Cheapest Way to Buy Gold: Cost-Efficient Purchasing Strategies

When you think of investing, the first thing that probably comes to mind is stocks. While this is a popular investment option, the volatility of the market isn’t suitable for every type of investor, especially risk-averse ones.

If you prefer to play it safe with your money, investing in precious metals like gold could offer more security and stable growth. Contrary to popular belief, investing in gold doesn’t require a mountain of cash. In fact, you can start buying gold cheaply and growing your wealth steadily.

From physical bars to mutual funds, we’ll unveil the cheapest way to buy gold in this article. We’ll help you understand all you need to know to make your gold investment affordable and make sure you’re paying a fair price.

History of Gold as an Investment

Gold has been viewed as a symbol of wealth for millennia. The Lydians first began minting gold coins around 700 BC, after which it became a foundational economic asset. For centuries onwards, it was used as currency and later as a standard for monetary systems mainly because of its rarity, durability, and beauty.

With the discovery of gold in California and Australia in the mid-19th century, the infamous gold rushes took place. Gold experienced a fast influx into economies and led to the development of key financial institutions and infrastructures, such as banks and railroads. Many nations started to peg their currencies to gold, a system known as the gold standard.

Today, gold is a safe haven for investors, especially during volatile economic times. Technological advancements in trading and the development of gold-backed financial products like ETFs have made gold more accessible to a broader range of investors, reinforcing its enduring legacy in the financial world.

Factors Influencing the Price of Gold?

So why do investors consider gold such a valuable asset? Its value derives from a combination of factors that sustain its demand and make sure its worth remains stable or even grows over time. Let’s look at the main reasons why gold is a valuable investment below.

Universality

Gold is valued globally, making it a staple in any diversified investment portfolio. Unlike country-specific currencies, gold’s worth is internationally acknowledged, meaning that it can be traded almost anywhere without significant barriers. This universality supports gold’s role as a “crisis commodity,” leading to its rising value during economic uncertainties.

Tangibility

Unlike most commodities like stocks and bonds, gold is a tangible asset. You can physically own and store it in safe depositories, which can provide a sense of security. It cannot be erased or hacked electronically. Physical gold, stored as coins, bars, or jewelry, can also be passed down through generations, maintaining its value over time.

Hedge Against Inflation

Gold has maintained its value throughout history, especially during periods of high inflation when the purchasing power of fiat currency tends to decrease. In the 1970s, the price of gold surged by 1,200% when inflation rates were high globally. In more recent history, gold also came to the rescue after the 2008 financial crisis and the dot-com bubble, increasing by 600% and reaching a new peak of $1,900 per ounce in 2011.

Steady Rise in Demand and Price

What’s more fascinating about gold as an investment is that its price and demand not only remain relatively stable but also grow over decades. Within the span of the past 20 years, the price of gold has increased more than six times, reaching an all-time high of $2,450.05 per ounce in May 2024.

Apart from that, gold is increasingly used in various new markets, including technology, where it is used in components for smartphones and computers. Gold demand in the technology sector rose by 12% at the end of 2023.

Limited Supply

Finally, the appeal of gold also lies in its rarity and limited quantity. The rate of new gold discoveries and mine development slows from year to year, limiting the supply and pushing prices higher as demand for gold remains strong and increases. This scarcity is another fundamental reason why gold maintains its value.

How Much Does Gold Cost?

The price of physical gold largely depends on its spot price, which is the current market price. Spot prices for gold fluctuate throughout the day depending on global economic conditions, supply, demand, and geopolitical events.

On top of the spot price, many investors will pay a premium or markup when purchasing physical gold from banks and dealers. The premium is an additional cost that covers the dealer markups, distribution costs, and manufacturing fees.

Premiums will also vary by gold seller and the type of physical gold you’re purchasing. Typically, gold bar markups range between 2% and 5% above the spot price. For gold coins, the markup is around 4% and 8%.

What Are the Cheapest Ways to Buy Gold?

Investing in gold doesn’t have to come with a hefty price tag. By choosing the right methods of buying gold, you can easily maximize value and minimize costs. If you’re looking for the cheapest way to buy gold online or physically, check out some popular options below.

Gold Bars

The cheapest way to buy physical gold is by investing in gold bars. Gold bars are manufactured by government mints and are highly valued because of their gold content. These bars come in various sizes, from a few grams to kilograms. Most gold bars have a 99.5% to 99.9% purity standard. Popular gold bars include Credit Suisse, Royal Canadian Mint, and Perth Mint.

Gold bars are an excellent option for investors looking for a cheap entry into precious metals investing because they often have lower premiums. This means that the price you’re paying for a gold bar is closer to its actual market value. You’ll be paying less additional fees when purchasing a gold bar, giving you more value for your investment.

Pro Tip: Most dealers offer bulk discounts if you buy larger quantities of physical gold. Often, they’ll slash premiums, allowing you to purchase more gold bars at the spot price. On average, you’ll need to purchase a few ounces of gold bars to qualify for a bulk discount.

Gold Coins

Some investors may prefer gold coins instead because they are valued for more than their gold content. Gold coins are also manufactured by government mints, but some are highly coveted because of their historical significance or design elements. Sizes and purity also vary, but most coins range between fractional ounces to a few grams and 90% to 99% purity. Examples of popular gold coins for investment include the American Gold Eagle and the Canadian Maple Leaf.

Most gold coins are available in smaller denominations, like one-tenth to one-quarter of an ounce. As a result, these coins are more affordable for investors who are looking for cheap investment options.

Pro Tip: Gold coins tend to be a more accessible and affordable gold investment option because they are available in smaller, fractional denominations. There are several fractional gold coins you can purchase, including one-tenth to one-quarter-ounce options. Fractional investing is a cheap way to purchase gold coins because it is a lower initial investment amount. Smaller size coins are also abundant and more liquid, making it easier to add to your investment over time.

Gold IRAs

If you have longer-term investment goals, a gold IRA could be a great option that helps you save for retirement in an affordable way. A gold IRA functions like a regular self-directed retirement account. The only difference is that you are investing your money in gold as opposed to the traditional stock market.

A gold IRA is a good, cheap investment tool because it allows you to take advantage of the tax benefits that come with traditional IRAs. First, your investment will grow tax-deferred, meaning you won’t pay any fees when you withdraw in retirement. Also, your investments in a gold IRA are tax-deductible, meaning you can lower your taxable income.

Pro Tip: When you open a gold IRA, you don’t have to invest a large amount of money upfront. Instead, a cheaper option is to invest small amounts on a regular basis. To stay on track, you can enroll in a gold accumulation plan, which is available through most dealers, banks, and financial institutions that offer gold IRA accounts. With a GAP, you commit to automatically investing a specified amount on a monthly basis. This lowers the barrier of entry for gold investing, allowing you to invest only as much as you are comfortable with.

Stocks in Gold Mining Companies

For investors who prefer not to hold physical assets, purchasing stocks in gold mining companies can be a great way to invest in precious metals without having to worry about storage. With this option, you can buy stocks in gold mining companies.

Stocks in these companies are directly related to the operational success of gold mining, which can increase in value if the price of gold rises or the company’s revenue grows. Some of the largest companies in this industry are Newmont Corporation and Barrick Gold. Stocks in gold mining companies are available on major exchanges worldwide, including the New York Stock Exchange (NYSE), Toronto Stock Exchange (TSX), and London Stock Exchange (LSE).

Buying stocks in gold companies is often one of the cheapest ways to invest in precious metals because shares start as low as $5. You won’t have to pay additional broker or dealer fees like you would for gold bars or coins, making your money go farther. Finally, some companies pay dividends, allowing you to earn passive income or reinvest.

Pro Tip: Stocks in mining companies come with some level of risk, as the market is fairly volatile. However, you can minimize risk and invest in a cost-effective way by utilizing the dollar-cost-averaging (DCA) strategy. With this method, you will invest a specified amount at regular intervals regardless of the stock price or market conditions.

This reduces the likelihood that you invest a large sum at an inopportune time, and it makes investing more accessible because you only put in an amount you’re comfortable with. Finally,

you can lower your average cost per share by buying shares at different price points. When prices are low, your investment will purchase more shares. Over time, you can build a sizable portfolio through consistent, smaller-sum investments.

Ready to Invest in Precious Metals?

McGruff has the tools and resources to help you invest in a gold IRA. Our guides support smarter decisions, and we can help try to connect you with a gold dealer today.

FAQ

Check out this FAQ section for more information:

Is Gold Cheaper in Other Countries?

Gold can be cheaper in some countries because of the differing premiums, taxes, or labor costs involved in manufacturing and selling it. However, the base price of gold is universal globally and is tied to international gold markets.

What Is the Best Country to Buy Gold?

The United Arab Emirates, and particularly Dubai, sometimes has the cheapest gold price in the world, hence it is often considered to be the best country to buy gold from. This is because of its generally low taxes, high purity standards, and a large variety of available gold. Switzerland and Hong Kong are also known to have high-purity gold at lower prices.

Which Gold Asset Has the Lowest Liquidity?

Based on the gold investment options listed above, IRAs have the lowest liquidity. This is because of the legal and regulatory processes and procedures that you have to follow when liquidating your assets. The process also requires a significant amount of paperwork, and failing to follow the IRS’ rules can extend the process or result in penalties.

That’s why gold IRAs are an ideal investment option for investors who are looking for a secure and long-term growth option for retirement.