How to buy gold safely?

If done right, gold can be a good investment for people who want to diversify their investments, and for those who want to protect themselves from the risks of stocks and inflation given that gold historically has retained its buying power. But can one buy gold safely?

However, investing in gold is not as simple as buying a car, for example. You need to know what type of gold you want to buy, find a real gold dealer and decide on how you can safely store your gold. Therefore one should raise the question how to buy gold safely prior to making the purchase.

Tavex has made this guide, to help you make the right decisions regarding your investments in gold.

How to buy gold safely?

The first thing you should decide on is what type of gold you intend to buy.

Do you want to buy bullion? Do you want to buy gold coins or gold bars?

Another solution would be to invest in gold via an ETF (Exchange Traded Fund), futures or other financial instruments via your bank.

All of these ways are opportunities to invest in gold and they each have their own buying process.

If you decide to buy bullion, decide on the size of the bars or coins suitable to the amount you want to invest for. Next, look for a company to buy gold from such as gold dealers, brokers and banks that sell gold coins or bars.

It is important that you research the various sellers, and choose one with a good reputation which can deliver your gold in a safe and secure way, for example by offering insured deliveries, and which can deliver your purchase quickly without undue delay.

We recommend that you choose a gold retailer which is an official distributor for the various producers of gold coins and bars. This way you ensure that you have access to products which have been bought directly from the producer.

Once you have found a reputable gold retailer, and have made your purchase, find out how to best store your gold. This is an important point as you do not want to keep your investment in an insecure place. Many people keep their gold coins and bars in safe deposit boxes in their bank, while others buy safes for the home. You should also investigate whether your home insurance will cover any possible theft, should you be so unlucky to experience a burglary.

Some people even choose to bury their gold in the garden – however, this is not a solution which Tavex recommends.

NOTE: Gold will not yield lucrative gains or value additions in the short term. The price of gold rises and falls like any other commodity and you should therefore not invest in gold because you have an expectation that you will make a lot of money quickly. You should therefore make gold a part of your portfolio, and should not be the only investment in your portfolio.

Tips for buying gold

– Prefer physical gold

If you are considering investing in gold, we believe it is important to remember the role of gold as money. Gold has been used 5,000 years, and it was not until 1971 that Nixon took the dollar off the gold standard, that the world switched to a “fiat” system where the currencies were no longer backed precious metals (gold or silver).

Most gold that is traded is what is called “paper gold”. This includes futures, ETFs and other financial instruments.

Many of these financial instruments have never seen the shadow of gold, and more paper gold is being traded than there is physical gold which can create a very complicated scenario as soon as investors want to get their gold investment paid off / delivered. Here they will either experience that there is not enough physical gold available or be charged exorbitant fees to receive it in physical form.

This is why you should make sure you also have physical gold – not just own it on paper.

– Buy globally recognised products

Of course, it is attractive to buy gold at the cheapest price, but this is not the only thing to consider when you are buying gold. You should also ensure that your gold is liquid, i.e. easy to liquidate if needed.

If you are looking for a very liquid gold portfolio then we recommend you buy gold coins, such as Canadian Maple Leaf, Australian Kangaroo, South African Krugerrand, Austrian Viennese Philharmonic and American Eagle or bars in sizes between 1 oz and 100g.

These products ensure that your gold investment is liquid, as you do not want to look for days for a place where you can sell a 1 kg gold bar, especially if you need the money urgently. These products are also specifically made to be sold at a very low margin over the current gold price.

Furthermore we recommend that you stay away from rare gold coins – leave this to the collectors as it can be difficult to get them sold at the right price and if you don’t have any experience with coin collecting you risk getting cheated.

In addition, make sure that the gold retailer from whom you have purchased your gold has a good buy-back policy. You should not invest in something which you are uncertain in how to sell again. A serious and credible gold-retailer will always have a buy-back policy with clear and understandable terms and conditions and transparent buy and sell prices.

Therefore – buy popular coins and smaller gold bars (1 oz – 100g) that are easy to convert into cash with a gold retailer with a good buy-back policy.

Therefore – buy popular coins and smaller gold bars that are easy to convert into cash.

– Use your savings – not loans – to buy gold

If you want to make a good investment, you should first save together before investing. A sound investment strategy is not based on loans and credits.

If you buy gold, use your savings. Do not use your credit to buy gold with the hope that it will increase in the future. You never know how the market will react in the short run and you may end up having to repay your credit before the gold price rises.

– Be aware of the regulations

We advise gold investors to familiarise themselves with regulations regarding physical gold if you want to make good investment decisions. As an investor you should familiarise yourself with current tax regulations and the anti-money laundering regulations.

Conclusion

As described, investing in gold can be a complex affair. We are delighted to help you to understand how to buy gold safely. You should therefore avoid taking “shortcuts”. It is important to do the proper research and decide what types of gold you want to invest in, as there are several different options on the market – including gold coins, gold bars, jewellery, ETFs and more.

Lastly, keep in mind that investing in physical gold is a sensible way to spread your risk and diversify your portfolio, but you should avoid investing all your money in gold.

This guide is a good introduction to your first gold investment, but it can of course not answer all your questions. If you would like a personal consultation from one of our experts then please don’t hesitate to contact us on +36 20 225 1515 and tavex@tavex.hu.