The Beginner’s Guide to Investing in Physical Gold

Is the volatility in the markets and uncertain economic outlook making you worried about your financial future? Individuals hoping to find safer investment opportunities often find themselves wondering how to invest in gold. More importantly, they’re asking whether doing so is the right choice.

If you’re looking to add gold to your investment portfolio, there are lots of options available. You can purchase physical pieces of this precious metal, but investing in stocks, options, and even gold funds are also an option. In many cases, though, physical gold is ideal. 

In the following guide, we’ve gathered a wealth of knowledge that’s essential when you’re learning how to invest in gold. This information will help you better understand your investment options and how to do it safely. 

Recent events have shown just how fragile the markets can be, and people are demanding economic changes now more than ever. Financial uncertainty may be something we have to live with, but with gold investment opportunities, it’s something we can easily hedge against. 

Why You Should Invest in Gold 

Before you make any investment, it’s important to always ask WHY. Even when considering precious metals, your decision to invest should have a basis in solid reasoning. Fortunately, there’s plenty of that to go around once you know how to invest in gold. 

One of the biggest reasons for investing in gold is diversification. To put it simply, you don’t want all your eggs in one basket. By diversifying your investment portfolio, you’re reducing the overall risk faced while improving the odds of positive returns. 

When the bottom fell out of the economy in December 2007, for instance, the price of gold was around $800 per ounce. Within three years, this had skyrocketed to over $1,800. Even people who lost money in the stock market saw returns if they knew how to invest in gold beforehand. 

Beyond diversification, there are several other benefits of investing in gold: 

  • Highly liquid and easily transportable: Not only is gold easy to buy and sell, but it’s easy to do so around the globe. Regardless of the activity seen with currency exchange rates, the recognition of an ounce of gold’s value is worldwide. 
  • Hedge against uncertainty: The significant increase in the value of gold during the Great Recession wasn’t unexpected. Historically, precious metals have an inverse relationship with the market. This means knowing how to invest in gold can hedge against economic downturns. 
  • Investment protection: When the market isn’t doing well, people often sell their stocks for financial security.
  • Stable asset class: Even though gold is no longer used often as currency, it still serves as a store of value. In fact, it has served this purpose for over 5,000 years. The purchasing power of gold has historically remained stable even during inflationary times. 
  • Supply and demand: One of the primary reasons people are investing in gold and silver is due to increasing demand. Production has dwindled in recent years, and this led to a shortage which makes items more valuable. This will probably continue – driving up the price of these metals – due to a limited supply & higher investor demand.
  • Returns on investment: While profit returns can vary over periods of time, those who learned how to invest in gold back in 2005 have done well. Between 2005 and 2020, the price of gold increased by 330 percent. The Dow Jones only went up 153 percent during the same time. 

Whether you’re interested in how to buy gold bars, bullion, coins, or other assets, the advantages of doing so are undeniable.

No discussion of how to invest in gold, though, would be complete without touching on alternative investment types. But before delving into these other strategies, though, it’s important to start with the basics. 

Purchasing physical gold was the most popular – and often the only method for investing in the precious metal throughout history. Our next section will focus on how you can do this in a smart and safe way. 

How to Invest in Gold

Investing in physical gold is something that anyone – regardless of their economic status – can get involved in. Even someone who can’t purchase a stack of gold bars can start building a collection of rounds, coins, and small bars. 

Of course, identifying the differences in gold types is vital when learning how to invest in gold. This is because a coin with the same gold content as a bullion round can sell at a significantly higher premium. For instance, an American Gold Eagle coin has a higher premium over spot than simple bullion products. 

If you’re going to invest in physical gold, here’s what you need to know about your options: 

Pricing and Premiums

You’ll often hear the term “spot price.” This is what a specific asset is currently selling for on the open market. It’s important to note, though, that this isn’t usually the price you’ll pay.

This is because the spot price doesn’t account for other costs. Bullion bars and coins don’t come out of the ground looking beautiful. There are costs linked to refining, minting, manufacturing, warehousing, marketing and hedging of gold products.

The average person doesn’t have the buying leverage to purchase enough gold quantity from mints and other sources to get near spot prices. This is why buyers pay a gold premium. One silver lining is that premiums investors pay are fairly small, which over time, allows precious metals to be a successful investment if done properly.

Investing in Gold Coins

Coins are a favorite way to get started for people studying how to invest in gold. These coins typically contain a known quantity of gold, and since they feature designs on their faces, they carry a measure of beauty, intrinsic artistic value & face value as well. A well known gold coin are 1 oz Gold Maple Leaf’s, produced by the Royal Canadian Mint.

The big issue with investing in gold coins is that you may end up paying a premium. An especially rare or collectible coin will carry numismatic worth – a value that often exceeds the gold content in the item. Most investors however are only focused on the gold content of the item they are purchasing, and would rather pay the lowest premium possible.

Investing in Gold Bullion Bars

If your quest to learn how to invest in gold focuses specifically on the precious metal’s value, buying gold bars might be your best bet. This form of bullion provides investors with a precise and known amount of gold. In fact, all gold bars bar have the weight engraved right on the face. 

While you may find bullion bars with no features whatsoever, they typically contain at least a basic engraving in addition to the weight. This often identifies their source. Suisse gold bars issued by Scotiabank, for instance, feature a beautiful flying eagle with sunshine in the background. 

Investing in Gold Rounds

Similar to bullion bars, gold rounds provide investors with a specific and known amount of gold content. While governments mint physical coins, though, rounds come from private mints. This means they carry no face value as you’d see with $20 gold eagles and the other U.S. minted coins. 

If collectible value means little to you, it’s smart to opt for the most basic rounds. Gold rounds are very similar in premium and price to gold bars. The main difference is their shape, which is the same as a gold coin.

Investing in Gold Accounts

Some banks allow you to invest in precious metals by starting gold accounts. If you open such an account, the bank will take your money and invest it in gold. Depending on the company you choose, they may or may not take physical possession of your investment. 

When you choose to cash out, the bank will sell the gold and return your money. Unfortunately, this means you may not always have quick access to your investment. You’ll also typically end up paying significant fees for the storage of the gold and maintenance of your account. 

Investing in Gold Jewelry

If you’ve researched how to invest in gold for any amount of time, you’ve no doubt come across jewelry as an option. Going this route not only provides a great store for your money, but it also offers the opportunity to wear your investment. After all, who doesn’t look good in gold? 

This form of investment carries a higher premium compared to gold coins, bars and rounds, as the manufacturing process is much more complex and expensive. It is important to do proper research into the company you are purchasing jewelry from to ensure you are paying the best price possible.

An important factor to keep in mind for those just learning how to invest in gold is authenticity. If you choose to buy secondhand jewelry as a method of affordable investment, you may get scammed by not choosing a reputable dealer. Authenticity is important – especially when you try to resell. 

Buying Gold by the Gram or Ounce

If you’re just starting out in the world of gold buying, you may be hesitant to purchase coins with high numismatic value or large bars of gold. Fortunately, buying gold by the gram or ounce is an option. And if the price of an ounce of this precious metal blows your mind, remember that there are over 31 grams in a troy ounce.

Buying gram bars of gold is an affordable way to get started investing. The price for 1 gram of gold is a fraction of the price of 1 gold ounce. You can build up your reserve whenever you have a few extra dollars, and you’ll eventually have your own treasure trove to help secure your financial health.

What About Other Gold Investments? 

The intersection of technology and increasing demand for precious metals has done great things for gold. This makes now the perfect time to learn how to invest in gold due to the number of options available to you. Gold offerings currently go far beyond traditional bullion, bars, and coins. 

Just because you can buy gold in a certain way doesn’t mean you should. Take a moment to review all your options before making a decision. While each of these investment opportunities offers distinct advantages, you’ll typically find that physical gold maintains its superiority. 

Once you’ve reviewed all these ways to buy gold – often referred to as ‘paper gold’ – we think you’ll agree with that assessment. 

Physical Gold vs Exchange Traded Funds

People who have experience in the stock market already know how to invest in gold via exchange-traded funds (ETFs). That’s because they can purchase gold ETFs just as they would any other stock or publicly traded fund. These securities can contain stocks, commodities, and more. 

The performance of a gold ETF will often mimic the price of gold, but isn’t always the case. ETFs may contain stocks from companies that end up performing poorly. This can minimize any potential gains seen in the price of gold. Commission and brokerage fees can also eat into your profits. 

Unfortunately, this isn’t where the price of owning gold ETFs ends. Investors often also have to pay a management fee every year, and not all these funds have high liquidity. Because of these reasons, it’s important to think hard before deciding if this is how to invest in gold in order to meet your goals. 

Physical Gold vs Futures Contracts 

Buying gold futures options – also known as futures contracts – is a way to minimize risk when investing in gold. This is another alternative that’s very familiar to those who already invest in stock exchanges. Purchasing a futures contract is not the same as investing in gold. 

Rather than acquiring physical gold – or even securities related to gold – purchasing a futures contract gives you the right to buy the precious metal at a specific price. This contract only lasts for a certain amount of time and is based on how you think the asset is going to perform. 

There are various places you can use to purchase gold futures:

  • New York Mercantile Exchange (NYMEX)
  • COMEX Gold
  • Tokyo Commodity Exchange 
  • London Metal Exchange 

Purchasing futures is one of the more complex ways of learning how to invest in gold. Many investors do not have the skills, knowledge, time or risk tolerance to invest in gold futures contracts.

While futures options can decrease your overall risk, they don’t guarantee that you’ll ever actually invest in gold. Additionally, there’s typically less liquidity and higher commissions involved. You can avoid these issues by opting for physical assets or investing in real commodities. 

Physical Gold vs Gold Mining Stocks 

Another roundabout way of investing in gold is purchasing stocks from mining corporations. Like other “paper gold” investments, you won’t have a physical commodity to buy or sell. Additionally, the value of your stock may have no correlation with the price of gold at all.

Imagine a situation where the economy crashes and the price of gold skyrockets. If a mining company gets hit hard due to the downturn, the price of gold may do nothing for their bottom line. The big problem with these stocks is that their value rests in a company’s operating performance rather than gold. Gold mining stocks always carry higher risk than physical gold, and their day-to-day price movements are more extreme as well.

The Bottom Line

Now that you know how to invest in gold in a variety of ways, it’s time to decide on your next step. This is certainly a valuable commodity, and you could profit from just about any investment vehicle. While each of these options has benefits, though, physical gold will often be your best bet. 

Of course, knowing how to buy gold bars, coins, rounds, and other physical items isn’t the end of the story. You’ll need to secure your investment to ensure its safety and financial stability. 

How to Store Physical Gold

Learning how to invest in gold and doing so successfully is only the first step in securing your financial future. Unlike stocks, savings accounts, mutual funds, and other financial assets, precious metals don’t exist in a bank or on an exchange somewhere. 

People have bought and secured their own gold for thousands of years, and fortunately, the methods of doing so have improved in that time. 

Even with people investing in gold throughout most of history, though, there are still only three appropriate ways to store your investment: 

1.  Storing Gold at Home

Many people reading this guide on how to invest in gold are doing so from the comfort of their own homes. Some will take this comfort an extra step by also choosing to keep their precious metal investments in their homes as well. 

Storing gold in or around your house has many security drawbacks, but some people feel it’s the most secure place to keep it. After all, there’s something to be said for having immediate access to your collection of physical gold. 

There are three methods for storing precious metals at your home: 

Hiding Your Gold

One of the biggest concerns of storing gold at home is the potential for theft. Fortunately, burglars are often hoping to get in and out as quickly as possible. This means a great hiding place can go a long way after you learn how to invest in gold. 

Consider using multiple hiding spots to protect your overall investment. This is a bit like diversifying. It also wouldn’t hurt to leave decoys – such as fake jewelry – lying around to distract potential criminals. Most importantly, think like a thief when you’re picking a hiding spot. 

Burying Your Gold

While it may seem like something from a bygone era, some people still bury their valuables in their yards. You won’t find many manuals on how to invest in gold, though, that recommend this practice. If you’re committed to having buried treasure around, take a few steps to protect your investment: 

  • Choose a container that’s insect-proof, waterproof, airtight, and won’t erode. 
  • Pick a spot you’ll always remember but that wouldn’t be obvious to strangers. 
  • Don’t make instructions to your heirs for finding your stash too complicated.
  • Dig at a time or place that won’t get noticed by neighbors. 
  • Remember that metal detectors can penetrate the ground. 

If there’s one recommendation we’d like to convey now that you know how to invest in gold, it’s “don’t bury your investment in the yard.” Even though your gold will be nearby and easily accessible, precious metals shouldn’t be stored where you might forget them or where the elements may cause damage. 

Storing Gold in a Safe

If you plan on keeping gold in your home, purchasing a strong safe is ideal. People store their most important documents in home safes, so it’s a good idea to keep precious metals there as well. There are a few safety rules you should follow if you go this route: 

  • Choose a safe that’s sturdy, waterproof, and fireproof. 
  • Install the safe in a hidden area that you can still easily access. 
  • Don’t advertise the fact that you have a safe full of precious metals. 

Security is an essential aspect of storing items after learning how to invest in gold. This means having alarms and cameras around your home regardless of how you store your investment is ideal. 

It’s also important to check your homeowner’s insurance policy to see if they’ll cover a loss. In most cases, you may need to invest in additional insurance. And while security is key, it’s ideal to choose at least one confidant who knows the location of your gold. 

2.  Using a Safety Deposit Box

It would be great if banks would store your investment – with the same FDIC protections as your cash – after you have a grasp on how to invest in gold. Most banks do offer safety deposit boxes where you can store precious metals, but there are a few caveats to keep in mind:

  • Restricted access: You can only get to your safety deposit box during bank hours. This is a huge drawback for individuals who value being able to access their gold at a moment’s notice. 
  • Ongoing expense: If you’ve taken the time to learn how to invest in gold, it’s probably because you want to see a profit. Unfortunately, ongoing safety deposit fees can cut into this. 
  • Lack of insurance: While your money may have FDIC protection at your local bank, items in your safety deposit box do not. Consider investing in your own policy if you go this route. 

While there are some drawbacks to utilizing a safety deposit box for storing gold, it’s one of the better options available. You can worry about your investment not being secure due to a lack of insurance, but the chances of a bank robber taking safety deposit boxes are minimal. 

3.  Storage Firm

Anyone with an understanding of how to invest in gold should consider the option of using a storage firm. This is especially the case if they have large holdings. Also known as a depository, these are third-party firms that will safely store your gold for a fee. 

The benefit of depositories over safety deposit boxes comes down to one word: security. Banks are certainly secure, but depositories have the singular goal of keeping valuable items safe from the outside world. 

Other benefits of storage firms include: 

  • Political and geographic diversification through choosing vault locations. 
  • High liquidity thanks to the ability to sell at any time and wire money directly to your bank. 
  • Depositories have insurance, so there’s no additional cost to insure on your end.

Third-party storage firms certainly seem appealing if you just learned how to invest in gold. For most investors, this option makes the most sense regardless of the size of your gold holdings. Annual storage costs are a lot smaller than most people think!

4.  Storage with a Gold Dealer

Not all storage firms are equal in every aspect. One depository option many people overlook is storage with a gold retailer. These firms focus entirely on storing precious metals, so they know the nuances of keeping gold safe. And since you can purchase bullion and other gold directly from them, you can avoid transportation costs.

Solid Financial Solutions is a perfect example of this service. You’ll find the following benefits:

  • Allocated and segregated storage.
  • Third-party facilities away from banks.
  • Zero counter-party risk.
  • Affordable rates.
  • Audited and insured.

The Final Word on Storage

It would excite anyone to effectively master how to invest in gold, but far too many individuals overlook the storage aspect. You don’t want your investment lying around the house where anyone could accidentally stumble upon it. 

There are benefits to each of the storage methods we’ve discussed, but some are obviously superior to others. In reality, it all comes down to what works best for you. As long as you take active measures to protect your investment, you can secure your financial health for years to come. 

A Parting Note on How to Invest in Gold Safely

You no doubt have a firmer grasp on investing in gold than when you started reading this guide. If there’s only one lesson you remember from this, though, it should be to always work with a reputable dealer. 

It may seem tempting to go the cheap route, but if something seems too good to be true, it typically is. A quick search for gold coins on the popular Wish e-commerce site, for instance, returns a beautiful Australian Gold Kangaroo coin for a mere $11. 

An actual Australian Gold Kangaroo coin, though, has an ounce of gold in it. Even when the price of the precious metal bottomed out in 1970 – a perfect time to learn how to invest in gold – an ounce was still worth over $200. If you’re going to invest in gold, make sure you choose reputable sources. 

Steps After You Learn How to Invest in Gold

Most people’s education on investing in precious metals ends once they learn how to buy gold bars and other valuable items. Recognizing the many advantages of investing in these physical assets is beneficial, but it’s also essential to understand underlying economic issues. 

More importantly, you should strive to ensure you’re making smart financial steps. Knowing how to invest in gold requires much more than recognizing the value in bars, bullion, and other physical options. You need to make sure you’re purchasing from reputable companies with a solid history. 

In the world of online precious metals retailers, no one compares to Solid Financial Solutions. Rest comfortably knowing that you’re dealing with the best. And since our assets are mint-direct, you know you’re only getting high-quality investments.

Call us at 403-910-7395 and you’ll see that learning how to invest in gold doesn’t require a degree in finance. You can choose from bars, coins, bullion rounds, collectibles, and more in order to diversify your portfolio and hedge against economic downturns. Take a step to secure your future today.