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How to Invest in Gold Like a Pro

From Purchasing Gold Bars to Coins: How to Invest in Gold Like a Pro

Posted on November 9, 2023
Writer: James Miller

If you’re looking for a safe-haven investment that has stood the test of time, then gold may be just what you need. The popularity of gold as an investment has never waned, and for a good reason.

Its scarcity, durability, and intrinsic value have made it a reliable asset for thousands of years. But you may be wondering how to invest in gold like a pro. That’s the question we aim to answer in this blog.

Whether you’re a seasoned investor or taking your first steps in the world of investing, we’ll equip you with the knowledge you need to make informed decisions and reap the rewards of investing in gold. So, without further ado, let’s explore how to invest in gold and discover why it remains a highly sought-after investment to this day.


Gold as a Form of Currency

Unlike paper currencies, gold has intrinsic value that is not dependent on the stability of any particular government or economy. During the gold standard era in the 19th and 20th centuries, many countries pegged their currencies to the price of gold, ensuring that their paper money could be redeemed for gold at a fixed rate. This helped to stabilize exchange rates and provided a sense of security for investors.

Close up on gold coins used as currency

Today, gold is still viewed as a reliable and valuable investment option. It serves as a hedge against inflation and market volatility, and its value tends to rise during times of economic uncertainty. The value of gold has increased by 352.72% from 1971 to 2022. Gold is also a highly liquid asset, meaning that it can easily be bought and sold on the open market. This could explain the rapid increase in gold demand over the past three years.


Understanding the Gold Market Before Investing

Before jumping into our guide to investing in gold, you should understand the gold market and how it operates. While gold is often viewed as a safe-haven investment option, its price can fluctuate based on various factors. Some of them include:

  • Supply and Demand. Gold reserves are finite; the amount of new gold mined each year is relatively small compared to the existing supply. As a result, changes in demand for gold can have a significant impact on its price. Nevertheless, the demand for gold increased by about 28.85% between 2020 and 2022, which increased its price.
  • Global Economy. During times of economic uncertainties, investors usually turn to gold as a safe-haven asset, driving up demand and increasing its price. On the other hand, a strong and stable economy may lead to lower demand for gold and a corresponding decrease in its price. To illustrate this, in 2022, we saw the highest global demand for gold – up by 18%.
  • Geopolitical Events. Uncertainty surrounding elections, wars, or other significant events can increase gold demand, driving its price. For instance, after 9/11 on the London market gold prices rose from $271 to $287.
  • Market Sentiment and Speculation. The price of gold may also be influenced by market sentiment and speculation. Changes in investor sentiment, whether positive or negative, can lead to fluctuations in the gold market. Additionally, speculation by investors and traders can create short-term volatility in the gold market. When considering investing in gold, take a long-term approach. Short-term fluctuations in the gold market are expected. However, over the long term, gold has historically provided a stable and reliable investment option for those seeking to diversify their portfolio and protect against market volatility. The price of gold has been consistently rising since the beginning of the century. Currently, it is almost four times its original value in 2000.

Advantages and Disadvantages of Investing in Gold Bars and Coins

Once you’ve investigated the market, it’s time to browse gold investment options. Gold bars and coins are the most popular products if you’re looking to purchase precious metals. Several reasons make gold bars and coins a highly sought-after investment, including liquidity, global demand, variety, and historical significance.

Stack of gold coins and positive market graph

Both assets usually contain 99.9% gold. They are typically priced based on their purity and weight but can sometimes cost more because of their historical significance.

Gold coins and bars can be purchased from licensed dealers online or in physical stores. Take your time to research some of the best gold coin dealers by checking their online offerings and prices.

Advantages

For those interested in purchasing gold as an investment, coins and bars can be a great way to start. Let’s start with the advantages of investing in gold coins and bars.

Hedge Against Inflation and Economic Downturns

As mentioned, one of the primary advantages of investing in gold is that it can act as a hedge against inflation and economic uncertainty. This is because the value of gold tends to rise during times of economic turmoil, making it a valuable asset to hold in your portfolio.

For instance, the price of gold rose over 50% in just nine months during the 2008 economic crisis. And by investing in gold bars and coins, you can protect yourself against the effects of inflation and economic downturns. This is because when the value of paper currency declines due to inflation, gold can retain its tangible value and serve as a store of wealth.

Portfolio Diversification

Diversification of your investment portfolio is another advantage of buying coins and bars that it can help you. By adding gold to your mix of stocks, bonds, and other assets, you can reduce the overall risk of your portfolio and protect against market volatility. This is because gold has a low correlation to other assets, meaning it may perform well when other assets perform poorly.

Tangible Asset With Intrinsic Value

Gold, a precious metal revered for millennia, offers investors a tangible asset with intrinsic value. But why does this matter?

Close up on a handful of gold nuggests

In an increasingly digital and volatile financial landscape, holding physical gold presents a unique advantage: its enduring worth. Unlike fiat currencies or stocks, gold’s value isn’t tied to a company’s performance or a government’s stability.

This means it can act as a hedge against inflation and economic downturns, providing investors with a sense of security and diversification. Furthermore, gold’s limited supply and universal demand enhance its appeal as a store of value.

Disadvantages

Despite the many advantages, there are also some drawbacks that even the best gold bar dealers can’t control. Here’s a brief introduction to some of them:

No Income Generation

One potential drawback of investing in gold bars and coins is that they do not generate profit. Unlike stocks or bonds, gold does not pay dividends or interest payments. As a result, you won’t receive any regular income from your investments.

However, investors usually buy gold to sell at a higher price later or keep it in their retirement accounts to withdraw later.

High Storage and Security Costs

Since coins and bars are physical assets, they must be stored in a secure vault to protect against theft and damage. This can be costly, especially if you invest in large amounts of gold. For instance, storing gold in a depository can cost anywhere from $50 to $500 annually, depending on the amount you hold.


How to Invest in the Gold Market: Types of Gold Investments

There are several ways to invest in gold, including physical gold, ETFs and mutual funds, and gold mining stocks. In this section, we’ll dive into each of these to help you make an informed decision about how to invest in gold.

Invest in Physical Gold

Physical gold is the most traditional and straightforward way to invest in gold. It involves the acquisition and possession of tangible gold assets, such as physical gold coins, bars, or jewelry.

Stack of gold coins and bars next to sack with "invest" written on it

Investing in physical gold delivers the benefits of a stable, long-term store of value, safeguarding your wealth against inflation and economic uncertainties while providing a tangible asset for your financial security.

Types of Gold Bars and Coins

Gold bars and coins are available in various sizes, weights, and purities, each having distinct implications for their value and investment benefits.

  • Gold coins and bars are available in various sizes to cater to different preferences and budgets. For instance, gold coins are available in sizes ranging from one-tenth troy ounce to one kilogram, while gold bars span from one gram to a hefty 400 troy ounces. As the size of the gold piece increases, so does its price. This is due to the greater gold content and, consequently, the higher intrinsic value. Size matters to an investor for several reasons. First, smaller gold products tend to have higher premiums over the spot price of gold, as the production costs and markups are larger. Conversely, larger gold pieces often carry lower premiums, benefitting investors seeking cost efficiency.
  • Another factor is liquidity. Smaller gold coins and bars typically enjoy greater liquidity as they are more affordable for a wider pool of buyers. However, larger gold pieces can be more challenging to liquidate quickly, particularly in local markets.
  • Gold bullion products are also available in a variety of purities, typically ranging from 22k to 24k (or 91.7% to 99.99% fine gold). As a general rule, the higher the purity of the gold, the higher the price of the coin or bar. Purity matters to investors because it affects the value and investment potential of the item. Higher-purity coins and bars may be more durable and liquid, making them easier to sell. Additionally, higher-purity gold may have more potential for appreciation because it is a rarer and more valuable commodity.
  • Finally, weight also matters to investors looking to invest in gold coins and bars because it affects the cost and investment potential of the item. Heavier coins and bars may be more expensive, but they may also have great potential for appreciation over time because they contain more gold. Larger or heavier coins may also be more cost-effective for investors because they may be easier to store.

Common types of gold coins and bars include the following:

Gold coinsAverage Price (one ounce)Gold barsAverage Price (one ounce)
U.S. American Eagle$2,289PAMP Suisse Mint$1,995
Canadian Maple Leaf$2,256Valcambi Suisse$2,135
South African Krugerrand$2,257Perth Mint$2,139
Australian Kangaroo$2,005Argor Heraeus$2,102
Chinese Panda$2,129Royal Canadian Mint$2,118
Austrian Philharmonic$2,251Johnson Matthey$2,033

You can acquire most of these coins and bars from all certified dealers across the United States. Today, you can buy gold online, including all the abovementioned products, and get it delivered to your doorstep in a few days.

Invest in Jewelry

Gold jewelry is another way to invest in physical gold. Popular items include rings, bracelets, and necklaces.

Unlike bars and coins, gold jewelry can serve a dual purpose as an investment and a wearable accessory. Additionally, the value of gold jewelry may appreciate more over time, especially if the item is made by a reputable jeweler or contains unique designs and elements.

While it’s challenging to provide an average price range due to the variety of brands and products, keep in mind that these factors, along with the brand’s reputation and any additional embellishments, significantly influence the final price.

To make a well-informed investment in gold jewelry, carefully consider the interplay of gold content, design, and craftsmanship, and remember that comparing similar pieces across different brands can offer valuable insights into the price range you can expect.

Furthermore, selling gold jewelry can be more complicated than selling gold coins or gold bars, as it requires a specialized buyer who is willing to pay for the jewelry’s aesthetic value.

Invest in Gold Indirectly in Gold ETFs and Mutual Funds

A gold exchange-traded fund (ETF) and a gold mutual fund are investment vehicles that allow investors to invest in gold indirectly. A gold ETF is a type of investment fund that is traded on stock exchanges, much like stocks, and tracks the price of gold.

When you invest in a gold ETF, you own a share of the fund, which holds a certain amount of physical gold or gold-related assets, such as mining company stocks. This allows investors to gain exposure to the price of gold without having to buy and store the metal physically.

Magnifying glass close up on mutual fund

On the other hand, a gold mutual fund is a type of investment fund that pools money from multiple investors to purchase a portfolio of securities, such as stocks of mining companies, gold futures contracts, and other gold-related assets.

The fund is managed by a professional fund manager who makes investment decisions on behalf of the fund’s investors. Like a gold ETF, investing in a gold mutual fund provides exposure to the price of gold without the need for physical storage.

Both gold ETFs and mutual funds can be a convenient and cost-effective way to gain exposure to the gold market.

Some Benefits of Investing in ETF

  • Diversification and Hedge Against Volatility: ETFs provide exposure to the price of gold without the need for physical ownership of the metal. Investing in gold ETFs can help mitigate the risks associated with a single stock or sector, providing a more balanced portfolio.
  • Convenience and Cost-Effectiveness: ETFs can be traded like stocks on major stock exchanges, making them easy to buy and sell during market hours. Additionally, they typically have lower costs, making them a cost-effective way to invest in gold.
  • Flexibility: ETFs offer flexibility in terms of investment size, allowing investors to buy as little or as much as they want.
  • Tailored Exposure: Some gold ETFs offer exposure to specific aspects of the gold market, such as mining companies or derivatives.

Benefits of Investing in Mutual Funds

  • Diversification: By investing in a wide array of securities, mutual funds spread risk across numerous investments, reducing the impact of any underperforming asset. This can help minimize potential losses and provide a more stable return profile.
  • Professional Management: Mutual funds are managed by experienced investment professionals who actively research, analyze, and select securities based on their expertise. This can help mitigate risks and enhance returns, especially for investors who may lack the time or knowledge to manage their portfolios.
  • Liquidity: Mutual funds are easily bought and sold during regular market hours. This flexibility allows investors to access their funds when needed without significant delays or penalties.
  • Automatic Reinvestment: Mutual funds often allow investors to reinvest dividends and capital gains automatically. This feature enables investors to grow their investments without any additional effort.

Consider Gold Mining Stocks

Gold mining stocks are shares of companies involved in gold extraction and exploration. Investing in gold mining stocks can help diversify your portfolio, which can lower risk. Second, they often perform better than physical gold during strong market periods, giving you a chance for larger returns. Finally, many gold mining companies pay dividends, providing regular income.


How to Invest in Physical Gold

As mentioned, investing in physical gold can be a great way to diversify your portfolio and protect your wealth against inflation and economic downturns.

Hand placing gold bar in storage

Below are some tips on how to invest in tangible gold.

Buying Gold Coins and Bars

Here is a step-by-step guide on how to invest in gold coins and bars:

1.    Choose a Reputable Dealer

First, buy gold assets from a reputable dealer to ensure authenticity and avoid fraud. All legitimate dealers should be certified and licensed to sell gold products. That said, look for dealers with good customer reviews, a long-standing reputation in the industry, and proper certifications, such as dealers’ licenses.

2.    Choose a Storage Option

While keeping gold at home is an option, it is not always the safest. Instead, consider storing your gold at a certified and insured depository.

Depositories provide a range of benefits, including protection against theft, damage, and loss, as well as professional handling and management of your gold assets. Many depositories also offer insurance coverage, auditing services, and 24/7 access to your holdings.

Depository storage fees range between $50 and $300 annually, depending on the type of storage facility and the amount of gold you store.

Buying Gold Jewelry

Below we present some tips on how to invest in gold jewelry:

  • Determine Your Budget: Before investing in gold jewelry, determine how much money you can afford. Jewelry prices may vary by brand, type, gold content, and purity.
  • Understand the Quality of Gold: The higher the karat, the more valuable the gold is. This is because karats measure the purity of gold. Higher karats signify the jewelry is made primarily from gold and is not mixed with other metals. Most gold jewelry is 14, 18, or 22 karats.
  • Consider the Design of the Jewelry: When investing in gold jewelry, consider the design and style of the piece. Timeless, classic designs are typically the most valuable, as they won’t go out of fashion. Examples of classic designs include simple gold bands, diamond studs, and tennis bracelets.
  • Choose a Reputable Brand: Some well-known brands include Cartier, Tiffany & Co., and Bulgari. These brands have a history of producing high-quality and valuable jewelry, which can hold its value over time.
  • Consider the Condition of the Piece: The jewelry’s condition can impact its quality. Scratches and dents can decrease the value of the jewelry, so make sure to buy from a reputable dealer that provides authentication and inspection services. 
  • Consider the Resale Value of the Jewelry: Gold jewelry may not have the same liquidity as bars or coins. Remember that the resale value of gold jewelry may be affected by design, demand, and condition, so choose a style that you can resell easily.
  • Be Prepared to Pay a Premium: Investing in gold jewelry typically requires paying a premium over the current market value of gold. Different brands can charge markups on top of the intrinsic value of gold. This is often the case when purchasing gold jewelry from brand-name companies.

How to Invest in Gold ETFs and Mutual Funds

Here are the main steps for investing in gold ETFs:

  • Step 1: Determine Your Investment Goals: First, define your primary goal when tapping into ETFs. Do you want to invest in gold for long-term growth or as a hedge against inflation? Once you have a clear plan, it will be easier to choose the right type of investment.
  • Step 2: Choose a Gold ETF: The next step is to choose a gold ETF that meets your investment goals. Some popular options include SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and Vanguard Precious Metals and Mining Fund (VGPMX). These funds vary in terms of their fees, investment objectives, and risk profiles, so be sure to research before making a decision.
  • Step 3: Open a Brokerage Account: Once you have chosen a gold ETF, you will need to open a brokerage account to make your investment. There are many online brokers that can offer low-cost trading, such as TD Ameritrade, Fidelity, and Charles Schwab.
  • Step 4: Fund Your Account: After opening a brokerage account, you will need to fund it using cash or securities. Most banks will allow you to transfer funds electronically from your bank account or another brokerage account.
  • Step 5: Place Your Trade: Once your account is funded, you can place your trade for your chosen gold ETF. You will need to enter the ticker symbol for the fund and specify the number of shares you want to purchase. Make sure to double-check your order before submitting it to ensure accuracy.
  • Step 6: Monitor Your Investment: Finally, don’t forget to monitor your investment regularly to ensure it aligns with your goals. Gold ETFs can be affected by factors such as changes in the price of gold, market volatility, and interest rates. Stay informed about these factors and adjust your investment strategy as necessary.
Close up on ETF platform on cellphone

Similarly, here are steps for investing in mutual funds:

  • Step 1: Assess Your Financial Goals and Risk Tolerance: Determine your financial goals and risk tolerance, considering your age, income, investment horizon, and comfort with market fluctuations.
  • Step 2: Research Different Types of Mutual Funds: Familiarize yourself with various mutual fund categories and their risk-return profiles. Explore funds focused on different sectors, industries, or countries to understand which aligns with your investment objectives.
  • Step 3: Choose a Reputable Fund House: Select a well-regarded fund house with a proven track record of performance and responsible management. The fund house will have professional investment managers who actively manage the mutual fund on your behalf. Some popular fund houses for gold investments include Sprott Asset Management, VanEck, and BlackRock.
  • Step 4: Evaluate Fund Performance and Costs: Analyze a fund’s historical performance, keeping in mind that past results do not guarantee future success. Additionally, consider the fees associated with the fund, as these costs can impact your returns.
  • Step 5: Decide on the Investment Amount and Frequency: Determine how much you want to invest initially and whether you’ll make one-time or recurring investments. Many mutual funds offer systematic investment plans (SIPs) that allow you to invest a fixed amount at regular intervals, such as monthly or quarterly.
  • Step 6: Monitor Your Investments: Even though professional investment managers handle the mutual funds, regularly review their performance to ensure they align with your financial goals. Be prepared to make adjustments to your portfolio as needed.

How to Buy Gold Stocks

Here’s how you can buy gold stocks:

  • Determine Your Investment Goals: Similar to other investments, take time to identify your goals and risk tolerance.
  • Open a Brokerage Account: This will allow you to buy and sell gold mining stocks on the stock market.
  • Identify the Potential Gold Mining Stocks: You can use various sources such as financial news, stock market reports, and research reports to identify the companies that would yield the highest return.
  • Analyze and Buy the Potential Gold Mining Stocks: Once you have identified potential gold mining stocks, you should analyze them to determine their suitability for your investment portfolio. Look at the company’s financial performance, management team, and growth potential. A stockbroker can help you make an informed decision.
  • Monitor Your Investment: As always, don’t forget to monitor your investment constantly. Keep an eye on the stock price, company news, and financial performance to know when to sell or hold your investment.

Possible Risks and Drawbacks

While investing in gold mining stocks can offer significant potential returns, there are also several risks and drawbacks associated with this investment option. Some of these risks include:

  • Geopolitical Risks: The mining industry is subject to a range of geopolitical risks, such as social and political unrest, which can impact production levels and profits.
  • Operational Risks: Mining companies face several operational risks, such as equipment failures, natural disasters, and labor disputes, which can also impact production and profitability.
  • Price Volatility: The price of gold mining stocks can be highly volatile, and investors may experience significant fluctuations in their portfolio’s value.
  • Regulatory Risks: Mining companies are subject to various regulations, such as anti-bribery or conflict minerals regulations, which can also impact their operations and profitability.

Selling Gold Bars and Coins

Selling gold bars and coins can seem daunting, especially if you’re new to investing in gold.

Gold bar on top of $100 bills and cellphone with stock graph

But here are some tips that may help you familiarize yourself with the selling process and maximize profits when selling your gold investments.

  • The first step is to research and find a reputable dealer who will offer you a fair price for your investment. You can check with the dealer you purchased the gold from, as they may be interested in repurchasing it.
  • Alternatively, you can search online for other gold dealers specializing in buying gold investments. Check the reputation of the dealer by reading reviews from previous customers. Make sure they have all the regulatory certifications, knowledge, and experience in the industry.
  • When selling gold, also understand the current market price. So keep an eye on the gold market and monitor the daily price fluctuations. You can find real-time prices on Kitco, Bloomberg, and CNBC. Some gold dealers also have live price tracking on their websites. This will help you determine the best time to sell your gold bars and coins for the best possible price.
  • Another tip for maximizing profits when selling gold is to consider the condition of your gold investments. Gold that is in good condition and well-maintained is likely to fetch a higher price than gold that is damaged or tarnished. Therefore, ensure your gold is properly stored and maintained to keep it in the best possible condition.
  • Finally, it’s also worth considering the fees and costs of selling gold. For instance, some dealers may charge a commission or other fees when buying back your gold, which can reduce the profits you make from the sale. Dealers usually charge a 1% commission fee or more on resale. So be sure to inquire about any fees upfront before selling your gold.

Sum Up

Investing in gold offers an opportunity for investors seeking to diversify their portfolios, hedge against economic uncertainties, and preserve wealth. As an enduring store of value, gold continues to shine bright in the financial world.

Investors can choose from various forms, such as physical gold, ETFs, and mining stocks, each with unique advantages and risks.

Still, make sure to weigh the advantages and disadvantages of each investment option carefully and consider individual goals and risk tolerance before committing to any investment strategy.


FAQ

Can I Purchase Gold Bars or Coins Online, and Is It Safe to Do So?

Yes, you can purchase gold bars or coins online from reputable dealers.

However, first, you must thoroughly research the dealer to ensure they have a solid reputation and positive customer reviews. Next, verify the legitimacy of the gold by asking for a certificate of authenticity that will confirm the purity, weight, and manufacturer of the piece.

It’s also worth comparing prices of gold on different websites to ensure that you are getting a fair price. Finally, use a secure payment method like PayPal or credit card and avoid paying with wire transfers or cash as they offer little protection.

How Can I Track the Value of My Gold Bars or Coins Over Time?

Monitor the spot price of the gold, which is the current market price. Various online methods are available to track the value.

Many financial news websites and investing apps also provide real-time updates on the spot price of gold. You can also track the value of specific gold coins or bars by researching recent auction results or using online price guides.

How Do I Determine the Premium I Will Pay for a Gold Bar or Coin?

The premium for gold bars or coins varies depending on their size, weight, purity, and rarity. Research the current market price of gold by looking it up online or speaking with a gold dealer.

Usually, the higher the purity and weight of the gold asset, the higher the price will be. It’s also worth comparing prices from different dealers to make sure you’re getting a fair deal, as dealers charge various markups on the market price of gold.

Can I Purchase Gold Bars or Coins in an IRA or Other Retirement Account?

Yes, you can purchase gold bars or coins in an IRA or other retirement account. One of the most popular retirement accounts is the gold IRA, which allows you to invest in gold and other precious metal products, including bars, coins, and gold mining stocks.

However, you should understand the rules and regulations for investing in a precious metals retirement account. For instance, the IRS has specific regulations regarding the types of precious metals that may be included in an IRA account. Similarly, the IRS imposes minimum storage requirements.

You may need to work with a qualified custodian specializing in precious metals to ensure you comply with IRS regulations.

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