Where to Buy Gold - Purchasing Physical Gold or Gain Exposure to Price Movement of Gold?
Are you asking yourself where to buy gold? There is a wide range of methods available to investors.
Are you asking yourself where to buy gold? There is a wide range of methods available to investors. You can buy physical gold (like gold bars or coins for example) or gain exposure to gold price movements (basic and more complex structured financial products are available); the distinction between these two options is not always clear, but it is worth giving the same consideration to your purchase as you would to any other investment. The most appropriate way will depend on the requirements and outlook of the individual investor.
Where to Buy Gold Bars?
The most traditional way of investing in gold is by buying bullion gold bars. Gold bars can be bought in a variety of weights and sizes, ranging from as little as one gram to 400 troy ounces. In some countries these can easily be bought or sold "over the counter" of the major banks. Alternatively, there are bullion dealers that provide the same service. Bars are available in various sizes and are increasing in popularity as investment vehicles, as they carry lower premiums than gold bullions.
Gold bars can be held either directly by you or indirectly (held in a safe deposit box or bank vault on your behalf). Because of the many difficulties of transporting, storing and verifying pure gold bars, an increasingly popular method of investing in gold bars for the small investor is via allocated holdings using a gold account.
Where to Buy Gold Coins?
Bullion coins offer private investors an attractive way of investing in relatively small amounts of gold. Typically bullion coins are priced according to their weight, plus a premium above the gold spot price; premium tends to be higher for smaller denominations. Large banks buy and sell these coins over the counter. In many countries - including the whole of the European Union - gold purchased for investment purposes is exempt from Value Added Tax.
One of the most popular gold coins is the American Eagle bullion coin, which is guaranteed by the United States Government and has been in circulation for over 300 years. The American Eagle coins contain a stated amount of pure gold and are made in four denominations, by the Department of Treasury.
Where To Buy Gold Certificates?
Gold certificates allow investors to buy and sell the security without the inconvenience associated with the transfer and storage of actual physical gold. The client thus saves on storage and personal security issues, and gains liquidity in terms of being able to sell by simply telephoning the custodian. Gold certificates are issued by individual banks which confirm an individual's ownership while the bank holds the metal on the client's behalf.
Gold bullion banks offer two types of gold accounts - allocated and unallocated.
Allocated account is like keeping gold in a safety deposit box and is the most secure form of investment in physical gold. The gold is stored in a vault owned and managed by a recognized bullion dealer or depository, while the holder has full ownership of the gold and pays the custodian for storage and insurance.
With unallocated account investors do not have specific bars allotted to them; instead gold bullion banks may trade, lease or lend the gold bars. One advantage of unallocated accounts are smaller storage and insurance charges, but it has to be noted, that gold holder is exposed to the creditworthiness of the bank or dealer providing the service in the same way as they would be with any other kind of account.
Other Types Of Accounts
There are also some other varieties of gold accounts for smaller investors, like Gold pool account (for less than 1000 ounces of gold, you can invest as little as one ounce), Electronic currencies (a simple and cost-effective way of buying and selling gold, and using it as money; any amount of gold can be purchased) and Gold Accumulation Plans (similar to conventional savings plans, putting aside a fixed sum of money every month).
Where To Buy Gold Mining Companies Shares?
Gold stocks are actually stocks in a gold mining company. So when you buy gold stocks, you don't exactly buy gold. Your risks are different with stocks than when you buy gold coins or bars for example. It would be misleading to equate investment in a gold mining equity with direct investment in gold bullion as there are some significant differences. The appreciation potential of a gold mining company share depends on market expectations of the future price of gold, the costs of mining it, the likelihood of additional gold discoveries and several other factors. To a degree, therefore, the success of the investment in gold stocks depends on the future earnings and growth potential of the company.
Where to Buy Gold Mutual Funds?
A wide range of funds exist in different countries (can be mutual funds, open-ended investment companies, closed-end funds, unit trusts, and any similar structures), which specialize in investing in the shares of gold mining companies, companies that mine minerals other than gold, some may invest in futures as well as mining equities and some may invest partly in mining equities and partly in the underlying metals.
Where to Buy Gold Exchange-Traded Funds (Gold ETFs)?
Gold ETFs are traded like shares on the major stock exchanges and represent an easy way to gain exposure to the gold price, without the inconvenience of storing physical bars. Physical gold ETFs are 100% backed with physical gold, while other ETFs are backed with futures or gold miner's shares. Typically a very small commission is charged for trading in gold ETFs and a small management fee is charged annually from within fund assets, therefore gold ETFs are expected to track the gold price almost perfectly.
Where to Buy Gold Linked Bonds and Structured Notes?
Gold-linked bonds are available from the world's largest bullion dealers and investment banks. Their products provide investors with some combination of exposure to gold price fluctuations, a yield and principal protection. Structured notes tend to allocate part of the sum invested to purchasing put/call options and the other part is invested in traditional fixed income products, such as the money market, to generate a yield. They can be structured to provide capital protection and a varying degree of participation in any price appreciations depending on market conditions and investor preferences.
Where to Buy Gold Derivatives, CFDs and Spread Betting?
Derivatives, such as gold forwards, futures and options, currently trade on various exchanges around the world and over-the-counter (OTC) directly in the private market. In the U.S., gold futures are primarily traded on the New York Commodities Exchange (COMEX), a division of the New York Mercantile Exchange (NYMEX), and NYSE Liffe US. Firms such as CMC Markets or IG Index from the UK provide contract for difference (CFD) or spread bets on the price of gold.
Written by: Goran Dolenc
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