If you want to start investing in gold, it's natural to want to find the most economical way to do it. Buying gold at a good price can help you get more for your money and maximize your investment. But finding the cheapest way to buy gold is not as simple as you might think. It involves juggling a number of factors, such as fees, premiums, storage costs and more.
In this article, we'll explore the cheapest way to buy gold, including how different ways to buy gold can affect its price and tips for buying cheap gold.
Different ways to buy gold
There are several options when it comes to buying gold, such as buying physical gold, gold ETFs, gold mutual funds, gold futures or shares of gold mining companies. Each method has its own advantages and disadvantages. For simplicity, in this article we will focus on buying gold bullion, gold ETFs and gold mutual funds.
1. Physical gold (i.e. gold bullion and bullion coins)
Buying physical gold is the oldest and most popular method of investing in gold. This involves buying gold bullion, gold coins or gold jewelry to wear. You can buy investment grade gold bullion from government mints or online precious metals dealers.
Owning physical gold bullion has many benefits, including:
*You own the physical metal yourself.
*You enjoy the security of owning a tangible asset.
*There is no need to rely on a third party (i.e., no counterparty risk).
An additional consideration when buying physical gold is that you should consider storage to protect your investment against theft or damage. Some people choose to pay for secure storage in a vault and others take out insurance to protect their assets. Depending on how you choose to store your gold, you may add additional costs to your initial investment.
Gold bar or gold coins?
In most cases, gold bars are cheaper to purchase on a per ounce basis compared to gold coins. This is because they have lower premiums. That said, we generally recommend holding gold bullion for long-term investments, as it is less liquid than gold coins, which are more easily sold in small quantities.
If you'd like to learn more about the differences between gold bullion and gold coins, we have an article that outlines the pros and cons of each investment so you can discern which is best for you.
How to buy physical gold
Buying gold bullion is a simple process. All you need to do is find a reputable dealer, choose the type of gold you want to buy and presto, your gold investment will be shipped safely to your location.
No specialized knowledge is required and prices are transparent, making investing in physical gold the easiest option.
Tips for buying physical gold
To help you get the most out of your physical gold investment, here are some tips to keep in mind:
Check the spot price: always check the current price of gold before you buy to make sure you are getting a fair price.
Ask questions: don't be afraid to ask gold dealers which purchase is best for you. At StoneX Bullion, our team is always available to guide you through the gold investment process and answer any questions.
Do your research: before buying gold from a dealer, be sure to check other places to find the best price. Read customer reviews and testimonials to make sure your dealer is reliable and reputable.
Buy in bulk when you can: if you have the means to buy large amounts of gold at one time, this can help you save money compared to spreading out your purchases.
Tax implications: if you decide to buy legal tender gold coins, you may be exempt from paying VAT or capital gains tax on your investment. This could mean you can buy more gold for the same amount of money, but be sure to check local laws and regulations for guidance.
2. Exchange-traded funds (ETFs)
Gold ETFs offer a way to invest in gold without having to own the physical metal. They are mutual funds that are traded on exchanges, just like stocks. Gold ETFs track the price of gold or invest in gold mining companies and allow you to benefit from gold price movements without owning gold.
Investing in gold ETFs has many benefits:
*You don't have to worry about storage or insurance costs.
*You can buy or sell gold ETFs at any time and instantly.
*Minimum initial investment can be very low
*It is the most cost-effective way to invest in gold.
However, investing in ETFs carries additional risks. First, you do not own the physical metal and therefore do not benefit from having a tangible asset with intrinsic value. Second, there is a large counterparty risk. If the ETF provider does not back the ETF with enough physical gold, you could end up losing money.
How to buy gold ETFs
Buying gold ETFs is less straightforward than buying gold bullion, especially if you haven't invested in stocks before. We recommend that you spend some time researching and studying the gold market before you get started. Once you understand the process, you will find that it is quite simple.
The first step to buying gold ETFs is to find a broker and open a brokerage account. Then, you can use your broker's website to search for gold ETFs. Before investing in an ETF, spend some time analyzing its past performance. When you've found a good one, simply buy it as you would a stock.
Tips for investing in gold ETFs
If you think buying gold ETFs may be the best option for you, here are some tips to help you in the process:
*Buy during dips: gold ETFs are bought and sold on stock exchanges and behave like traditional stocks. If you follow prices closely, you may find an opportunity to buy gold ETFs at a lower price than the spot price of gold.
*Look for low commissions: You will likely have to pay commissions when investing in gold ETFs, and they can add up quickly. Before you start investing, look for a reputable broker with low commissions.
*Research ETFs: Every gold ETF is different and it is important to carefully research an ETF before buying it. This includes checking that the five-year returns match the spot price movements of gold and looking for an ETF with a low expense ratio. At the time of writing, the best performing gold ETFs include: abrdn Physical Gold Shares ETF (SGOL), SPDR Gold MiniShares Trust (GLDM) and iShares Gold Trust Micro (IAUM).
3. Gold mutual funds
Like gold ETFs, mutual funds provide exposure to gold price movements without you having to own and store the physical metal. They involve spreading your investment among various gold-related assets, including shares of gold mining companies, ETFs or physical gold. Gold mutual funds are a more diversified way to invest in gold and a better option for investors who don't want to pick individual stocks or ETFs.
Investing in gold mutual funds has several benefits:
*You don't need to think about owning or storing gold.
*Less research is required compared to ETFs.
*Minimum investment requirements can be quite low.
*Your investment is diversified across several companies.
That said, they can carry high management fees and carry the same counterparty risk as ETFs. Like stocks and ETFs, you can buy gold mutual funds through a brokerage firm or other financial institution.
Tips for buying cheap gold
If you want to go the traditional route of investing in physical gold, here are some tips to help you save money when buying gold:
Time your purchase
The price of gold fluctuates frequently and is affected by a variety of factors. We recommend studying the spot price of gold over a period of time to understand its movements. By watching the price of gold, you can plan your investment when the price is low and save money.
Buying gold in bulk
Generally, you will get the most gold for your money if you decide to make a wholesale gold purchase in a single transaction. Of course, this will cost more up front, but it can save you money on premiums, shipping and other associated fees.
Buying gold online
Online gold dealers often offer the best prices for pure gold compared to buying from dealers in person, mints or banks. This is because they have lower overhead costs. That said, to avoid being scammed, it is important to research dealers carefully (see next point).
Research dealers
Don't simply buy gold from the first precious metals dealer you find online. Spend some time researching different dealers, comparing prices and reading customer reviews to make sure they are trustworthy. A highly reputable and secure precious metals dealer:
*Be an LBMA affiliate member.
*Possess the necessary licenses
*Offer a range of gold bullion from reputable mints.
*Have a track record of satisfied customers
*Display live gold spot price on your website.
Beware of gold dealers who offer extreme discounts or sell gold at a much lower price than anywhere else. This is likely a scam. The last thing you want is to run the risk of the price of gold being extremely low and having your money stolen. If the prices seem suspiciously low, be sure to check for hidden fees that could increase the total cost of your purchase. If it seems too good to be true, it probably is.
Buy gold at the best price
Another way to buy cheap gold is to look for "Best Value" gold on dealer websites. This refers to used or pre-circulated gold coins or bars that are generally sold at a lower price than if they were new. For example, a "Best Value" gold coin may be up to one percent cheaper than a newer issue, despite having the same amount of gold content.
Avoid numismatic coins
Many people who want to invest in gold are attracted to the world of collectible or numismatic coins. These are rare and historic coins, but extremely difficult to value and sell. Fraud is rampant in the numismatic communities and, unless you know a lot about the subject, it is easy to fall prey to a counterfeit or overpriced coin.
If you want to invest in gold coins, it is best to buy gold bullion coins through authorized precious metals dealers. Gold bullion coins are transparently priced based on the spot price of gold, unlike collectible coins, whose value is based on subjective and intangible factors. Popular gold bullion coins include the Gold Maple Leaf, the Gold Krugerrand and the Gold Vienna Philharmonic.
Buy coins to avoid capital gains tax (CGT).
Gold bullion may be more affordable per ounce than gold coins, but gold coins have the added benefit of helping you avoid paying capital gains tax and VAT, depending on where you live. This can make them the cheapest way to buy gold. In the UK, gold sovereigns dated after 1837, Britannia gold coins and other gold bullion coins with face value, such as the Tudor Beasts and Myths and Legends series , are exempt from capital gains tax.
This is not only the case in the UK, but in many other countries that issue legal tender gold coins with a face value. To be sure, check your country's specific tax rules or consult with a tax professional.
Summary: What is the cheapest way to buy gold?
When it comes to physical gold bullion, buying it from an online precious metals dealer is the best way to get a good price for your gold investment.
By StoneX Bullion