How to Invest in Physical Gold

October 6, 2023 11:19:31

Investing in gold is a no-brainer for investors looking to diversify and add some stability to their portfolios. The precious metal has traditionally acted as a store of value because its value doesn’t depreciate during times of upheaval, making it the perfect investment vehicle during recessions, inflation and political turmoil. As such, most gold market analysts advise investors to store some of their wealth in gold bullion to protect themselves against market volatility.

The first thing you should consider before investing in gold is prices. Note that spot price usually refers to the cost of immediate bullion delivery and that the actual retail price will likely include a markup. On top of markups, you may also have to cover costs such as shipping, insurance and handling of the pure gold bullion. Consider the processing fees involved in owning gold as well. In some cases, paying with a credit card may result in higher costs while buying larger amounts of gold bullion could result in lower prices.

Once you have figured out your budget and how much it can stretch, you can begin looking through different gold products and choose one. You will want gold products or bullion that are 0.999 fine, such as the American Gold Eagle, the South African Krugerrand or gold rounds. Gold rounds and coins come in sizes ranging from one-tenth an ounce to an ounce, with the larger varieties being much more common and available. Whatever form you choose, make sure you avoid items geared to gift giving and collecting because they likely won’t fit your specific investment needs.

Gold bars and rounds tend to be more affordable compared to gold coins of similar weight; coins have a higher premium because they are fabricated by governments.

Next determine the amount of gold you will buy. While this amount will mostly be determined by your budget, note that larger sizes are more accessible and easier to manage compared to smaller gold products.

Furthermore, consider when you may want to offload your gold investments in the future while determining the size of your investment. Selling off larger gold products will require that you liquidate a bigger portion of your gold portfolio, and you may even have trouble finding sellers in a timely fashion. You can reduce this risk by buying gold products of varying sizes rather than focusing on only large or small products.

Gold bullion can be purchased through private and government mints, jewelry stores and precious metal dealers. Consider businesses or sellers that also buy back gold from investors to make it easier for you to offload your gold in the future.

Your storage options may also determine the viability of the investment. Secure storage can reduce your profits, but it is often the most secure way of storing gold bullion. Minimize your storage costs as much as possible by hunting for bargains and make sure you choose storage options that offer insurance.

If you think the intricacies involved in investing in physical gold are a too much for you, you could opt for shares in any of the gold extraction companies such as Newmont Corporation (NYSE: NEM) (TSX: NGT) after doing your due diligence and confirming that the selected stocks meet your investment prerequisites.

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