How to Purchase Gold Bars
Gold as a Store of Value
Gold has been used as a store of value since before the beginning of recorded history, especially during times of war and economic chaos.
The allure of gold is still appealing today, especially as central banks around the world continue to print money and debase their currencies.
Gold can also diversify an investment portfolio since it's price often moves in the opposite direction from the prices of other investments such as stocks.
Investors seeking to diversify and safeguard their portfolios can purchase gold bars. Gold bars can be purchased with a lower premium than coins due to lower production costs. And investors can take possession of the physical gold bars, adding security.
Size of Gold Bars
Gold bars are sold in many different sizes and weights that are suitable for investors with varying resources.
Small investors can purchase gold bars weighing as little as one gram (0.035274 ounce). At a spot price of $1556 per ounce, a one gram bar contains just $54.89 worth of gold. Thus even the smallest investor can afford to purchase a gold bar!
Large investors can buy massive gold bars weighing up to 400 ounces. At $1556 per ounce, a 400 ounce gold bar contains $622,400 worth of gold. Relatively few investors have the resources to buy them.
Investors deciding what size bars to purchase have several considerations:
- Budget: The size of an investment budget limits the size of gold bar that can be purchased. For example, an investor with $10,000 is limited to a 10 ounce gold bar.
- Premium: Gold bars sell at a premium to the value of gold they contain. The premium decreases as the size of the bar increases since the cost per ounce to produce a large bar is less than the cost per ounce to produce a small bar. Thus investors have an incentive to purchase the largest gold bar they can afford.
- Liquidity: Since many more people can afford small gold bars than large gold bars, it can be quicker and easier to sell a one ounce bar than a 400 ounce bar.
- Need for Cash: Investors who may need to sell gold occasionally to raise cash should buy gold bars that can be easily sold to raise the proper amount of cash. For example, an investor who may need to raise $20,000 to buy a car would find it easier to sell a handful of one ounce bars rather than a 400 ounce bar.
Many individuals find the one ounce gold bar to be the optimum size. The price is within reach of most investment budgets, premiums are low due to the large numbers of such bars produced, there are many willing buyers, and they can be sold as needed to raise cash for typical large household purchases like cars or roofs.
Branded Gold Bars
Quality of Gold Bars
As with all purchases, investors must exercise due diligence to insure they purchase high-quality gold bars. While gold is gold, it is not true that all gold bars are of equal quality.
Some investors have been duped into buying forged or counterfeit gold bars. Some forged bars contain less-than-pure gold (most gold bars are 99.99% pure gold, which is often stamped on the bars). Partially-forged bars (especially large bars) may contain a hidden cavity filled with tungsten. Shady operators even sell copper bars coated with a thin layer of gold.
One method to assure the quality of gold bars is to perform a metallurgical assay. However, assays are typically practical only for large individual, institutional or governmental investors due to their costs and the time required to perform them.
For most investors, the best way to assure the quality of a gold bar is to purchase only from a well-known, trusted and established supplier, and to obtain an assay certificate of the gold bar's weight and purity.
Investors can also purchase branded gold bars from trusted names like Credit Suisse, OPM Metals or Perth Mint. Such bars are often stamped with the brand name and/or are sold with anti-forgery devices such as sealed, tamper-proof packages or even holographs to prove their authenticity.
Investors in high-quality gold bars will find it easier to sell them at a fair price.
Other Terms of Sale for Gold Bars
Investors seeking to purchase gold bars have many choices.
Some investors have ready access to local coin shops or jewelry shops which buy and sell gold bars. In some countries, such as Canada, Austria, Switzerland and Argentina, investors can buy and sell gold bars at major banks.
For most investors, the most convenient way to buy gold bars is through an online supplier. There are many online suppliers, including Golden Eagle Coins, Provident Metals, and Monex Precious Metals. Gold bars can also be purchased through online auction sites like eBay.
Investors should consider a number of factors in selecting an on-line supplier:
- Reputation: Purchase gold bars only from reputable suppliers to assure their quality. Be especially wary of purchasing unbranded gold bars from individuals.
- Premiums: Savvy investors price-shop between suppliers to obtain the lowest premiums between the spot price of gold and the price of the gold bars.
- Shipping Costs: As with other online purchases, shipping costs depend on the shipping weight and speed of delivery. Some suppliers offer free shipping for large purchases.
- Insurance: Make sure the delivery is guaranteed and check if there are any insurance fees.
- Payment Charges: Some suppliers offer cash discounts or charge fees for credit card purchases or bank transfers.
- Hidden Commissions: Review the bottom line price for any hidden costs.
Or would you rather buy a gold ETF?
- Using a Gold ETF
The easiest way to invest in gold is to buy gold exchange traded funds, or gold ETFs. However, gold ETFs aren't always perfect substitutes for owning physical gold.