How to buy gold bullion

Gold is the best insurance against the financial crisis. There are many ways to invest in gold, from exchange-traded funds to gold mining stocks, but the simplest way is to buy physical gold coins or bars outright. James McKeigue looks at the options available, and explains everything you need to know about buying gold bullion.

There are many ways to invest in gold, from exchange-traded funds (ETFs)to gold stocks, but the simplest way is to just buy physical gold or bullion - outright. But what's the best way to invest in gold bullion? We look at the options below.

Should you buy coins or bars?

You can buy bullion in two main forms: coins or ingots (bars). The advantage of gold coins over gold barsis that they allow you to be more flexible. After all, it's easier to sell 20% of your gold if you ownten gold coins rather than if your whole investment is in one gold bar. By the same token, given this flexibility, you'll probably find that coins are that bit more liquid (easy to sell) than big bars. That said, if you want to buy a sizeable amount of gold, then bars might make more sense from a practical point of view.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Investing in gold coins

There are all sorts of gold coins from the Chinese Panda to the American Eagle. Some coins are more expensive than others because they are rare, beautiful or antiques these are known as numismatic coins, and they have value as collectibles over and above their value as gold coins.

But if you are simply looking to track the gold price, then ignore these numismatic coins and focus on those that offer the cheapest premium' over the spot price (this is the current price, the one you'll usually see quoted on financial websites).

Advertisement
Advertisement - Article continues below

First produced in 1967, the one-ounce South African Krugerrand is the most common gold coin on the planet and so normally trades at the cheapest premium over the spot price. Other good options are the sovereign and the Britannia. Both of these are still officially UK tender (the Britannia has a face value of £100, for example), which means that if you sell them at a profit there is no capital gains tax to pay.

Regardless of how you buy your bullion, there is no stamp duty or VAT to pay.

How to buy

One key thing to consider is costs. Gold dealers make their money like anyone else - by selling for more than the market price, and buying for less. The difference (or spread') can range widely depending on the quantity and type of bullion you buy, as well as who you buy it from, and the current state of supply and demand.

The worst deals will come from the gold vending machines and gold bars' now popping up in shopping centres. The latter serve a market for people keen to turn cash into gold fast, but most investors should go nowhere near them.

Hong Kong is widely acknowledged as the cheapest place to buy gold coins. Go to Queen's Road in Hong Kong's Central District, and you'll find well-known banks, such as HSBC, shifting gold coins for as little as 0.2% above the premium.

But given that a flight to Hong Kong isn't cheap, the best option for most UK investors is to buy from large, established British or European dealers. They will deliver it straight to your house, through trackable insured couriers. It's better to go with a well-known, large firm with a good track record. There are a range of options, but providers include Baird, ATS Bullion, Chards, and GoldCore.

Advertisement
Advertisement - Article continues below

For free and impartial information on where and how to buy gold bullion coins and bars, see our comparison of leading gold brokers here.

When it comes to selling your gold, you'll find yourself at the wrong end of the gold dealers' spreads once again. Depending on the dealer, you could find yourself getting up to 5% less than the market price.

How do I store my gold?

The benefitof owning physical gold is that you have it to hand if you are genuinely concerned about complete financial or societal breakdown. We've always described gold as insurance, and if you think things could get to the point where all financial assets are essentially worthless, then having access to gold coins would be useful.

The key problem with taking physical delivery is that you have to look after it. You will need to store it securely. A safe is the most obvious option, or outside the home ina bank safe deposit box. If you do store the gold at home, and you want it to be covered by your home insurance, you will of course need to tell your insurer. Depending on how much gold you have, this could potentially bump up your premium.

Buy gold online and have it stored for you

An alternative way to buy physical bullion, and have it stored conveniently for you rather than taking delivery of it, is via a website which allows you to buy gold online. One of the best known is British firm BullionVault. It offers the option to buy gold which is held in vaults in Switzerland, London and New York. It conducts a daily independent audit of its holdings, and will also allow you to take physical delivery of your gold if you so wish. A similar service is offered by James Turk's GoldMoney.

At MoneyWeek, we've been tipping gold since 2001. In that time it went from $250 to $1,900 an ounce in 2011 (a 660% increase), hitting record highs each year since 2002.

Advertisement
Advertisement - Article continues below

Successful investing is about the diversification and management of risk. It makes sense to have a part of your wealth invested in gold.

We show you the best ways to do that in our latest free report, click here to find out why you should buy gold now.

Advertisement

Recommended

Visit/investments/commodities/gold/600623/how-and-where-to-buy-gold-coins-and-bars
Gold

How and where to buy gold coins and bars

We have compiled a directory of leading gold brokers where you can buy gold bullion, coins and bars online, over the phone or even in branch. New t…
14 Jan 2020
Visit/520466/gold-dont-panic-and-dont-sell
Gold

Don’t panic about Iran – but don’t sell your gold either

Markets have reacted calmly to the tension between the US and Iran. But don’t get too complacent. It’s still a good idea to hold on to some gold as in…
9 Jan 2020
Visit/520221/heres-how-gold-could-rise-above-7000-an-ounce
Commodities

Here’s how gold could rise above $7,000 an ounce

That the gold price could hit $7,000 an ounce is a logical and plausible possibility, says Charlie Morris. Here, he explains how it could get there.
30 Dec 2019
Visit/520199/gold-is-in-a-bull-market-and-it-could-have-much-further-to-go
Commodities

Gold is in a bull market – and it could have much further to go

Many investors forget that gold is still the best-performing asset of this century, says Charlie Morris. It could also have much further to go.
27 Dec 2019

Most Popular

Visit/currencies/600665/currency-corner-new-zealand-dollar-kiwi-vs-us-dollar
Currencies

Currency Corner: how is the New Zealand dollar doing against its US counterpart?

The New Zealand dollar has been doing well against the US dollar in recent months, but has started to wobble a little. Is it still a buy? Dominic Fris…
20 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600653/indias-small-and-mid-cap-stocks-are-set-for-big
Share tips

India’s small and mid-cap stocks are set for big gains – here are three to buy now

Each week, a professional investor tells us where he’d put his money. This week: David Cornell of the India Capital Growth Fund highlights three favou…
20 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600636/class-acts-going-cheap-buy-into-europes-best
Share tips

Class acts going cheap: buy into Europe’s best bargains

Value investing appears to be making a comeback, while shares on this side of the Atlantic are more appealing on metrics such as price/earnings ratios…
16 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600641/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020