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how to buy gold

Gold can be an attractive investment for those who wish to protect themselves from the volatility paper currency and stocks experience. However, the process of acquiring gold is a bit more opaque than simply heading to an ATM. You need to decide what kind of gold you want to buy, find a reputable gold dealer and make sure you’re storing your gold safely.

Read on to learn why you may want to invest in gold in the first place, how to purchase gold and what the different kinds of gold investments can look like.

Why Should You Buy Gold?

Buying gold is a way you can diversify the types of investments that you hold. By diversifying, you are protecting yourself against the possibility that all of your assets will lose value.

Gold in particular is thought of as a safe kind of asset. Since gold has had value in some form for millennia, people generally are confident that it will continue to have value. If you are less confident in, say, paper currency or the stock market, then you may be interested in the safety of gold. Another plus with gold is you can expect little to no effect from inflation. Because the process of finding and extracting gold is long, it’s almost impossible for the supply to fluctuate in the short term.

An important thing to remember about gold is that it won’t earn you any kind of lucrative return or interest. The price of gold moves up and down like any asset, but you shouldn’t invest in gold with idea that your money will be earning lots more value. Gold should be one portion of your portfolio, not the whole thing.

how to buy gold

How to Buy Gold

The first step in the gold-buying process is deciding what kind of gold you want to buy. Are you interested in purchasing scrap gold like old jewelry? Are you looking to buy gold bullion? If so, are you looking for coins or bars? Would you rather invest in gold futures or a gold exchange-traded fund (ETF)? All these products will have slightly different purchasing processes, so deciding which type best suits you will save you time and energy.

If you choose the bullion route and you’ve decided what size coin or bar you want, then you can start looking for a seller. The U.S. Mint provides a list of Authorized Purchasers, including gold dealers, brokerage houses and some banks that can sell American Eagle bullion coins. It’s important that you do your homework on the dealer you choose and make sure they have a good reputation. Steer clear of places like pawnshops or Craigslist.

After you’ve found a reputable dealer and you’ve purchased your gold, you must decide how you’ll store it. This decision is just as crucial as deciding on the right dealer. After all, your gold won’t be much use to you if it’s stolen. Many people store their gold bullion in safety deposit boxes or purchase home safes.

Gold Bullion vs. Gold ETFs

Investing in gold bullion is undeniably safe. However, you lose a bit of liquidity by purchasing bullion, since you’ll physically need to retrieve your gold and sell it to someone in order to get back to cash. If you’re looking for safety and liquidity, you may be more interested in a Gold exchange-traded fund (ETF).

With a gold ETF, such as the SPDR Gold Shares fund, you’ll be purchasing shares of a fund that then purchases gold bullion. So, you’ll never actually see or hold the gold, but the buying and selling process is greatly streamlined.

When deciding between these two options, it comes down to your priorities. Do you want the peace of mind that may come with being able to see and hold your gold? If so, then bullion may be for you. Would you rather be able to move your assets from gold to something else with ease? In that case, you may be more suited to an ETF.

how to buy gold

Bottom Line

Investing in gold is a more complex process than simply buying a few bars and burying them in your back yard. However, it can be worth it to diversify your assets and hedge against things like inflation and volatility. Also, the choices within the gold market – coins, jewelry, ETFs, etc. – allow you to tailor your investing to your preferences.

If you choose to add gold to your asset portfolio, always make sure to work with a reputable gold dealer. Also, have a secure storage plan for keeping your gold safe. If the extra logistics of the gold-buying process seem like too much hassle for you, consider looking into a gold ETF instead.

Finally, investing in gold can be a great way to spread your risk and diversify your investments. However, it’s crucial that you’re diversifying with gold. Investing all of your assets in gold isn’t a good idea, just like investing all your assets in stocks or any one asset class is a bad idea. If you’re looking to buy gold, make sure it’s one aspect of a healthily diversified portfolio.

Tips for Responsible Investing

  • When it comes to investing, it’s extremely important to diversify your portfolio to protect yourself from risk.  If you’re looking to purchase gold, make sure that it’s just one aspect of your portfolio.
  • When you’re deciding how to allocate your assets, make sure to think about your rate of return. You always want your investments to be outpacing inflation, otherwise they’ll be less valuable than when you invested in them.
  • If you need help navigating all the different types of investments, a financial advisor could really help. Our financial advisor matching tool can link you with up to three local financial advisors. These are professionals who can guide you through every step of the investing process.

Photo Credit: ©iStock.com/gmutlu, ©iStock.com/Olivier Le Moal, ©iStock.com/ma-no

Hunter Kuffel, CEPF® Hunter Kuffel is a personal finance writer with expertise in savings, retirement and investing. Hunter is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. He graduated from the University of Notre Dame and currently lives in New York City.
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