How to Invest in Gold Bars

If you’ve found yourself captivated by the enduring allure of gold bars, you’re not alone. In a world where financial markets are often subject to volatility and unpredictability, gold bars offer a tangible asset that has held its value throughout history. 

Over the years, the pathway to owning gold bars has become more straightforward thanks to advancements in technology, increased market transparency, and a variety of purchasing options. 

Whether you’re a seasoned investor or a newcomer to the world of gold, we’ll walk you through the intricacies of investing in gold bars. By the end, you’ll be well-acquainted with the terminology, considerations, and methods for this age-old investment.

Important terms to know when investing in gold bars

Before diving into the world of gold investment, understanding its jargon is crucial. Not only does it help you make well-informed decisions, but it empowers you to navigate the market with confidence. Before investing in gold, be sure you’re familiar with the following: 

• Bullion: This is the term for gold in its physical form, often as bars or ingots. Bullion is what most people picture when they think of investing in gold.
• Troy ounce: Precious metals are measured in troy ounces to help ensure consistent purity and weight standards. A troy ounce is around 31.1 grams, heavier than the ounce we generally use in the U.S., which is 28.35 grams.
• Spot price: This is the current market value of a troy ounce of gold. The spot price  changes because it’s subject to price fluctuations throughout the trading day due to supply and demand factors, geopolitical tensions, and market sentiment.
• Premium: When you buy a gold bar, you’ll pay more than the spot price. This extra charge is known as the premium, and it covers the costs of fabrication, distribution, and a small dealer fee.
• Liquidity: Liquidity refers to how easily you can sell your gold. Gold bars, being a universally recognized asset, have excellent liquidity. You can sell them in a hurry without affecting their price much.
• Assay: An assay is a quality assurance report. It verifies the purity and weight of the gold, often provided in a small, card-sized certificate. An assayed gold bar has undergone this verification process.

Considerations before investing in gold bars

Before you begin investing in gold bars, ask yourself the following important questions. You can click the question to jump down and find out why it’s important.

• Do I want gold bars from a specific brand?
• What shape and size gold bars do I want?
• Do I want gold bars with a specific design?
• What purity level do I want my gold bars to be?
• What condition is acceptable for my gold bars?
• Where do I want to store my gold bars?

Do you want gold bars from a specific brand?

The brand of gold bars you choose to invest in can have a significant impact on your investment. Numerous mints and refineries produce gold bars, but not all are created equal. 

Some brands have established themselves as pillars of quality and trustworthiness, making their bars more liquid and easier to sell in the future.

For example, PAMP Suisse and Credit Suisse are Swiss brands known for their exceptional quality. 

• Their bars often come with advanced security features, such as serialized holograms and intricate designs, which add an additional layer of authenticity and value. 
• They are accredited by the London Bullion Market Association (LBMA).
• Both brands issue gold bars that are 99.99% pure. 
• An assay certificate comes with either brand’s bars, further increasing the legitimacy of the product. 

The Royal Canadian Mint offers bars with unique assay cards, as well as tamper-evident packaging and gold in a wide variety of weight classes. 

While investing in well-known brands may come at a higher premium, the benefits of easier liquidity and higher market acceptance often outweigh the costs. It’s crucial to weigh these factors carefully when deciding on a brand.

What shape and size gold bars do you want?

Gold bars come in a wide range of shapes and sizes, each with its own set of advantages and disadvantages. 

The standard form is the rectangular ingot, but gold bars can also come in smaller shapes, sometimes referred to as “wafers,” or even larger ones known as “door stops” due to their significant size and weight.

The size you opt for will depend on several factors, including your investment budget, storage capabilities, and liquidity needs. Smaller bars—those weighing one to 10 grams—are easier to store and sell. 

However, they often come with higher premiums over the spot price of gold. Larger bars, such as those weighing a kilogram, offer a lower premium but come with challenges related to storage and resale.

Do you want gold bars with a specific design?

The intrinsic value of a gold bar primarily lies in its gold content, but the design can also play a role for those interested in the collectible aspect of gold bars. 

Standard gold bars usually carry minimalistic designs, often just the brand logo, the bar’s weight, and its purity level. But some mints produce limited-edition bars with intricate designs, commemorative themes, or cultural motifs.

Such bars can sometimes fetch higher prices in the resale market, particularly among collectors. Remember: Elaborate designs can also come with higher premiums, so weigh your interest in the design against your overall investment goals.

What purity level do you want your gold bars to be?

The purity of a gold bar is a critical factor in its value. Most gold bars come with a purity level of 0.9999, meaning they are 99.99% pure gold. However, gold bars with lower purity levels, such as 0.995 (99.5%), also exist. 

The difference may seem minimal but can affect the bar’s value. The higher the purity level, the closer the bar’s price will be to the current spot price of gold.

Higher purity levels can make the gold bar softer and more susceptible to scratching or denting, which could affect its resale value. So if you plan to handle your gold bars regularly, you may want to opt for those with a slightly lower purity level.

What condition is acceptable for your gold bars?

When it comes to investing in gold bars, condition matters. New or mint condition bars are those that have been recently manufactured and come sealed in original packaging, often with an assay certificate. 

These bars are considered more valuable than “secondary market” bars, pre-owned bars that may show signs of wear or handling.

The condition of a gold bar can influence its resale value. We recommend purchasing gold bars that come with assay cards—certificates that verify the bar’s weight and purity. Store the gold bars in their original packaging with the assay card if you intend to sell them. 

If you’re buying a secondary market bar, it’s even more crucial to ensure that it comes with an assay card. This can help you verify its authenticity.

Where do you want to store your gold bars?

Storage is a critical factor that can influence your choice of gold bars. Smaller bars are easier to store at home or in a safe-deposit box, but larger quantities may require professional storage solutions. 

Several companies offer vault services for storing gold bars, complete with high-level security measures and insurance coverage.

Storing your gold bars at home offers the advantage of immediate access, but it also comes with risks, such as theft or loss due to natural disasters. Professional storage solutions can mitigate these risks but come at an additional cost. Your storage choice should align with your investment strategy and risk tolerance.

How can you invest in gold bars?

You have several options if you want to invest in gold bars. Click the link below to jump to more details about the associated advantages and risks.

• Local dealer
• Online dealer
• Auction site
• Gold independent retirement account (IRA)
• Brokerage account

Local dealer

• Advantages: Purchasing gold bars from a local dealer is one of the most traditional methods of investment. An advantage of this approach is the ability to inspect the gold bars before making a purchase. This can be useful for those new to gold investment. It provides an added layer of assurance.
• Risks: Local dealers often have higher operating costs, such as rent and employee salaries, which can result in higher premiums on their gold bars. And the selection at a local dealer may be limited compared to online options, potentially restricting your choices in terms of brand, size, and design.

Online dealer

• Advantages: Online dealers have become more popular in recent years, offering a wide array of options at competitive prices. Websites often provide detailed product descriptions, high-quality images, and customer reviews, helping you make an informed decision.
• Risks: Buying gold bars online requires a leap of faith because you can’t inspect the product before purchase. It’s crucial to shop from reputable online dealers that offer secure payment options, transparent pricing, and reliable delivery services.

Auction site

• Advantages: Websites such as eBay offer platforms where individual sellers can list gold bars for auction or immediate purchase. This can sometimes result in lower prices because individual sellers may be less knowledgeable about the current market value of gold bars.
• Risks: The risk of encountering counterfeit or misrepresented products is higher on auction sites. It’s crucial to exercise due diligence by reading product descriptions, examining photos, and checking seller reviews before making a purchase.

Gold IRA

• Advantages: A gold IRA offers a unique investment avenue, allowing you to hold gold bars in a tax-advantaged account. It offers the same tax benefits as a traditional IRA, making investing in a gold IRA an attractive option for those with a long-term view. Specialized custodians that provide secure storage options tend to offer gold IRAs. This removes the hassle of storing large quantities of gold bars, which can be beneficial for those looking to make a significant investment.
• Risks: You won’t have immediate physical access to your gold.

Brokerage account

• Advantages: Some brokerage accounts allow you to invest in gold exchange-traded funds (ETFs) or gold mutual funds as an alternative to owning physical gold bars. These financial products are backed by gold but offer an effective hedge against inflation because you can easily buy or sell them on the stock market.
• Risks: Investing in gold ETFs or mutual funds does not provide you with physical ownership of gold bars. This method offers a convenient and liquid form of gold investment, but it comes with management fees and lacks the tactile satisfaction of owning physical gold. It may not be the ideal option for those who wish to hold a tangible asset.

Which investment approach is best for me?

When it comes to investing in gold bars, there’s no one-size-fits-all approach. Your ideal method will depend on various factors, including your investment goals, risk tolerance, and interest in physical possession versus financial products.

• If you value the tactile experience of holding physical gold and have adequate storage facilities, buying gold bars from a local or online dealer may be your best bet. 
• If you’re looking for a long-term investment that offers tax benefits, a gold IRA could be more suitable.

It’s also worth considering the size and purity of the gold bars you wish to invest in. These factors can influence the upfront cost and potential resale value of your investment. 

Gold bars represent a traditional and tangible asset, but they are just one of many investment avenues available to you. Some investors also explore other financial options, such as stocks and bonds, as ways to diversify their portfolios. 

It doesn’t take long to learn the ins and outs of these techniques and use them to hedge or further your investments. 

No matter how passionate you are about gold, diversification is key.

“No more than 10% of the investable assets in your investment portfolio should be allocated to gold.”

Erin Kinkade

CFP®

Is it better to invest in gold bars or other forms of gold?

Gold bars are just one of many available options for gold investment, each with its own set of advantages and disadvantages. Other forms include gold coins, gold jewelry, and even gold ETFs and mutual funds. Let’s take a look: 

Investment	Pros	Cons
Gold bars	Lower premium over spot price of gold	Lack historic and aesthetic value of gold coins
Gold coins	Smaller Easier to store Variety of designs	Higher premiums over spot price of gold
Jewelry	Can be remelted	More volatile than gold bars (value depends on craftsmanship and quality of jewels on it)
Gold ETFs	Good for beginners High liquidity Lower cost than tangible bullion	Ownership of shares, not of physical gold

The choice between gold bars and other forms of gold investment will depend on your individual preferences and investment goals. If cost-effectiveness is your primary concern, gold bars may be the best option. 

However, if you value the additional layers of historical and aesthetic significance, gold coins could be more suitable.

How much is a gold bar worth?

Determining the value of a gold bar is straightforward. Its weight and purity are the biggest influences on its value. The spot price of gold, often quoted per troy ounce, serves as the baseline for calculating its value. 

To find the value of a specific gold bar, multiply its weight in troy ounces by the current spot price, then add any premiums or dealer fees.

For example:

• If the spot price of gold is $1,800 per troy ounce and you’re looking to buy a 10-ounce gold bar, the base value would be $18,000. 
• If the dealer charges a 5% premium, the total cost would be $18,900.

The spot price of gold fluctuates throughout the trading day. Therefore, the value of a gold bar is dynamic and influenced by factors such as supply and demand, geopolitical events, and market sentiment.

Once you’ve made your purchase, you can track the value of your gold bars using financial news websites, which often provide real-time updates on the spot price of gold. Some investors also use apps or software designed to track the value of precious metals, providing convenient and timely updates.

How much should you spend on gold bars?

When it comes to spending on gold bars, there are several schools of thought. Some financial advisors recommend allocating a specific percentage of your investment portfolio to gold, often between 5% and 10%. This provides a form of diversification, helping to hedge against market volatility and economic downturns.

Others advocate for a more dynamic approach, adjusting the amount you invest in gold bars based on current market conditions. For example, you might choose to increase your gold holdings during periods of heightened market uncertainty or geopolitical tension.

There’s no definitive answer, so it’s crucial to consider your financial situation, investment goals, and risk tolerance when deciding how much to spend on gold bars. Consulting with a financial professional can provide personalized advice tailored to your individual circumstances.

FAQ

Which gold bars are the most valuable?

The value of a gold bar is determined by its weight and purity. Factors such as brand reputation and condition can also play a role. 

Larger bars with higher purity levels tend to be more valuable, but they can also be more challenging to store and sell.

How are gold bars made?

Gold bars are produced using one of two methods: casting or minting. Cast bars are created by pouring molten gold into molds and are often larger and less refined. Minted bars are cut from flat sheets of gold and are usually smaller and more intricate.

How does the value of a gold bar increase?

The value of a gold bar can increase due to a rise in the spot price of gold, which is influenced by factors like supply and demand, geopolitical events, and market sentiment. 

Can you purchase gold bars with cash?

Yes, many dealers accept cash payments for gold bars, but they may limit the amount you can spend due to anti-money laundering regulations. Other accepted payment methods often include bank transfers, credit cards, and checks.