How to Buy Gold Bars and Protect your Investment

Gold bars and refined gold coins—collectively defined as gold bullion—come in various sizes, weights and types. As purchasing gold coins is as simple as a trip to your nearest …

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Gold bars and refined gold coins—collectively defined as gold bullion—come in various sizes, weights and types. As purchasing gold coins is as simple as a trip to your nearest coin shop, this article will focus exclusively on the considerations of buying gold bars.

Know why you’re buying gold bars

While some individuals may buy gold in other forms (coins, nuggets, jewelry, etc.) for its intrinsic beauty, those who purchase gold bars generally do so solely for investment purposes, as a means of hedging against inflation, thereby preserving or enhancing an individual’s asset base. Like any investment, buying gold bars involves some risk, but you can minimize that risk by understanding the dos and don’ts.
 
Consider historical gold prices
The price of gold has been steadily increasing for several years now. By the end of 2003, gold closed at $414.80 a troy ounce. As of this writing (end of the first quarter 2008), the spot price of gold was approximately $930 for a Troy ounce (approximately 1.1 ounce)—more than double the price 5 years ago. Given current prices, a 1-kg gold bar (about 2.2 lbs) costs about $30,000.  If you’re going to buy gold bars, you should have an understanding of some of the volatility gold prices have seen over the years. In addition, as I’m sure you’ve probably seen in many financial disclaimers; past performance to does not guarantee future results.
 
Select for purity and weight
The price of gold is determined by supply and demand, but two important factors go into the determination of individual gold bars: its purity and its weight.
 
Purity: The majority of gold bars are stamped with the purity value of the bar, and that purity can vary depending on the mint; the average purity is 99.98%, but government-backed gold bars can be as high as 99.99% pure.
 
Weight: Gold bars come in a wide variety of sizes, ranging from about 1 gram (.035274 ounces) up to 440 grams, which is just shy of 1 lb. In general, given your resources, you should buy the largest gold bar that you can afford, because the larger bars have proportionately less margin (mark-up) than the smaller bars, and you’ll come closer to the actual value of the gold.
 
Look for gold bar standards
Typically, each gold bar has four marks which uniquely identify it:
 
1)     refiner’s mark or the goldsmith’s “brand” name;
2)     gross weight, stated (usually) in Troy ounces;
3)     purity percentage; and
4)     serial number of the bar.
 
Make sure you identify these markings on the gold bars before buying them. This can be difficult if buying over the internet, so ensure you are working with a reputable company.
 
Choose a gold bar dealer
From where or whom you buy your gold bar should be an important consideration. Because a gold bar can vary in value from one bar to the next, you should buy gold only from a reliable, trustworthy dealer. The dealer should be able to prove that the gold bar has been assayed and tested, and should certify that it is solid and true. Do your homework here, so that you avoid being defrauded. Look at both brick and mortar gold dealers, as well as online-based. In this business, longevity is an important factor in finding a reputable dealer, as is reputation.
 
If you purchase gold bars online, the dealer should send your purchase to you via registered insured mail, or some other insured delivery process, for the full value of the gold. Purchases upwards of a fixed amount, usually in the hundreds of thousands of dollars, would warrant the hiring of an armored car delivery service.
 
Protect your investment
When it comes to storing and protecting your investment, the smaller your gold bar, the easier it will be for you to store it. A single ounce of gold could easily be kept in a bank safe deposit box, though you should bear in mind that safe deposit boxes are not FDIC insured. When you deal with bars of gold the size of which you would normally find at Fort Knox, you need to look at a bonded vault facility, exclusively devoted to protecting gold and other precious commodities. 
 
In the long term, gold is a wise investment, and many experts are predicting that within the next decade, the price of it could double or even triple from where it currently stands. There’s an adage that says, “Who ever has the gold makes all the rules.” They’re a gold investor’s words to live by.

 

 

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