How do Beginners buy Gold?
6 Strategies to Consider
Investing in Gold becomes more popular during rough economic waters. When Inflation strikes or recession claws at your wallet, Precious metals can protect your dollars and diversify your Portfolio. (Not to mention, it makes darn gorgeous jewelry.)
However, you don’t just want to rush out and buy Gold willy-nilly. The right Investment strategy should balance your risk tolerance and reward preferences. That’s not an easy task, particularly post-Covid.
So, before investing in the yellow metal, you’ll want to ask a few questions. How much of your Portfolio can you devote to Gold – is it even suitable for you? Do you also have a place in your Portfolio for Silver or the other Precious metals (Platinum and Palladium)?
Once you’ve worked through these questions, you can’t neglect one of the most important:
How do beginners buy Gold?
Strategy 1: Gold Bullion
When you think of buying Gold, chances are, Gold Bullion comes to mind first. Gold Bullion encompasses any form of pure or nearly-pure Gold (like Gold bars) certified for weight and purity (typically 99.5% or better).
Investing in Gold Bullion offers some upsides, such as being able to handle your Investment physically. Smaller bars and Coins are also relatively liquid in a pinch, especially during economic downturns.
That said, you have to choose wisely. Heavier Gold bars can cost tens or hundreds of thousands apiece, making them costly to purchase and insure.
Meanwhile, smaller Bullion provides more liquidity and ease of transportation. But the smaller you go, the more you will pay per ounce due to higher refining and distribution costs. And you’ll still have to contend with the logistics and risks of storage, insurance, and theft.
If investing in Gold Bullion as a beginner sounds ideal to you, you can start searching online for local Precious metals dealers. Some pawn shops also buy and sell Precious metals.
Before you start snapping up the yellow metal, however, remember to:
- Check the spot price of Gold to ensure you pay a fair price
- Ensure that the Gold is legitimate through an appraisal and/or its serial markings
- Prepare a safe location for long-term storage
Strategy 2: Gold Coins
For centuries, governments have relied on Gold Coins to store and distribute wealth. Nowadays, as economies turn to paper and/or digital monies, Gold Coins are primarily used for speculation, Investment, and collection.
Generally, Gold Coins are less pure than Bullion. For example, the American Gold Eagle is only 91.67% pure – Copper is added to make the Coin harder and more durable. Despite their lower purity, Gold Coins offer several perks, like:
- Smaller, more convenient units
- Lower prices per Coin (though higher prices by weight which means you’ll pay more per ounce for your metal)
- Increased liquidity over large Bullion bars
That said, you’ll want to consider the ramifications carefully.
To start, Gold Coins still require special storage and insurance considerations. Smaller amounts of Gold, such as Coins versus Bullion bars, are also sold at a markup due to higher production and distribution costs.
Additionally, some older or special-edition Coins are sold as collector’s items at a substantial premium over the price of the Gold itself.
Still, if you crave the feel of physical Gold, Coins make a convenient, relatively affordable choice. You can find them at local pawn or Gold shops, Coin shops, and in the hands of private dealers and collectors.
Strategy 3: Gold Jewelry
Nearly half of the Gold mined worldwide goes into jewelry, and it’s thought that the demand for jewelry will increase over time. However, while pretty, Gold jewelry rarely makes a good Investment vehicle.
For one, fine jewelry typically retails at a markup multiple times higher than the Gold content itself. While you may discover better deals second-hand, you’ll have to exert extra effort to seek out valuable pieces. Plus, you’ll have to keep track of any existing paperwork to prove the item’s legitimacy (particularly for pieces made by famous jewelers).
Still, it’s possible to add jewelry to your Portfolio and your wrists. Start by seeking out Investment-grade jewelry – that is, Gold rated 14 karats or higher. From there, get your piece(s) appraised and purchase insurance to cover accidental loss, damage, or theft.
Strategy 4: Gold-based ETFs, Trusts, and Mutual funds
As we’ve seen, investing in physical Gold requires ongoing cashflow to store and protect your asset. However, Gold pays no interest or dividends to offset these added costs while remaining vulnerable to short-term price fluctuations.
That’s why many investors turn to less direct, potentially income-producing assets like Gold-based ETFs, Trusts, and Mutual funds. These Precious metal vehicles are specialized Investments that represent a fixed amount of Gold. Some of these instruments also invest in Gold-related stocks to capitalize on potential price appreciation and dividend payouts.
These funds aren’t free; generally, they cost 0.5% to 1.5% per year. Still, that’s usually cheaper than the cost of storing and insuring Gold yourself. Plus, you can choose between passive funds that track an index, or actively-managed funds overseen by human eyes.
That said, few exchange-traded or mutual funds stick with Gold Investments alone. Often, these funds branch into multiple Precious metals, from Gold and Silver to even rarer materials like Platinum and Palladium. However, that’s not necessarily a negative, as these funds offer additional diversification and (potentially) reduced risk.
These perks make Gold-based ETFs and Mutual funds simpler, more cost-effective Investments than physical ownership. They also make trading whole or partial shares easy, as you can usually buy them right in your brokerage or Individual Retirement Account (IRA).
Strategy 5: Gold Mining Stocks
As noted above, the stocks of Gold miners and refiners provide another route to indirectly invest in Gold. Investing in these companies gives Gold a slightly more active role in your Portfolio and comes with potential perks like:
- Stock price appreciation
- Dividend payments
- Corporate profits that rise with Gold prices and hedge against downfalls
- The ability of the company to branch into other metals or mines to preserve profit potential
- Your ability to purchase shares in your regular Investment accounts or buy into Gold-related ETFs
However, mining and similar Gold-related stocks can be risky in their own rights. To start, there’s no guarantee that the shares will rise over time. Additionally, Mining stocks may face legal or moral dilemmas like environmental or human rights violations.
As such, it’s essential to do some extra research before investing in Gold Mining stocks.
Strategy 6: Gold Futures and Options
Gold futures and options provide another avenue for Gold Investments, albeit risky ones. Investors may use these securities for speculation purposes or to receive delivery of Gold when the contract expires.
Both contract types allow investors to use leverage – meaning that you can buy valuable contracts with a relatively small deposit. While that greatly increases your profit potential, you may find yourself in deep debt if you make the wrong bet.
Additionally, due to the high price tags and volatility inherent to futures markets, these Investments are best-suited for more advanced investors.
Looking at Gold Futures
Futures are standardized contracts that require the buyer to purchase a set amount of an asset at a predetermined date and price. Some futures settle in physical ownership (that is, you receive a shipment of Gold), while others pay cash when the contract expires.
Gold futures often represent large amounts of Precious metals (for instance, 100 ounces) that make them expensive and potentially risky.
Looking at Gold Options
Gold options are futures that give the option, not the obligation, to buy a set amount of the yellow metal at a predetermined date and price. Options provide investors with a slightly less risky alternative to regular futures, as you can back out of the contract. However, due to this, investors must pay added costs on top of the underlying value of the Gold.
Strategy 7: Gold IRAs
Gold IRAs are self-directed IRAs that allow investors to use tax-advantaged funds to purchase physical Precious metals including Gold, Silver, Platinum, and Palladium. Both Bullion and Coins can be held in a Gold IRA.
As self-directed IRAs, you’re required to hold these accounts separate from your traditional IRA. They may also come with higher fees stemming from Precious metal storage costs.
As an IRA, these accounts come with special tax protections, such as contributing pre- or post-tax dollars (tax-deferred vs tax-exempt). Depending on which option you choose, you may be able to pay taxes in retirement, or pay taxes now and skip taxes in retirement later – including on any capital gains.
Opening a Gold IRA is fairly easy. You simply choose a Gold IRA company to work with, fund the account, and then select the metals you want to hold. There are lots of Gold IRA companies to choose from so selecting the best company can be a daunting task.
At Satori Traders we have researched numerous Gold IRA companies and identified Augusta Precious Metals as the best one overall for two reasons.
Augusta is dedicated to customer education and service – that is the primary reason we selected them best overall. If you read the company’s reviews on the Better Business Bureau’s (BBB) website you will find that customers consistently mention that Augusta was patient answering questions without applying any pressure.
Another remarkable aspect of Augusta Precious Metals is that the company has received zero customer complaints at BBB or any other rating agency.
The mini-review below summarizes our findings about Augusta. For an in-depth evaluation visit the Augusta Precious Metals review page.
Augusta Precious Metals
Augusta Precious Metals is committed to educating their customers. The company provides extensive educational materials on its website and investors with $100,000 or more to invest can schedule a 1-on-1 teleconference with Devlyn Steele, the company's Harvard-trained director of education. Many of Augusta's customers state that the company worked with them patiently until they were comfortable making an Investment in Precious metals. Augusta minimizes the fees you will pay for a Gold IRA and they never charge an IRA maintenance fee.
How to invest in Gold for Beginners
For many investors, the appeal of owning physical Gold is outweighed by the added costs of possession. And when it comes to individual Gold mining stocks, options, and futures, the potential risks (and research required) become cumbersome quite quickly.
For these reasons, Gold-based ETFs, Trusts, and Mutual funds typically provide some of the safest, easiest routes to Gold ownership. Every share you purchase increases your stake while outsourcing the research and storage to an outside entity.
For investors who are determined to own physical Precious metals, a Gold IRA may be the best solution. You pay a slightly higher cost to offset storage requirements, but the long-term financial protection may be worth the cost.
After the dot com bubble popped I started researching Financial bubbles - how they evolve, how they pop, etc. I quickly realized that Gold is the only real money on planet Earth and in 2002 I bought my first Gold Coin. I've been investing in the shiny stuff ever since - both physical Precious metals and the Mining stocks. I've also studied the Financial markets, trading, Technical analysis, and the endless games that central banks play with fiat currencies. I do my best to share what I've learned with others - that's what you'll find here on Gold Well Live.