Investors looking to enjoy the touch, feel and security of owning gold may wish to buy gold bars instead of intangible investments such as gold exchange-traded funds (ETFs). Physical, investment-grade gold, also referred to as gold bullion, can be purchased at spot price, which is the price of un-fabricated gold plus additional costs, which vary depending on the seller. Physical gold can be liquidated in the unlikely event of a total economic collapse.

Key Takeaways

  • The most standardized way of directly owning physical gold is by acquiring bullion bars.
  • Be sure you are doing business with a reputable dealer and check the bars' purity, form, size, and weight before purchasing.
  • Keep in mind that purchasing gold bars comes with extra costs including storage and insurance and a sales mark-up.

The Gold-Buying Process

Buying physical gold bars online is a fairly simple process. Browse gold bar products on reputable retail websites such as APMEX, JM Bullion, and WholesaleCoinDirect.com. Select the gold bars you wish to buy by weight, quantity, and price. Online gold retailers typically give discounts to customers who buy larger quantities. Certain retailers give discounts for using a credit card, while others do so for using wire transfers, so choose the more cost-effective payment option. Once you receive the gold bars, keep them in their packaging to prevent scratches and store them in a home safe or safety deposit box at your bank.

You can also bid on gold bars on eBay. When shopping for gold on the auction website, it is important to review the seller's feedback. Avoid buying from sellers with documented negative feedback on authenticity, exorbitant shipping and handling fees, and failure to deliver. Gold-to-Go ATMs are available if you wish to buy gold bars in cities such as New York, Las Vegas, and Dubai. Consumers are advised to be especially aware of the spot price of gold since such ATMs sell the precious metal well above this price and above the prices of most other retailers.

Buy Pure Gold Only

Investment-quality gold bars should be at least 99.5% pure gold. The rest is an alloy, usually silver or copper, that makes smelting possible. People who purchase gold bullion as an investment should only buy a bar that features the name of its manufacturer, its weight, and its purity, usually expressed as 99.99% stamped on the face. Popular mints that produce gold bars include the Royal Canadian Mint, Perth Mint, and Valcambi.

Know the Difference Between Bars and Coins

While all forms of pure gold have significant monetary value, not all investment-quality gold is equal. From an investment perspective, investors wanting to add the physical product that tracks the price of gold may wish to avoid gold coins. These coins often feature attractive designs, have historic value, and contain a lower quantity of gold, but still, cost more due to their numismatic value.

In addition to costing more, gold coins sometimes skew the value of an investor’s portfolio. For example, the highly regarded American Eagle coin produced by the U.S. Mint contains 91.67% gold but costs more than plain gold bars because of its value as a collector’s piece. Some investors may want collector's items, while others may want plain gold bars, which typically are the easiest to hold long term and convert to cash.

Buy Gold in Workable Sizes

Gold bar buyers should consider the ease with which they can liquidate the bars as part of the buying process. For example, if gold is selling at $1,400 per ounce and an investor has $14,000 with which to buy gold bullion, she will usually have an easier time selling the gold down the road if she buys 10 one-ounce bars rather than one 10-ounce bar. She can sell the one-ounce bars one at a time as needed, while she might have a harder time finding a buyer for the 10-ounce bar if she needs to sell quickly. Conversely, considering the tiny size of one-gram gold bars, investors sometimes save up to buy bars of a more substantial size.

Shop Around

Investors should be aware of gold's spot price when browsing the bullion market. Finance websites that display stock tickers usually display the daily price of gold. Gold is fairly easy to buy, but prices vary greatly as sellers include their desired profit margin plus additional costs such as authentication certificates, shipping and handling, and payment processing fees. A price comparison including the different sellers' charges is key to getting the best price on gold bars.

Avoid Rip-Offs

Gold bar buyers should review websites such as the Better Business Bureau and Ripoff Report to learn more about a gold seller’s reputation. In general, reputable gold sellers must disclose all the fees required to close a transaction upfront. Buyers in the U.S. should also do their due diligence before buying gold from sellers abroad. Even when the gold bars are authentic, seller charges may be exorbitant, and buyers might face issues clearing the gold through customs, depending on the quantity purchased.

The Bottom Line

Physical gold ownership involves a number of unique costs, including storage and insurance costs, and the transaction fees and markups associated with buying and selling the commodity. There can also be processing fees and small lot fees for investors making smaller purchases. While collectively these costs may not significantly affect someone looking to invest a small portion of their portfolio in gold, the costs may become prohibitive for investors seeking to gain larger exposure.