When it comes to buying gold, the average person doesn’t really know how to get started. There are a number of gold bullion coins in circulation in the world. The attraction of these is that they retain near full bullion value regardless of either change of government or being transported outside their country of issue.
So the starting point would be to know which gold coins are sold in your country.
Major bullion coins:
- Issuing country Coin
- Australia Nugget
- Canada Maple
- New Zealand Kiwi
- South Africa Krugerrand
- United Kingdom Britannia or Sovereign
- United States Eagle
For simplicity’s sake, let’s look at the country in which you are living. For the moment, forget about buying coins from other countries. Let’s just concentrate on what will be the easiest way for you to start your collection. If you know someone who routinely buys gold and silver and has a reputable dealer, that would be your starting place. If not, I would strongly suggest that you start researching the dealers in your area and do some comparison shopping. Find out how long they have been in business, find out if they have ever gone bankrupt, if they have ever had any lawsuits against them, if they follow through on what they say. Find out how much of a premium they charge you for purchasing your gold. Most dealers charge you a premium up front when you buy the gold, but do not charge you at the other end when you sell it back to them. But since things have a way of changing rapidly, you should still question whether or not you are being charged at the other end too.
Other ways of buying gold: gold mining shares – too risky as the quantity of a mine’s reserves is never accurately known. There can be unforeseen engineering problems in extracting ore. These can increase production costs and thus eat into the mine’s profitability. The mine can be all played out and there is no more gold there They are traded on the stock market and can just as easily disappear off the boards and you can lose all your money.
Now, let’s take a look at buying gold over the internet – or otherwise known as E-gold. There are various companies who offer online purchasing and selling of gold bullion.
What are the advantages and disadvantages of this method of investing in gold?
- You can buy very small quantities of gold at relatively economic price– you do not have to buy in ounces, but you can purchase grams of gold which at the time of writing is $35.00 per gram.
- You can buy and sell your gold 24/7 and are not limited to store opening hours of the bullion dealers.
- The premiums charged for purchasing the gold are much lower than bullion dealers or mints. Typically you will pay between 2-3% of the purchase price.
- You can either allow them to keep your gold in their depository or, depending on where you live in the world, you can take delivery of your gold. These companies are currently based in the northern hemisphere and they will not deliver gold to the southern hemisphere at present.
- You do not have to spend your gold grams. You can sit on them or you can sell them in return for straight cash.
Disadvantages of e-gold account:
There is a degree of intermediation in the holding. Your gold is the legal property of trustees who have a fiduciary duty to you. This means that it is not quite the same as outright ownership of the gold in your hot little hand.
There could be security issues in that a hacker may get into your account and make an unauthorised payment. Similar to the risks of doing internet banking.
Other ways: gold futures, gold backed shares – e.g. ETF’s – too risky for the average investor
It is a profitable business for those who buy at wholesale and sell at retail. But it’s a poor way of investing in gold.
- Enjoyment of wearing it
- Very easy to buy
- Acquisition costs are high. Retail jewellery is often marked up by 300% or more in the shops
- The real value of jewellery is in the gemstones, the design and craftsmanship. These greatly outrank the value of the gold
- All pieces are different and their values are subjective. If you don’t have experience you probably won’t know a fair value.
- It is easily stolen.
Ways of buying gold:
- Bullion dealers and mints
- Gold mining shares
- Gold shares – ETF’s (Exchange Traded Funds)
In conclusion, make sure that whoever you buy your gold from is a dealer or a business that has been in operation for a long time, that they have a good reputation and that they are not fly-by-nights.