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. 

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

Whether you’re a seasoned investor or a newcomer to the world of gold, this guide aims to navigate 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 also empowers you to navigate the market with confidence. Don’t even think about investing in gold without knowing 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: The avoirdupois ounce commonly used in the United States, but, precious metals are measured in troy ounces to help ensure consistent purity and weight standards. A troy ounce is approximately 31.1 grams, heavier than the avoirdupois ounce, which is 28.35 grams.
• Spot price: This is the current market value of a troy ounce of gold. The spot price  changes as it is 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 quickly without significantly affecting their price.
• Assay: An assay is essentially a quality assurance report. It verifies the purity and weight of the gold, usually provided in a small, card-sized certificate. An assayed gold bar is one that has undergone this verification process.

Considerations before investing in gold bars

Before you begin investing in gold bars, ask yourself these important questions.

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, brands like 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 slightly higher premium, the benefits of easier liquidity and higher market acceptance often outweigh the costs. Therefore, 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, like those weighing one or ten 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?

While the intrinsic value of a gold bar primarily lies in its gold content, the design can also play a role, particularly 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. However, 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. However, it’s essential to remember that 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. 

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

However, it’s worth noting that higher purity levels can make the gold bar softer and more susceptible to scratching or denting, which could potentially impact its resale value. 

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

The condition of a gold bar can significantly impact its resale value. Therefore, it’s advisable to purchase gold bars that come with assay cards, which are certificates that verify the bar’s weight and purity. And to store the gold bars in their original packaging with the assay card, specifically 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, as 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 in a safe deposit box, but storing larger quantities may require professional storage solutions. 

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

While storing your gold bars at home offers the advantage of immediate access, 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. Therefore, your storage choice should align with your investment strategy and risk tolerance.

How can you invest in gold bars?

Local dealer

Purchasing gold bars from a local dealer is one of the most traditional methods of investment. One of the primary advantages of this approach is the ability to physically inspect the gold bars before making a purchase. This can be particularly useful for those new to gold investment, as it provides an added layer of assurance.

However, local dealers often have higher operating costs, such as rent and employee salaries, which can result in higher premiums on their gold bars. Additionally, 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

Online dealers have become increasingly 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.

However, buying gold bars online requires a leap of faith, as you can’t physically inspect the product before purchase. Therefore, it’s crucial to shop from reputable online dealers who offer secure payment options, transparent pricing, and reliable delivery services.

Auction sites

Auction sites present another avenue for gold bar investment. Websites like eBay offer a platform where individual sellers can list gold bars for auction or immediate purchase. 

This can sometimes result in lower prices, as individual sellers may be less knowledgeable about the current market value of gold bars.

However, the risk of encountering counterfeit or misrepresented products is higher on auction sites. It’s crucial to exercise due diligence by thoroughly reading product descriptions, examining photos, and checking seller reviews before making a purchase.

Gold IRA

A gold individual retirement account (IRA) offers a unique investment avenue, allowing you to hold gold bars in a tax-advantaged account. While you won’t have immediate physical access to your gold, it offers the same tax benefits as a traditional IRA, making it an attractive option for long-term investors.

Gold IRAs are typically offered by specialized custodians who provide secure storage options. This removes the hassle of storing large quantities of gold bars, which can be particularly beneficial for those looking to make a significant investment.

Brokerage account

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, as they can be easily bought or sold on the stock market. However, it’s crucial to understand that investing in gold ETFs or mutual funds does not provide you with physical ownership of gold bars.

While this method offers a convenient and liquid form of gold investment, it also comes with management fees and lacks the tactile satisfaction of owning physical gold. Therefore, it may not be the best 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. 
• On the other hand, 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, as these factors can influence both the upfront cost and potential resale value of your investment. 

While gold bars represent a traditional and tangible asset, they are just one of many investment avenues available to you. Some investors also explore other financial options, like 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 much you’re passionate about gold, diversification is key. If you can cash in your invoices, make use of stocks on the rise, or ride the AI hype train, you can prepare for even the most calamitous gold market crashes.

Quote block: “No more than 10% of the investable assets in your investment portfolio should be allowed 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: 

• Gold bars typically offer a lower premium over the spot price of gold, making them a cost-effective option for those looking to invest significant sums. However, they lack the historical and aesthetic value that gold coins can offer. 
• Gold coins are often smaller, easier to store, and come in a variety of designs and historical significance. However, they usually carry higher premiums over the spot price of gold, making them a more expensive option. 
• Jewelry is more volatile than gold bars, mainly because its value depends on the craftsmanship and the quality of any jewels on it. It can be remelted, though. 
• Gold ETFs are suitable for beginners due to their liquidity and most likely lower cost than tangible bullion.

All in all, 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 a straightforward process, primarily influenced by its weight and purity. The spot price of gold, usually quoted per troy ounce, serves as the baseline for calculating a gold bar’s value. 

To find the value of a specific gold bar, you would 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.

It’s worth noting that the spot price of gold is subject to fluctuations throughout the trading day. Therefore, the value of a gold bar can change dynamically, influenced by a variety of 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.

While there’s no definitive answer, 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 primarily determined by its weight and purity, although other factors like brand reputation and condition can also play a role. 

Generally speaking, larger bars with higher purity levels are 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, although there may be limits on the amount you can spend due to anti-money laundering regulations. Other accepted payment methods typically include bank transfers, credit cards, and checks.