In the current times of financial uncertainty gold has become the investment choice for millions of investors across the globe. So how do you go about buying your gold? Should you save up for some bullion? Invest in some Krugerrands? Or stash some gold teeth under your pillow?
The most common type of gold investment is to buy gold bullion which is then stored in a secure environment for you. There are many companies that offer this service. ‘Bullion vault’, for example, offer a service whereby you can open an account with them and deposit whatever sum you wish. You can either use the deposit to buy gold immediately, or you can set a trigger price that will buy the gold for you when the market price is lower, giving you more control over your investment.
The gold (or silver) that you buy exists in a physical form and is stored and insured usually in a highly secure vault in Zurich, London or New York.
When you decide to sell your gold it is sold at the current market price and you receive your money by bank transfer. There is no need to actually physically store the gold yourself, but should you want to you can withdraw whole bars for a charge of around 2.5% or, for quantities of less than 400oz, for 5%. Bullion vault make their money by charging a commission on transactions. Commissions run on a scale from 0.8% for small transactions down to 0.02% for large transactions. Systems like this have made the gold bullion market accessible to the smaller investors who were previously limited to the gold coin market.
Gold bullion coins
Investing in gold bullion coins is enjoying something of a renaissance at the moment. Gold bullion coins are coins that are valued on their precious metal content, not on any value as a collectible coin (despite what some dealers may tell you.) Bullion coins will normally sell for a premium over spot price (spot price is the price of the metal in the spot market), you can find the live spot price for gold here) and this premium will be somewhere in the region of up to 10% depending on the type of coin and the quantity bought. Size makes a difference too; you will always be better off buying a one ounce coin rather than two half ounce coins.
There are a number of different types of gold bullion coin on the market, but most people deal in either krugerrands or sovereigns. Krugerrands are of interest because they generally attract a lower premium above spot price, whereas sovereigns are also of interest because, as legal sterling tender, they are exempt from capital gains tax. You can choose which is of most interest to you.
Final thoughts on how to buy gold
The price of gold has increased dramatically from a price of $500 USD per ounce back in 2006 to peaking at well over $1,800 in 2011. This unprecedented rise is directly connected to the faltering economies seen around the world with investors looking for solid, hold in your hand, investments. As economies turn around surely the price will lower but that will be offset with a growing middle class in places like gold obsessed India.
In the current climate gold really has had a perfect storm to create demand and prices unheard of in the history of the precious metal. There are many methods on how you can buy gold and like any investment, if you could predict its future then you really would have the Midas touch.