Investing in gold can round out your portfolio and put you in a good position to face whatever the future may hold. In the 21st century, returns on gold have been very promising, especially during a crisis. It’s an asset that performs well during uncertain times and is often used as a hedge against stock market sell-offs.
The past two decades had their fair share of world-altering events. As climate change continues to reshape the world as we know it, many investors are betting that there’s more in store, and they’re looking for assets like gold to protect their wealth in uncharted waters.
If you’re looking to add a safe haven asset to your portfolio, it helps to know how to buy and sell gold the right way.
How to Buy and Sell Gold
Gold dealers have made it extremely simple to buy gold bullion. If you want to take a look at the real thing before you make your purchase, you can walk right into a shop to see what kind of gold bars and coins they have available and ready for sale. More commonly, though, investors buy gold online and pay with cash or a wire transfer.
The most important step is finding a reliable supplier. Do your research into local gold dealers, and don’t be afraid to compare premiums for the same products. A premium is a percentage charged by the dealer above spot, which covers the dealer’s expenses. You can look up spot prices daily the same way you would stock prices.
While you can find gold through online classifieds, you want to be careful about who you’re dealing with. There have been scams where individuals sold convincing fakes, often bars or coins of another metal plated with gold, enticing buyers with unbelievable prices.
If you’re investing, the easiest way to make sure you’re getting the real thing is working with a respected and well-known bullion dealer. They source their bullion products from well-respected mints around the world, such as the Royal Canadian Mint, US Mint, and Perth Mint, as well as private refiners like Valcambi.
Why You Should Buy Physical Gold
There’s more than one way to buy bullion, and they’re not all made equally. You may be tempted to invest in gold stocks because you can easily include them in your portfolio, but they are not the same as physical bullion.
When you invest in stocks, you’re buying part of a mining company, and that’s a very different bet. You’re investing in that company’s ability to turn a profit, and that doesn’t always coincide with rising spot prices.
The rising cost of surveying and mining has made it a tough industry, and you may not want to expose yourself to the management risks.
There are also ETFs (Exchange-Traded Funds). These are funds managed by gold experts who trade on exchanges. The major downside of investing in an ETF is that you don’t own real gold. Again, you’re exposing yourself to third-party risks, such as mismanagement of the fund.
Physical bullion remains your best option if you want your investment to correspond directly to prices.
Different Types of Gold Bullion
Demand for gold bullion over the years has meant a proliferation in the types of products you can buy. It’s worth knowing the difference between the 3 most common products:
- Coins: produced exclusively by sovereign mints, they feature a face value;
- Bars: produced by mints and private refiners in a variety of weights;
- Rounds: shaped like coins but produced by private refiners and essentially bars.
While all of these products should be fine gold bullion (99.9% or 91.67% in the case of the American gold Eagle coin), more recognizable products such as US or Canadian gold coins will be easier to sell.
When and How to Sell Gold?
Successfully investing in gold isn’t just about finding the right time or product to buy. It’s also about finding the right time and place to sell.
This is why gold stocks or ETFs seem appealing to investors. It’s as simple as a click of a button or an email to your money manager to sell. But there’s no reason to be scared of selling gold bullion.
When you’re talking about .999% pure bullion, selling it to a gold dealer will usually net you the best price. The greater the volume you’re selling, the closer to spot prices you can expect. Because of the costs of reselling and refining bullion products, you shouldn’t expect to be offered spot, but the closer you can get, the better.
The best time to sell gold depends on your goals and plans. It helps to sell for more than you bought, but you should also keep in mind inflation.
While it may be impossible to predict prices, it doesn’t hurt to understand what market conditions affect the price of gold. If you’re on the fence about selling or holding, you want to have a grasp of the economic conditions that can push things one way or another.