for the popularity of modern gold bullion coins is their designs. Each coin features cultural symbols that relate to their home country, such as Paul Kruger and the springbok for the South African Krugerrand or Queen Elizabeth II and the maple leaf for the Canadian Maple Leaf coin. Government mints employ talented sculptors and engravers to create these artistic designs.
Hand-poured gold bars are a classic option for investors and collectors.
Gold bars are similar in nature to bullion coins. Both carry a very low premium over spot price. Gold, silver, and platinum bars are also usually eligible for a Gold IRA.
One difference is that, unlike coins, gold bars usually bear no national insignia, because they have no legal tender status. Two exceptions are gold bars produced by Perth Mint (Australia) or the Royal Canadian Mint. Nonetheless, gold bars bear no face value as currency. The same is true for gold rounds (also called gold medallions).
Gold bars also give you flexibility to invest in small amounts of gold. Your gold investment may be as small as 1 gram or one ounce.
As mentioned earlier, in most cases gold bars are the cheapest way to buy gold.
3. Collectible Gold Coins
Most antique (or "semi-numismatic") gold coins are old, dating to before 1933. They were once used as regular money, or exchanged for gold certificates, but today are sought after by collectors and gold investors.
Numismatic coins are ones that carry collectible appeal. This is often because of their age and limited production numbers.
Therefore, semi-numismatic coins are those that are valued partly on their collectible status, and partly on their metallic content. They represent a middle ground for investing in the gold market.
British Gold Sovereigns are among the most popular antique gold coins.
Some noteworthy examples are the following:
- British Gold Sovereigns
- 20 Francs gold coins from France, Switzerland, or Italy
- Pre-1933 U.S. gold coins such as the Double Eagle
The main appeal of semi-numismatic gold coins is that they combine gold content with collectible upside. For this reason, when you buy coins, they often come at a slightly higher cost than other bullion items. This applies even more so to proof coins.
Other Good Options When Investing In and Buying Gold
Next, there are other ways to speculate on gold, although each has major drawbacks:
Gold Futures Contracts
Futures contracts are traded on the commodities exchange (COMEX), which is run by the Chicago Mercantile Exchange (CME). They are used by speculators and large commercial interests to “bet” on the gold price or to hedge their position in gold. Gold futures entitle the holder to take delivery of physical gold at a predetermined time in the future, typically one month, but the contracts are usually settled in cash instead. The minimum size of a gold futures contract on COMEX is 100 troy ounces.
Exchange-traded funds, or ETFs, are a fairly recent invention. An ETF is a financial vehicle that tracks the price of a given asset—in this case, gold. Unlike gold futures, there are restrictions on who can redeem their ETF shares for physical gold: Only Authorized Purchasers (APs) are allowed to do so, and you have to be a big bank to receive AP status. The most popular gold ETF is the SPDR Gold Trust (sometimes called SPDR Gold Shares), which has the abbreviation “GLD” on stock market tickers.
Gold stocks are simply shares of equity in gold mining companies. You can buy shares of these companies on the equity markets. Many people prefer gold mining stocks to gold coins and bullion because of their greater upside potential to produce cash flow. However, mining stocks do not offer straightforward exposure to the gold price. Mining firms are individual companies with their own financial situation, so factors beyond the price of gold can affect their value.
Other Gold Derivatives
There are many derivative financial products tied to gold. In addition to gold-backed cryptocurrencies and gold mutual funds, there are also gold miner ETFs such as the Van Eck Vectors Gold Miners ETF (GDX) and the Van Eck Vectors Junior Gold Miners ETF (GDXJ). These ETFs track groups of gold miners rather than individual stocks. Derivatives only offer indirect exposure to the gold price, much like mining shares. You should always speak to a certified financial planner (CFP) before any gold investment through derivatives.
Gold Jewelry & Art
Buying gold jewelry is often the first thing that comes to mind when most people plan to purchase physical gold. Jewelry and art with gold ornamentation are far more expensive in terms of the cost over spot (i.e. mark-up). This is due higher fabrication costs compared to coins or bars, as well as aesthetics. You should avoid gold with these high mark-ups unless you’re intimately familiar with the antique market. Otherwise, you will always pay too much for the gold on a gram-for-gram basis.
The newest innovation in the gold market is the gold-backed cryptocurrency. These are digital currencies (or digital tokens) that are somewhat akin to Bitcoin. The difference is that a gold-backed crypto is literally backed by gold. Like an ETF, it provides exposure to the gold price without the owner needing to physically hold or store any gold. Yet in many cases, these cryptocurrencies are redeemable for physical gold. Cryptos that are backed by gold are likely to become more and more popular in the coming years as the market for such digital tokens continues to mature.
Where to Buy Gold as an Investment
Despite all of the other options outlined above, there is one definitive answer: Find a trusted, reputable precious metals dealer. This is always your best bet for purchasing gold.
How do you know which dealers can be trusted? A good place to start to check their registration with the Better Business Bureau (BBB). This will allow you to see complaints against the company from customers, as well as the company’s response. If they do not have a BBB profile, you should avoid buying gold from them. Moreover, if their BBB rating is below A+, that’s an indication the business doesn’t adequately respond to customer complaints in a timely manner.
Another red flag would be a seller with low gold prices that seem “too good to be true,” such as gold priced below spot price. Legitimate dealers can’t make a profit if they sell gold below spot, so this could be an indication of illegally-sourced gold or even counterfeit gold.
You never want to buy gold from a questionable source.
It’s always advisable to go check your local coin shops, as well. They will be able to share their knowledge and expertise with you. Even if they only sell silver coins, coin dealers can help you find reputable dealers who do sell gold.
Coin dealers will tell you their average bid price if you want to sell your gold, as well. Many investors neglect to compare prices from different sellers, which is an important personal finance habit. Moreover, dealers have accountability as businesses: if there is ever an issue with your purchase, you know exactly where to find them.
Buying gold from an online gold dealer offers several advantages, however. The online shopping experience is quick, easy, and lets you explore a seller’s inventory on their website at your own leisure. You can buy gold coins from the comfort of your sofa.
For more information, find out the most compelling reasons why gold is so valuable.
FAQs About Buying Gold
What is the cheapest way to buy gold?
Gold bars tend to have the lowest premium over gold’s spot price when purchasing physical gold. This is partly due to the higher labor and manufacturing costs associated with coins. Bars are priced based on their metal content and the current market price of that metal.
Regardless of what form you choose to hold gold in, you will still have to pay capital gains tax when you sell the physical commodity.
Will gold go up during a recession or market crash?
It’s a very common line of thinking that gold rallies when stocks are down, or the U.S. dollar is down. Gold tends to perform well during a recession but not 100% of the time.
Owning physical gold is not a “silver bullet” or panacea to one’s financial challenges, yet it’s incorrect to suggest that gold has no benefits as a safe haven asset. Even in the absence of a gold standard, it offers some measure of protection from financial crises.
Should I buy gold bars or coins?
There are pros and cons to each option. While you may pay more for coins than gold bars, coins are generally more liquid. On the other hands, bars are more space-efficient for storing your gold, but come with the drawback of being less easy to authenticate on the spot. Space might be a key consideration if you’re storing gold in a safe deposit box (also called safety deposit boxes).
No matter what form it takes, even owning a modest 1%–5% allocation of gold in a portfolio helps provide long term diversification. Gold coins, bullion, and other tangible assets make up only a portion of a balanced investment plan. Think of them more as an insurance policy.
Is gold a good investment in 2022?
You should always speak to a professional before making any financial decisions. It’s worth pointing out that, in most cases, investors will invest money in order to make money. Pretty simple. In the case of gold, however, the intent is often to preserve or maintain one’s wealth rather than necessarily growing it.
Data from the World Gold Council (WGC) shows that gold demand around the globe remains very strong. Their editorial team remains bullish on gold. 2020 was also one of the best years of returns for the gold market on record. Gold is still an excellent in investment in 2022. For decades to come, gold will remain an important investment and financial asset.
Is It safe to buy gold online?
Online dealers of precious metals are a great way to buy gold bullion from the comfort of your own home. Purchasing physical gold online is absolutely safe, provided that the company trying to sell gold meets the following requirement:
Make sure the seller publishes its bid price, meaning it will buy back any gold or silver item that it offers for sale. This should hold true even if you pay with a credit card.
The bottom line: Buying physical gold from an online dealer with their own website and accreditation is safe and secure, but the same cannot be said if you purchase gold online from some third party or through an auction site.
More gold and silver buying guides from Gainesville Coins:
Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.
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