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The Best Ways To Buy Physical Gold

It's not a secret: gold is probably the best protection against inflation. Since many investors are also worried regarding the bank's financial stability - physical gold is the ultimate solution for them. How can you buy physical gold, which things to focus on and where can you store this gold? We've summarized all you need to know:
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Mann (Silvermann) is an experienced investor, financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO

Experience

Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Mann (Silvermann) is an experienced investor, financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO

Experience

Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

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Table Of Content

Contrary to what you might have heard or imagined, buying physical gold is not that complicated.  In fact, you should seriously consider gold and other precious metals to be part of your investment portfolio so you should try to purchase physical gold at least once.

Yes, you should arm yourself with knowledge about the general guidelines as you venture into it.  But we’ll let you in on a little secret:  buying precious metals is mostly a matter of seeking which options best suits your needs.

Is it a Good Time to Buy Gold Now?

This is dependent on your risk tolerance and your expectations for what the markets will do next. The following are some things to think about before buying gold:

  • What Will Happen to the Do Markets? – When the markets are performing well, gold is a poor investment. Stocks have outperformed gold and other precious metals by a large margin during the previous 100 years. If your analysis indicates that the stock market will rise in 2021, gold is not a viable investment for you.
  • What Will the Rate of Inflation Be? – Inflation was very low during 2008-2020, but we see a big jump in inflation in the last year. In 2020-21, the governments are expected to implement two massive stimulus packages. These packages necessitated the printing of a large amount of money by governments.The inflation rate in the US likely accelerated to 8.4% in March of 2022, the strongest pace since 1982. Inflationary pressures normally motivate more people to buy in gold. 

If you believe that we will continue the trend in 2022-2023 , gold is a solid investment. If you believe inflation will go down, however, alternative assets will be more enticing than gold. 

inflation in the US - graph

  • Think about your current portfolio – Take a look at what you currently have in your portfolio. It's possible that you currently have enough gold (or Gold ETFs) and that buying more isn't necessary. It's also likely that you've put money into other assets that are deemed safe havens. Many individuals believe that cryptocurrencies are a form of wealth storage, which is questionable. If you're one of them, your portfolio may already be adequately hedged against inflation and market declines.

Should You Go For Coins or Bars?

The good thing is you can buy gold in two main forms – coins or bars.  Coins have a distinct advantage over gold bars in that they allow for more flexibility.  Look at it this way:  If you own 10 gold coins, it would be easier to sell 3 coins if that’s all you need to do.  Now, try and imagine how you’d be able to do that if your whole investment were in one gold bar.

Accordingly, because of this flexibility, you’ll soon realize that the popular gold bullions coins are a bit more liquid (or easier to sell) than big bars.  Having said that, if you really want to buy a sizeable amount of gold, then bars would appear more practical to you.

Why Does the Price of Gold Rise?

The price of gold can be affected by many factors. The supply and demand for gold determine the price at which it is sold. This supply/demand can be affected by many factors. Let's take a look at some:

  • The gold store is very valuable. It is highly sought after during inflation. People consider it to be a store of wealth, something that will hold firm no matter how much currency depreciates due to its limited supply and history as a store of value.
  • Demand from major funds, especially Gold ETFs, can massively influence gold prices.
  • The price can rise if there is a decrease in supply. Mining is the only source of gold, and gold mining has declined in recent years.
  • Demand can be influenced by industries that use gold (e.g. Electronics But, gold is rarely used in industry. The vast majority of gold is therefore simply kept as a reserve of value. People expect the economy will slow down. Gold demand rises because it is a stable asset and a hedge against volatile assets.

Keep in mind that price increases may not be based upon what is happening right now. It may instead be based upon what might happen in the future. To hedge against the possibility of an inflationary recession, investors can buy gold to protect themselves.

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Option 1: Buy Gold From Your Local Dealer

You might be thinking it’s so old-school it might be obsolete.  But I tell you, there’s a lot of merit in buying gold from a local coin shop.  For one, you can see, check and examine the merchandise before you actually hand over any money.  Second, you can bring home your purchase with you immediately and not have to wait for delivery.  You spare yourself from paying any shipping fees and insurance and you can transact face-to-face with the person you are buying from.

Building up a relationship with the shop owner can provide you with some benefits.  First, you will have the opportunity to negotiate and a bargain – especially for things such as buyback fees.  Most dealers (not just in gold) will give repeat customers a better (if not the best) deal over ordinary customers.

But do keep in mind that local dealers aren’t always the cheapest place to buy gold.  These businesses have to spend on overhead (rent, utilities, insurance, etc.) and that will often translate into higher premiums on the gold products they sell locally than those you can buy online (even after adding the shipping and insurance costs).

Pros

  • See and examine the product you are buying.
  • Save on delivery or shipping charges because there isn’t any.
  • Build a business relationship with the dealer.

Cons

  • You have to pay higher for the product and lessen your buyback income.
  • The dealer might have limited liquidity to accommodate a large buyback.
  • The dealer might have limited inventory.

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Option 2:  Shop Online

There are two main things why online dealers stand out when buying gold:  convenience and cost-effectiveness.

When you invest online, you get access to 24/7 trading and professional account management.  An online dealer would be able to give you the ability to buy, sell, store, and request delivery of precious metals right from the comfort of your home, with just a few clicks on the keyboard or mouse.

When you buy from online dealers, it’s often a lot cheaper because they can offer lower premiums over the spot prices of gold and silver.  One reason for this is that they spend less overhead than with a physical store.  Another advantage is that if institutional investors also share on your trading platform, you may be able to ride on volume pricing.

As you browse for online dealers, always look for transparency.  Do they display their prices clearly on the product pages?  Do they lust for shipping and insurance fees?  Do they give a description of their delivery process?  Do they advise customers of the delivery timeframe before you place your order?  You should be able to find these and other important information on their websites.

How To Choose a Reputable Dealer

The Internet is awash with hundreds of precious metals dealers ready to do business with you.  But how do you know which one to pick?  The best dealer for you will stand out after you do the following due diligence:

They Have a Strong Trustpilot Rating

You should choose one with plenty of experience in the industry.  Check for repeat customers – obviously, customers won’t return if they get a bad service or a negative experience.

A word of caution though:  if the website displays the Trustpilot logo, don’t just assume that the logo is legit.  Go to Trustpilot’s website and search for the company.  Remember, unscrupulous dealers can just copy or imitate any logo.

They Educate Their Customers

Do not fall for those who just want to make a quick and big sale.  These are the ones who will only push for the most expensive products and discourage you from trying other less costly investments.

For example, they would try to ram rare coins down your throat when you are interested in gold bars.  A good rule to follow is:  trust your gut.  Remember, if a dealer is a bit off, he’s not the only dealer around – there are hundreds of good dealers out there.

They’re Big

Dealers who have built their business over the years are more reliable.  They will normally have strong volumes and can offer you greater flexibility.

Small dealers have some distinct disadvantages:  limited product selection and may be unable to fill a large order fast enough.  Delivery time is also a good indicator.  The bigger dealers would be able to ship within 2-4 days after your payment has cleared. The small dealers take longer.

They Have a Buyback Policy

There might come a time when you want to sell your gold and what easier way to do it than through the dealer that sold them to you?  Does the dealer have a buyback policy?  If they don’t have this kind of service available for you, then don’t bother dealing with them.  You’d want your dealer to be around when you need to sell and you want the assurance that you won’t be left waiting for a buyer in case you need one.

Well, of course, there are a lot of gold dealers who would be willing to buy gold any time but you can never tell.  A big plus with dealers that have a buyback policy is that they tend to give their buyers the best resale price.

They Will Accept Multiple Forms of Payment

There are many ways to make your payment and your dealer should be able to accept any of them.  From the traditional cash (like in your local shop) to checks and money orders.  They should also accept bank transfers and credit cards which are very convenient even if they sometimes come with additional fees.

Many dealers now use PayPal, Bitcoin, and other digital currencies.  Keep in mind though, that those online dealers would still wait until they get the funds before they send you the merchandise.

They Have an Online Store

As soon as you’ve made a shortlist of dealers you’d want to trade with, check if they have an online store service.  Between a virtual store and a brick-and-mortar shop, you may find the online store more to your advantage.  Dealing with them is faster and more convenient; you have access to it 24/7, and you can lock in your market price at the exact time you want to buy.

Here’s the kicker:  online stores’ prices are generally cheaper than your local shop even if you have to pay for shipping because their overhead is lower.

If you’re new to the game, get at least three dealers and make a comparison chart.  Match them up side-by-side in terms of commission, credit card or bank transfer fees, shipping cost, handling fees, and insurance.  After the cost-related items, go down to service:  customer contact, ease of ordering, delivery time, tracking, and buyback policies.

You should put all these items together when determining the best dealer for you.

Pros

  • It’s fairly easy to do – like you’re just buying shoes or bags from an online retailer.
  • You benefit from their low overhead cost and you might even get a volume discount.
  • You have 24/7 access to their store, customer service, and account management

Cons

  • You are at the mercy of the dealer when it comes to getting what you paid for – he may not deliver
  • Pay the extra cost in the form of shipping and insurance fees
  • Have to wait until your payment clears before they ship your order

Option 3:  Shop For Gold on eBay

You read it right: eBay.  Admittedly, it’s rather unusual and eBay may not be the best place to buy gold for a neophyte in the precious metals playing field.  But here’s the interesting thing:  many old-timers in the industry have had great experiences whey they bought from the site.

You’re probably familiar with how the website works and navigating through it should be easy.  But here are two tips to help you check if something is a good deal and make sure you will spend your money well when you eventually want to make a purchase:

First:  use the “Advanced Search” feature to search for recently closed listings for whatever it is you want to buy.  Knowing how much the product has sold for in the past will narrow your parameters so that you can have an intelligent idea of other seller’s asking prices.  By comparing their prices with your benchmark, you can immediately determine if the gold they are selling carries a relevant and competitive price.

Second:  Vet the seller before you actually buy by checking the seller’s approval rating.  If you don’t see a 100% rating (or extremely close to it), you may want to look for another dealer.  And, even if the seller has great ratings, take time to read buyer reviews just to make sure that there is no serious bad experience from previous buyers.

That may sound like a good precaution but why do we believe that eBay’s not the paradise for gold trading?

Well, since this is in cyberspace, some dishonest sellers find it too convenient to misrepresent their products.  Most of the time, inexperienced buyers end up receiving something completely different than the product they thought they had purchased, gold not exempted.

The website also teems with counterfeit or substandard products of which the majority come from China.  Many victim buyers have lost thousands upon thousands of dollars after buying ‘gold’ from eBay.  A good majority of them only realize they have been duped when they bring their fake gold to an expert for appraisal.

And let’s not forget that it’s a convenient place for a dishonest seller to artificially inflate his prices by rigging his own listing with his own bids.  You should purchase products on the spot or use the “Buy Now” option rather than go through the traditional auction.  Even with these safeguards, we are not totally convinced that you can use this as your primary option.

Pros

  • It’s very convenient and most dealers offer free shipping.
  • You won’t have to pay state sales tax.
  • If you know how to navigate the site, it’s easy and faster to look for what you want and the best price

Cons

  • It’s more suited for veteran investors and not for inexperienced buyers.
  • It is swarming with counterfeits, imitations and substandard items.
  • Dishonest sellers can manipulate prices to their advantage.

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How to Avoid a Scam?

Scams using gold are fairly widespread. Because there is little oversight in the industry, it is quite easy to identify dealers that appear to be reputable but aren't.

Before you buy or sell gold to a dealer, here's how to recognize a gold scam:

  • Understand what you're doing. Before you buy gold, you must first learn the fundamentals, such as how purity affects the value of the metal and how to weigh bullion properly.
  • Reputable Dealers: Always go with dealers who have a good track record and have been in business for a long time. Because they have a more stable and capable network, they can not only safeguard you from scams, but they can also provide you with better products
  • Avoid Special Offers: If an offer appears to be too good to be true, it most likely is. Always keep in mind that profit is not easy to get by. When you acquire gold, your goal is to protect your wealth rather than to increase it. Avoid buying coins that are selling for less than their spot value. As previously said, offers that appear too good to be true are almost always accurate.
  • Avoid Rare Coins: Avoid buying coins that are supposed to be rare but are being sold for far more than they are worth (the value they would have if melted). There is no evidence that their pricing will continue to climb or even remain the same in the future.

How Do You Store Your Gold?

If you somehow believe that the doomsayers who predict an imminent complete financial or societal collapse any time soon are correct, you’d want to have your physical gold with you.  We’ve always said that gold is like insurance in the case where all financial assets become worthless so it is a must for a gold owner to have quick access to his precious metal.

So what are your options when it comes to storing your gold?  Here are some:

  • A Buy-And-Store Program

This is perhaps one of the best features an online dealer can offer a gold buyer.

Many large dealers have entered into an arrangement with private (non-bank) vaults for safekeeping of precious metals.  When you purchase any metal with them, they will transport them straight to this third-party depository.  If you are an investor in gold bars, this service is ultimately important not just because of the safekeeping issue.  When you want to sell your gold, authenticating the metal will be a lot easier because the physical chain of custody for the items remained secure and unbroken.

A buy-and-store program will take the hassle out of storing your gold by making it easy, convenient and safe.  And here’s another bonus:  some big online dealers will let you keep your gold in different vaults around the world – that is if you want to diversify your holdings.

Supposing your dealer doesn’t have a buy-and-store program, don’t dismiss your ambition to be a gold investor.  You can find other dealers or other solutions.  However, if you’re thinking of storing it at home or in a bank, let us give you our thoughts on it.  You’d have to go through the hassle of sourcing for storage space or container and then coordinating the delivery of the items yourself.  

  • Home Storage

If you have a full understanding of the risks in keeping your gold in a home safe, you may proceed but with caution.  You have to bolt your safe to the floor or firmly install it in a wall – otherwise, thieves can just haul it off.  But you can’t also discount some desperate home invaders who might try to force open or cut the safe to take your gold.

When you keep gold at home, you would have to pay higher insurance and you would always have to factor in the security & safety angle not just for the gold but more for the people who live in the home.  Weighing the benefits and the disadvantages, going for home storage is not an option we would vote for.  Maybe you could stash a handful of coins for emergencies but keep the entire loot? A big no-no.

  • Bank Safe Deposit Box 

If there is a neighborhood bank that is near your house and offers a safe deposit box facility, you might consider stowing the gold there.  It’s convenient, accessible and quite secure.  It’s an effective solution especially if you can get a big enough box to store all your precious metals.

The disadvantage is that you don’t get any insurance against fire, theft or natural disasters such as earthquakes, hurricanes or tornadoes.  You will not be able to access your gold when the bank has closed for the day.  And worse, when the bank runs into some problems that it folds or declares a “bank holiday”, it’s going to prevent you from getting your hands on your gold for an extended time.

The Smart Investor content is intended to be used and must be used for informational purposes only. We are not an investment advisor and you should NOT rely on this information to make investment decisions.

Best Ways To Buy Physical Gold - FAQs

Owning gold in any form, bullion or coins, on U.S. soil is currently legal. However, before January 1, 1975, it was illegal. The December 31, 1974 repeal act by President Gerald Ford marked the end of executive order 6102, signed by U.S. President Franklin D. Roosevelt on April 5, 1933. The law had burned ownership of any form of gold without a special license bearing Federal Reserve seal and serial. With that in the past, now anyone can own gold freely.

Buying physical gold online is relatively straightforward. All you have to do is to choose a reputable online broker and head over to their website. On the website menu, select the kind of gold you want to buy, coin or bar. Once satisfied with your order – quantity, weight, and type – click on the cart and start the checkout process. With most online brokers, you don’t even have to sign up. You can simply checkout as a guest. In the last step, enter your payment method, billing address, and start tracking your order. 

It is hard to give a clear cut of how much gold you should buy at a time. For one, there is no limit to your investment. However, when it comes to portfolio strategy, you should have an idea about the gold market. Because, despite gold having a noticeable uptrend for the past century, it is susceptible to volatility. In the short run, it can lose or gain value depending on how volatile the market is.

On the other hand, as an investor, you should consider several factors such as affordability, storage, and how fast you can liquidate your gold. Regardless, it all boils down to your financial goal.