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Buying Physical Gold

Updated on September 1, 2011

What is Physical Gold?

Investing in gold can be accomplished through a veritable plethora of vehicles. Mutual funds, stocks, jewelry, and coins can all be valid strategies for purchasing the sought-after yellow metal. Experts from all walks of life tout each different investment style as a possible path to retirement riches. Wealth and fame may be garnered by selecting and pursuing a strategy with which you are comfortable.

Consider physical gold along with all the investment possibilities. This option may be the easiest to understand but may also include many hidden charges and possibly some unexpected risks.

Physical gold simply requires the purchase of tangible bits of gold, typically in an unadorned form. Jewelry and coins may also be considered 'physical', but generally the term is only applied to gold that has not been shaped into objects intended to increase the value of the metal.

Where Does Physical Gold Come From?

Given that rumors of alchemy tend to be greatly exaggerated, gold generally originates from a mine. These mines tend to pop up in relatively inconvenient locations for investors. Ideally potential gold purchasers could stroll from nearby Starbucks to competing local gold mines for regular purchases, but geography does not bear out such scenarios. Should you find yourself situated near an active mine, keep in mind that miners mind not the retail aspects of their livelihood: you probably can't purchase it from the guys who dig it up.

Short of trekking to a remote mine and negotiating with dirty pickaxe-wielding underground denizens, the malleable yellow metal may be obtained several ways. Investors usually find themselves reduced to mail-order purchases or stressful visits to local gold dealers. Assuming that all retail gold is pretty much the same quality, we shop on price.

Own piles of physical gold!
Own piles of physical gold! | Source

How much does gold cost?

Gold costs what it costs, except when it doesn't. The price of an ounce of gold varies widely based on how many times it has been handled and how many markups it has endured. A "spot price" generally provides benchmarking metrics for retail investors, but savvy buyers understand they are only looking at a starting point. The spot price is analogous to the sticker price of a stripped-down automobile. Your trusted car salesperson fully plans to add on dealer prep, undercoating, extended warranty, floor mat, and neon light kit charges. Your physical gold vendor will mark up the spot price, because they can. Expect a n increase of at least 2% over the spot price.

Ordering physical gold online requires a real-time decision to be executed. Should the material be delivered to your palatial estate or stored in an uber secure vault in a foreign country where they ski a lot and make really good knives?

Shipping the gold to your zip code costs real money. Given that a single ounce of gold approaches $2000 USD and fits easily into a pocket or purse, international shipping agencies may ask for approximately .75 USD per $100 of stated value. Quick calculations indicate that you should expect to pay:

(2000/100) X .75 = $15 USD

for insuring a single ounce as it travels to your front porch. This number won't break your bank, but it may prohibit you from buying and selling on a regular basis, unless you own stock in UPS.

Should Physical Gold be Stored in a Vault?

A secure vault, guarded by experienced guarders and high-tech systems, does come at a price. Certainly your physical gold will rest comfortably when locked behind immense bomb-proof doors, but don't expect your gold provider to offer this service for free. A monthly fee will be deducted from your account to pay off the guards and keep the electricity turned on. Physical gold, thankfully, doesn't require much physical space. Expect to owe about .015% of your holdings per month, or .18% per year. This rate may increase as a function of how much gold you actually plan to store.

Beware. You may lose all your gold if your storage fees fall into collections. Perhaps your banker will banish your holdings to a cardboard box on the steps of the bank, but probably not. Carefully study the banking and trading regulations in whatever country you select to host your investment. London (England), Zurich (Switzerland), and Hong Kong (China) are common locations for gold storage, but you may be able to identify other options by searching online gold-selling sites.

Physical Gold Costs Money to Sell

You can sell your next-door neighbor your gold, but if it's stored in a far-away vault you should expect to pay for the privilege. Certainly a modicum of overhead is involved in the transaction. At the very least the gold must be moved from your shelf to their shelf. A "sell fee" will be deducted from the total transaction. Some companies levy this charge and some do not.


Owning physical gold can be rewarding over the long-term, but be alert to additional costs and fees associated with the privilege.


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    • felicitylovespari profile image

      felicitylovespari 6 years ago

      I actually bought some 1 ounce bars on ebay last year which I have held onto. Just 3. But they are kind of fun....

    • nicomp profile image

      nicomp really 6 years ago from Ohio, USA

      @drbj : I read it on

    • drbj profile image

      drbj and sherry 6 years ago from south Florida

      Thank you, nicomp, for this plethora of information about owning physical gold. You say that the rumors of alchemy tend to be greatly exaggerated? OMG, what a blow! Who knew?

    • Rod Marsden profile image

      Rod Marsden 6 years ago from Wollongong, NSW, Australia

      I'll vote up.

      The land of Oz right now is doing well with gold. When paper money and coinage look mighty risky people do turn to gold. Personally I don't have any real interest in owning actual gold but if someone gave me stock in a going concern gold mind in Oz I would very much appreciate the gesture.

      Yes, gold is worth whatever the market says it is worth and it may go down in value if the USA can work out their financial woes and become once more a top nation, financially speaking. I cannot see that happening in the next ten years.

    • breakfastpop profile image

      breakfastpop 6 years ago

      Thanks for all this terrific information. I appreciate it. Voted up useful, interesting and awesome.

    • tsadjatko profile image

      TSAD 6 years ago from maybe (the guy or girl) next door

      I remember in the 1980s when gold couldn't get out of its own way trading around $300 an ounce for years. Then years later it seems houses sprang up all over the nation recommending to purchase gold year after year after year and it is still being recommended today - when will it end? Are companies that mine gold backing the houses that recommend eternally purchasing it non stop? Could the minig companies have created this demand for their own product to increase their worth and profitability? I suspect not or this would have been a story all over the media, but having been in the investment world myself I know that when everyone especially the media is recommending to buy something the bubble is about to burst, but it seems not to be the case with gold. My gut feeling is something just doesn't seem right with the universal, eternal buy buy buy recommendations, for decades now no matter the price rise but I can't put my finger on it. I understand all the reasoning behind owning gold but my gut says something's not right. When will it end?

    • nicomp profile image

      nicomp really 6 years ago from Ohio, USA

      @Old Poolman : Thanks, I usually cause more questions than I answer. ;)

    • profile image

      Old Poolman 6 years ago

      Interesting hub, you answered many of my questions about owning gold.