The 3 Best Ways To Buy Gold: A Definitive Guide
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The 3 Best Ways To Buy Gold: A Definitive Guide

Everett Millman
Published November 05, 2020
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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. 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.

gold coins gold bars

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 gold 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.

The 3 Most Ideal Ways to Buy Gold

1. Physical Gold

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 exposure to the gold price.

Nonetheless, there are clear advantages to owning the real metal rather than an investment on paper.

gold bullion

A variety of gold bars and bullion.

Physical gold can come in many 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 physical gold, 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 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. Antique Gold Coins

Most antique (or "semi-numismatic") gold coins are old, dating to before 1933. They were once used as regular money, 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 in the gold market.

gold sovereigns

British Gold Sovereigns are among the most popular antique gold coins.

Some noteworthy examples are the following:

The main appeal of semi-numismatic gold coins is that they combine gold content with collectible upside. For this reason, however, they often come at a slightly higher cost than other bullion items.

3. 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. Here’s a quick rundown of the most popular of these modern gold coins:

Another reason for the popularity of modern gold bullion coins is their designs. Each coin features cultural symbols that relate to their home country. Government mints employ talented sculptors and engravers to create these artistic designs.

pile of gold bars

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. 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.

In most cases, gold bars are the cheapest way to buy gold.

Other Possible Options When Buying Gold

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.

  • Gold ETFs: 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: Gold stocks are simply shares of equity in gold mining companies. 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 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 Junior Gold Miners ETF (GDXJ). 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.

  • 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.

Where to Buy Gold

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, that’s a red flag. 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 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.

gold investor

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. Coin dealers will tell you their average bid price if you want to sell your gold, as well. Moreover, they 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 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.

For more information, find out the most compelling reasons why gold is so valuable.

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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.

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 often performs 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.

Is gold a good investment in 2020?

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. 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.

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:

The Best Way to Buy Silver: A Guide to Buying Physical Silver

Gold and Silver Stacking: Expert Guide

Best Silver Bars to Buy: The Complete List

Junk Silver FAQs: Must-Know Facts About 90% Silver Coins

15 of the Best Coins to Collect

Key Date Morgan Dollars: Collecting Tips and Prices

Posted In: blog
Everett Millman

Everett Millman

Managing Editor | Analyst, Commodities and Finance

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.

In addition to blogging, Everett's work has been featured in Reuters, CNN Business, Bloomberg Radio, TD Ameritrade Network, CoinWeek, and has been referenced by the Washington Post.

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