Buying Physical Gold
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.
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.