Buying physical gold can often seem like a secretive or exclusive endeavor. Many who invest in gold keep a low profile to avoid drawing attention, and as a result, it may appear mysterious or out-of-reach for the average person. However, owning gold is more practical than extravagant, and this guide will focus on the basics of getting started.
If you’re new to buying gold or considering it for the first time, it can be overwhelming. Here, I’ll share what I’ve learned over 16 years of experience to help you avoid expensive mistakes and build confidence in your investments. Simplicity is key, especially for beginners, and focusing on the long term will serve you better than getting caught up in daily market fluctuations.
Avoiding Expensive Mistakes
Don’t obsess over the spot price: The price of gold fluctuates daily, and focusing too much on short-term movements can lead to poor decisions. Gold is typically a long-term investment, and it’s often better to forget about the daily price after making your purchase.
Understanding the basics: There are essential facts you need to know, such as the current spot price of gold and how to avoid paying unnecessarily high premiums.
Understanding Gold’s Value
Spot price: As of today, the spot price of gold is around $1,865 per ounce. This is the base price, and if you’re buying coins or bars, you will pay a premium above the spot price to cover minting and other costs.
Why people buy gold: Most people invest in gold to protect their wealth from inflation, diversify their assets, or secure their financial future. Gold is also popular for retirement planning or as a form of savings passed down through generations.
Gold Coins and Bars: The Most Popular Forms
Coins are the most common form: Coins like the American Gold Eagle and Gold Buffalo are popular choices. These coins are minted by the U.S. Mint and contain one troy ounce of gold.
Differences in purity: While both Gold Eagles and Buffaloes contain a full troy ounce of gold, the Buffalo is 24-karat gold (99.99% pure), and the Eagle is 22-karat (91.67% pure), alloyed with silver and copper for added durability.
Face value: Coins like the Gold Eagle have a face value of $50, but this is symbolic, and the real value is based on their gold content, which is much higher.
Premiums: Understanding the Extra Cost
Premiums over spot price: When buying physical gold, you will pay a premium above the spot price. This premium covers production costs and varies by the size of the coin or bar. For example, a one-ounce American Gold Eagle may come with a 6% premium, while smaller denominations like quarter-ounce coins often have higher premiums.
Long-term view: Although premiums can be higher on smaller coins, many people find it easier to buy these incrementally, allowing them to accumulate gold over time.
Where to Buy Gold
Start local: In the U.S., American Gold Eagles and Buffaloes are the easiest coins to buy and sell. In other countries, coins like the Canadian Maple Leaf, South African Krugerrand, or Austrian Philharmonic are good alternatives.
Consider resale value: While foreign coins can be bought with lower premiums, American coins may sell for more in U.S. markets, making them a more reliable option for American buyers.
Selling Gold
Coin shops are a reliable option: When it’s time to sell, local coin shops often offer the quickest turnaround, especially for popular coins like American Eagles or Buffaloes.
Don’t expect to recover the full premium: Although you may pay a premium when buying gold, you might not recover this amount when selling. For instance, if you bought a Gold Eagle with a 6% premium, you might only get the spot price when selling, meaning a small initial loss. However, the long-term appreciation of gold can make up for this difference.
How to Check the Spot Price
Stay informed, but don’t obsess: The easiest way to check the spot price is through a quick online search. Websites like Kitco offer real-time gold prices. However, focusing too much on the day-to-day changes can be counterproductive. Gold is a long-term investment, and frequent price checking may lead to unnecessary anxiety or impulsive decisions.
Gold Bars vs. Gold Coins
Bars can be cheaper but harder to sell: Gold bars are often less expensive than coins, as they carry lower premiums. However, local coin shops prefer coins because they are easier to authenticate and more recognizable. Bars may require additional testing, which can make some dealers hesitant to buy them.
Conclusion
Investing in physical gold is an excellent way to preserve wealth over the long term, but it’s important to start with the basics. Focus on coins like American Gold Eagles or Buffaloes if you’re in the U.S., and avoid getting wrapped up in daily price fluctuations. By building your gold reserve over time and understanding the premiums you’re paying, you’ll be well-positioned to protect your financial future against economic uncertainty. Keep things simple, and approach gold as a long-term savings strategy to avoid the common pitfalls many new buyers face.
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