How To Invest In Gold Bars
Gold can be a great investment as it provides diversification to your portfolio and in times of economic turbulence often increases in value. It’s generally always in high demand as it is a limited resource meaning there is only so much gold on planet Earth. There is almost always a high demand for gold and in many cultures like India it is beloved by the people and a symbol of pride and joy for anyone who owns it. Having gold gives you many advantages normal investments do not have.
However, investing in any asset can often times be very confusing. Particularly, gold bars seem to be difficult to understand and not as simple to invest in as would a stock mutual fund or housing property. We are going to try and simplify that process in this complete guide and show you how you too can invest in gold bars.
Quick Snippet On Gold
Normally, a currency, like cash, become worth less over time due to inflation and more of it can always be printed. However, physical assets, like gold, are a limited resource that cannot be created or produced. Although the price of gold fluctuates quite a bit up and down over time, it always holds some value due to the scarcity and limited supply of it. In fact, for all the gold that has been mined in the world, it would likely only fill three Olympic sized swimming pools!
In this complete guide, we will tell you everything you need to know about how to buy gold bars and give you a rundown of the costs involved and where to buy them. For those that aren’t interested in the physical asset of a gold bar, we will have other alternative ways to invest in them without actually holding the physical asset in your possession. But first, let’s talk about the cost.
How Much Does A Gold Bar Cost?
Gold bars cost around $500k for a standard sized gold bar that is about 7 inches long and 3 and 5/8 tall and weighing in at 12.4 kilograms or 27.5 pounds. Gold bars are measured in troy ounces. A troy ounce is the measurement used for precious metals and is about 10% heavier than a regular ounce and currently, as of this article, is selling at around $1,300 per ounce. There are 400 ounces in just one standard sized gold bar. So if you take that price and multiply it by the 400 ounces you have over $500,000. Generally, they look cool, and are quite heavy due to the fact that they are pure gold. At a minimum it must be at 99.5% fine gold so that means they can never be mixed with other metals.
That’s a lot of money for one pretty looking bar. But hold on a second, there are other options on the table other than just the standard sized 12.4 kg gold bars. We now will talk about the best ways to invest in gold bars without having to fork over half a million dollars and we provide a plethora of economical options.
Affordable Gold Bar Options
You might be thinking, what are the best gold bars to buy? Unless you have a nice $500k to shell out for a standard gold bar, there are other options out there. You can get gold bars that range all the way from 1 Gram to 1 Kilo gold bars which are around the size of a smartphone.
To start, the most basic gold bar a 1 gram 24 karat gold bar will cost you around $50 USD. Again, it should be noted that the bar should be above 99.5% pure gold. Generally, these fit into your hand and are about the size of a plastic tack that you would use to put a piece of paper into the wall. About the size of your fingernail. The selling prices tend to be a little bit high as it is quite a bit of manufacturing for such a small bar.
Next up, we have the 10 gram and 20 gram bars which cost approximately $500 to a little less than a $1,000 respectively. Most the time when people picture a gold bar they think of the standard size that are 12.4 kg and are quite large, but most individual buyers are looking to purchase the one troy ounce bars. The most popularly traded gold bars in the US and abroad is the 1 troy ounce gold bars. These are currently selling at around $1,300 to $1,400 and only weigh about 31 grams or so and can easily fit into your hand.
The 50-gram gold bars kick it up yet another notch and are sold at a little over $2k and easily fit in the palm of your hand. The 10 troy ounce gold bars are sold at almost $15k depending on where you buy from.
Finally, for those that want to take their investing to the next level, the Kilo gold bar might be the purchase you elect to choose. Although the kilo is significantly heavier as it is pure gold, it maintains a similar shape and size as an iPhone 6. It does feel glorious in your hands and is the highest bar that is available on the market for individual investors. These are currently selling at around $45k, so it is no small investment! Thankfully, gold has shown to hold its value over time and seems to be a pretty safe investment. Just don’t forget to insure it from theft and make sure you have a safe place to keep it.
How To Buy a Gold Bar
Once you’ve determined what size and how much you are willing to pay for the gold bars, now you have to determine where you are going to buy them. But before you go, make sure you do not forget to check the spot price or market price of the gold per ounce. Once you have these important details, you now have to begin the diligent process of determining the right gold sellers to purchase from.
First, I would look for gold sellers that are in your local area through a simple google or Yelp search. Make sure to read local reviews and follow up on the Better Business Bureau’s (BBB) website to verify the company that you are looking at doesn’t have any outstanding claims against them. Keep in mind, many pawnshops prey on customers that don’t know the full value of what they are buying. Look for a relaxed sales environment in an established storefront where you can get a nice baseline of the various selling prices.
And of course, it's a given that you'll be safest when you know how to buy gold bars from a bank.
Online Gold Bar Sellers
However, if you want to expand your search, there are several outstanding sellers that can be found online. Our suggestion would be to analyze each one and make sure their websites are up to date and have a support hotline that you can call with initial questions. Just as you did with the brick and mortar businesses, by checking the Better Business Bureau’s (BBB) info on each company you can further determine the legitimacy. Read up on all the reviews of these companies and verify that they are legit and their service is excellent especially as you are going to dish out a hefty amount of dough.
From there you can generally purchase the gold bars online through a wire payment, through ACH, or direct from your checking account. You can even buy through a PayPal payment in most places.
You can also consider purchasing the bars through a private listing although that is a little riskier as you would need to have an inspector inspect the bars and make arrangements with the seller. The risk of a scam is high in this option and we would generally recommend staying clear of this buying option. Check out the short video below to find out how to spot a fake.
Physical Gold Options Outside of Gold Bars
If purchasing gold bars intimidates you, there are a few other ways to invest in gold. There are other smaller options that help you get in the gold game without breaking the wallet. Here are a few options for investing in a physical asset like gold, without shelling out big time cash.
1) Invest in Jewelry or Other "Scrap" Gold
Sure, this might not be the sexiest way to invest in gold, but it can come in all different forms and shapes and sizes. Almost everyone you know at least has some gold jewelry or items lying around somewhere that they don’t want to keep. Maybe you can find them online, or, in a safer way ask friends or family if there is anything you can buy from them or they don’t need anymore. Maybe you can even get a good deal at a local pawn shop and pick up your first investments there.
Like any investment in physical assets and especially precious metals, you need to be extremely thorough in the details when purchasing. You might need to hire a gold expert or inspector to help you analyze that the product is true gold and is not just some gold coated crappy metal underneath or fake knockoff. Ask around and familiarize yourself with the potential frauds out there. With any high value asset, there is likely going to be a lot of fakes and scammers just trying to make a quick buck pawning off their fake gold.
2) Buy Other Gold Bullion Such as Gold Coins
Since these are usually considered collectors’ items, most often they are sold at a higher price than the market rate is dictating. This is because they traditionally can be sold for more on the secondary markets. Inversely, if you get a good deal and have some gold coins in your portfolio than you are likely to have a great collectable and one you can turn around and sell at a higher price later on assuming the market price of gold does not go to the tank.
It is very important that you be cautious of gold coins as often times they are not pure gold. The market is flooded with gold coins that are around 90% purity. Conversely, gold bars are around 99.5%-99.9% purity and are seen more as pure gold.
Often times, gold coins are mixed in with other metals which, as expected drop the coin’s value. This makes them more affordable, but naturally they do not hold up as much if you look to sell. Still, even as a cheaper alternative, a 1-ounce American Gold Eagle coin at 91.6% purity is selling at around $1,400. If that price is higher than you were looking to pay, then there are also .5 ounce options, .25 ounces, and .1 ounces’ gold coins. You can also find similar offerings of British Sovereign gold coins, Australian Kangeroo, or Canadian Maple Leaf among other options. In case you are wondering, the name seems to represent something about the countries that mint them. 🙂
Just like in scrap jewelry, there are often local gold exchanges and pawn shops that you should be very careful of. Also, buying online can be an even bigger risk as you are not able to inspect the gold coins beforehand by a professional. That being said, the US Mint does have a website to buy gold coins which is reputable. They have very unique designs to match just your interest or passion. It is important to note that the US Mint site does also refer you to reputable dealers for those that are looking to see the gold coins in person first.
Best Alternative Way to Buy Gold Bars
The best alternative way to buy gold bars is to purchase a stock or mutual fund that has gold in it's portfolio. These are called Gold Exchange Traded Funds and mirror the market price of gold. Essentially, you can invest in gold by working with a stockbroker to purchase an exchange traded fund. Although you won’t have the actual gold in your possession you can still reap the benefits of the appreciation of the gold over time. Plus, you won’t have to worry about the gold bars being lost or stolen. 🙂
But the benefits come at a cost. You likely will have to pay fees each year to a financial institution to manage the investment. Although these fees aren’t much and average around .4%, they add up over time and eat away at the value of the investment. So for a $10,000 investment in gold, it would add up to $40 a year in fees. That, and it doesn’t include the likely commission the stockbroker is going to make when you buy or sell the financial asset.
Investable Gold Funds
A couple investable options are SPDR Gold Shares which has more than $24 billion in assets and the gold that you are investing in is held in a vault in London. Sadly I don’t think you can visit the vault and hold the gold bars. However, each share represents an ounce of gold so the math is pretty simple on how much you own.
Another option is the Market Vectors Gold Miners ETF (GDX). This is a popular ETF to invest in and carries a small, but hefty .53% expense ratio. But that’s chump change if the market is soaring in value like it did in the early to mid-2000’s. It goes up and down solely based on the spot price, or actual market price at a point in time of gold.
Still, you can check out other investments like Market Vectors Junior Gold Miners (GDXJ), iShares Gold Trust (IAU), and AdvisorShares Gartmen Gold/Euro ETF (GEUR) if you want to find yet other funds to compare to. For a further breakdown please see the pros and cons table below.
Pros When Purchasing Gold Mutual Funds
Cons When Purchasing Gold Mutual Funds
Hopefully by this point, you should have a good understanding of how to buy gold bars, the sizes of the bars, costs and shapes, and of course where to buy the gold bars. There is something very special about holding something. The experience is always magnified when you are holding and reading a newspaper or magazine as opposed to when you are reading an article on the internet. We have laid out all the options to buy the physical gold bars or coins so you can now add to your investment portfolio.
For those that don’t want the liability of storing the gold bars, there is plenty of investment opportunities in gold exchange funds. Maybe now is the time to invest in gold to diversify your investment portfolio or time to purchase your first gold bars. The only question is, what is holding you back?
Still looking for more info? Here's 7 tips on how to buy gold bars as we show you how to make the right purchase.