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How to Buy Gold Bars: 5 Easy Steps to Avoid the Pitfalls

How to Buy Gold Bars

Updated on 02/07/17

Congratulations, you’ve decided to buy some gold bars! A wise decision.

Gold has given those who own it peace of mind in uncertain times. That’s not gold cheerleader talk—that’s the message from history. For over 3,000 years, regardless of the economic or monetary circumstances, gold has delivered a margin of safety to those who held it. And it doesn’t discriminate—it’s served everyone from kings and counts to serfs and servants.

Owning gold bars secures a timeless benefit. Beyond profiting from a future price rise, gold will protect your wealth and purchasing power at a time most other assets won’t.That’s its purpose—protection during crisis. And when the next crisis arrives, you’ll be glad you made this decision.

This comprehensive article will explain everything you need to know before buying gold bars, including what to buy, how to find a reputable bullion dealer, and where to store your gold bars. Plus, I reveal some “insider’s tips” with each step so you will avoid some of the common pitfalls.

Before we cover the five easy steps, you might wonder…

Why Buy Gold Bars?

Why bars rather than coins? Lots of reasons.

Gold bars…

  • Have lower premiums than coins

  • Require less space than coins to store the same number of ounces

  • Are easy to resell (must buy a hallmarked product; more below)

  • Are the product preferred by central banks and large financial institutions


Insider’s Tip: Gold bars are one of the least expensive forms of gold. They’re also portable, liquid, private, and will last forever.


Step #1. Decide How Much to Invest

Conventional advice is that gold should comprise 5%-10% of an investment portfolio.

How much gold to own is a personal decision. Here are the three primary benefits of gold ownership to consider:

  • Reduces risk. That’s because it’s an uncorrelated asset to the stock market. As stocks fall, gold tends to rise.

  • Long-term store of value. How many stocks and bonds have lasted for centuries? Chances are that some of the companies you own now won’t be around in twenty years, let alone for your great-grandchildren. Gold will.

  • Crisis insurance. Gold protects against crisis like no other asset can. Inflation or deflation, recession or depression, terrorism, debt implosions, credit defaults, bank failure—some of these will happen in your lifetime, and gold will protect your portfolio from the fallout.

So, how much should you invest in gold? It depends on the level of these benefits you want or need.

Whatever you decide, don’t be extreme. Don’t put all your money in gold, but also know that one gold bar won’t provide the advantages above.

Gold isn’t a sure thing, but history shows it’s a great diversifier and the best hedge against all kinds of crises.


Insider’s Tip: Buy a meaningful amount of bullion—enough that will make a difference to your wealth and standard of living if things get sour.


Step #2. Choose the Size of Gold Bars

Gold bars are available in sizes (weights) that vary from as small as one gram to as big as 400 ounces.

The most common bar sizes for investors like you and I are one ounce, ten ounce, and one kilogram (32.15 troy ounces; more popular in Europe). Institutions, commodity exchanges, bullion-backed ETFs, and central banks buy 100-ounce or 400-ounce bars.

The larger the bar, the smaller the premium per ounce you’ll pay over spot. That’s because it costs the manufacture just as much to produce a small bar as a big one.

So buy the biggest bar your budget can handle, right?

No!

Why most investors should buy small gold bars…

  • Few investors can afford to buy a 100-ounce bar, so you’d have fewer potential buyers when you want or need to sell.

  • The bigger the bar, the greater the risk for counterfeiting. Counterfeiters prefer big bars, because they make more money off them. (See how to avoid fraud below.)

  • Owning a big bar forces you to sell the entire thing to meet a small financial need. There may be circumstances where you don’t need all the money a bigger bar will generate—but you’d have to sell it to meet that need. If you do have a big financial need, you can always sell multiple smaller bars. And a large bar will be difficult to split among your inheritors.

  • The bigger the bar, the more likely it will require an assay prior to a sale. That is costly, inconvenient, and delays your payout.

The advantage of buying a bigger gold bar is that the premium will be smaller. But you lose these other advantages by purchasing the biggest bar you can. For high net worth investors, I’d consider buying both small and large bars.

I also don’t recommend buying gold bars smaller than one ounce—the premiums can get insanely high. If your budget is such that you can’t afford more than one ounce, I do recommend buying several smaller bars so you have the advantages above. Owning gold is better than not owning gold.


Insider’s Tip: Buy one-ounce gold bars to meet future needs as they come up. If you have a high net worth, buy both small and large bars.


Step #3. Find a Reputable Bullion Dealer

You want to buy gold bars from a reputable bullion dealer, either online or at your local shop. You can also find them on eBay and at dealer shows, but I wouldn’t recommend those options until you have a couple purchases under your belt.

Here’s a comparison of buying online vs. at a local shop:

Online Dealer Local Shop
Can order online, but must trust dealer to deliver your product No waiting; can take immediate possession. Face-to-face transaction.
Total cost is likely cheaper even with shipping (they have lower overhead) No shipping/insurance costs, though total cost may still be higher
Expanded hours, but product won’t ship until payment clears May have limited product choices, and low liquidity for large buybacks

(You can find more options for buying gold bars in our article, Where to Buy Gold Bars: The 6 Options With Pros and Cons.)

Whichever way you go, here’s a quick checklist of what to look for…

  • A trusted and established dealer. Check their Better Business Bureau rating. Favor those that have decades of experience. Check how many repeat customers they have; buyers wouldn’t return if their experience was negative.

  • An educational dealer or website instead of salesy. Avoid the dealer that heavily promotes rare coins—that’s what they’ll want to sell you since the markups are higher.

  • The size of the business. Small dealers may have limited product selection or be unable to fill a large order. Small dealers may also be unable to buy back a large sale. Be sure to ask about delivery times; if they don’t ship within a day or two of your payment clearing, that’s a red flag.

  • A buyback policy. Ask the dealer if they’ll repurchase what you buy. If they don’t have a policy in place, shop elsewhere. This is another reason it’s important to do business with a reputable dealer—you want them to be around when you need to sell. Dealers with buyback policies also give prior customers their best resale price.

  • Accepted forms of payment. You can reduce your cost by paying with a money order (or cash). Bank wires and credit cards come with extra costs. Some dealers may take a personal check without a surcharge, though they’ll wait until the check clears before shipping.

Lastly, compare three dealers. Be sure to compare total cost—commission, credit card or bank wire fees, and shipping and insurance. Consider buying from two different dealers, so you can compare service and delivery, and also have two vetted sources for future purchases. Consider who you feel most comfortable with, too.

Only Buy Quality

Once you select a dealer, only buy gold bars with these markings:

  1. Proper stamping. Every gold bar should have its weight, purity, refiner, and registration number stamped on it. It’s important to buy gold bars with these markings. Without them you don’t know what you’re getting, and a future buyer would certainly require an assay.
  2. A hallmark. This simply means you want to buy a reputable brand. The world’s most highly regarded refiners include Johnson Matthey, Argor-Heraeus, PAMP Suisse, and Valcambi. There are others, but the easiest way to avoid getting ripped off is to buy a reputable brand. (If you buy a hallmark brand it will have all the proper stamping.)

A properly stamped hallmark gold bar is highly liquid. You can easily sell it virtually anywhere in the world!


Insider’s Tip: Don’t buy from TV ads. They have big marketing budgets and expensive celebrity endorsements, which can only be paid by high premiums or pushing numismatics.


Step #4. Choose Your Storage Locations

As soon as you receive your gold bars, one question will immediately hit you: where do I keep them?

You basically have two choices: you can store them yourself, or have someone store them for you. You can also do both.

One caution: don’t store all your gold at home. The risks with home storage are theft or natural disaster. All it takes is one mishap and your entire stash is gone!

You can easily avoid that risk by keeping some of your gold bars stored away from home. Along with a bank safe deposit box, there are some very reputable facilities that provide dedicated gold storage. The point is that once you accumulate more than a few ounces, I recommend diversifying where you store your gold bars.

Here are the three primary options…

Home Storage

Everyone should keep some gold at or close to home. That’s one reason you own bullion, so you can access it quickly in case you need it. You don’t bank three towns away, and you should not store your “emergency gold” that far either.

You can probably think of a hundred places to hide the gold bars in your house. But please, no cookie jars or under the mattress! Those are the first places thieves look. More than one hiding place is good, but not so many that you forget where they all are.

There’s a golden rule with home storage: tell only one other confidant where your gold bars are hidden. It obviously must be someone you trust implicitly.

A home safe is a good option, but keep in mind that if it’s not bolted to the floor, it’s just as easy to carry out as it was to carry in. I personally know of several horror stories where robbers found out someone had gold at home and forced the homeowners to reveal the hiding location or open the safe. One of these stories ended tragically.

If a thief hears that you have gold bars at home, your entire gold storage plan is sunk. And once the word is out, there are no takebacks. It can’t be overstated: tell no one other than your confidant!

Bank Safe Deposit Box

This is generally an inexpensive storage option. Your gold is close to home, and no worries about theft or the house catching on fire. And most bank robberies occur at the teller station and not the safe deposit box area.

But a bank box isn’t risk-free, either. A bank safe deposit box doesn’t come with insurance for theft or acts of nature (fire, flood, tornado, earthquake, etc.). Think of the banks that were washed away by the 2011 tsunami in Japan. Those box holders lost everything stored in them—and had no recourse.

Access to your box is another issue. Banks are only open limited hours and days. If an emergency strikes at night or on a weekend or holiday, you’re out of luck.

Bank storage also compromises privacy. If you have a bank box, the government knows about it. This may or may not concern you, but it’s another thing to consider.

Bottom line: a bank box is a viable option, but it should not be your only storage location.

The last option is a superior one…

Professional Storage

There are repositories specifically built for bullion storage.

The advantages are that your gold bars are stored outside the banking system. A number of facilities offer international storage, which is another way to diversify. The better companies offer immediate delivery upon your request.

The disadvantage is that you’ll pay more for storage than a bank box. But once you own more than a few ounces, it’s prudent to keep a portion of your gold bars stored out of your house and outside the banking system.

Look for a reputable custodian who will store the gold. The top three are:

  • Brinks

  • Loomis

  • Malca-Amit

You can also consider a buy-and-store program. There are several large dealers that are linked to a depository—you buy gold bars from the dealer, and they’ll transport them to a storage facility with a separate custodian (you never want to store at the bullion dealer).


Insider’s Tip: Consider the ease of a reputable buy-and-store program. They can remove the risks that come with home and bank storage. You can always take delivery and they’re a great way to diversify internationally.


Step #5. Be Cautious with Transportation and Insurance

If you buy gold bars at your local shop, remain vigilant about the area when you leave. Don’t let anyone follow you as you approach your car, or follow you home. If you make a big purchase take your confidant with you or stagger your purchases.

If you need to move your gold, be careful transporting it yourself. It’s not risk free, and if you lose it for any reason you generally have no recourse. Taking more than an ounce or two across a national border comes with additional risks, so I definitely wouldn’t put my fate in the hands of a border agent.

Dealers and storage facilities are experienced at transportation, so I would use their services. If you want to do it yourself, do so with only small amounts and over several trips.

Should I Insure My Gold Bars?

Counterintuitively, I generally don’t recommend insuring gold bars stored at home. Why? Because doing so means you must tell other people what you have and where it’s stored, and that breaks the golden rule.

Think about it. Here’s how many people know you have gold as soon as you try to acquire insurance:

  • Insurance agent

  • Insurance agent assistant

  • Insurance agent corporate office

  • Appraiser

  • Appraiser’s assistant

  • Appraiser’s corporate office

That’s not a guess. I did a trial run with an insurance company about getting a home policy for some gold and those are the people who I had to share my information with. And who knows who they’ll tell or who else will have access to the paperwork?

Better to use a good hiding place for a few ounces, then use a bank and professional storage facility for the rest.

If you use a buy-and-store program, insurance coverage is automatic, as it is included in the storage fees from the facility.


Insider’s Tip: Entrust transportation to your dealer and don’t insure your gold. Instead, use more than one storage location and only keep an emergency stash well hidden at home.


Time to Act

Buying gold bars is an essential component to every long-term financial strategy. History shows they will protect your lifestyle regardless of the economic, monetary, or fiscal circumstances. It’s the same strategy used by central banks and the wealthy.

If you don’t own gold bars, I strongly encourage you to add some today to diversify your portfolio, protect your purchasing power, and gain all the advantages covered in this report. You’ll be glad you did!

Free Ebook: Investing in Precious Metals 101: How to buy and store physical gold and silver

Download Investing in Precious Metals 101 for everything you need to know before buying gold and silver. Learn how to make asset correlation work for you, how to buy metal (plus how much you need), and which type of gold makes for the safest investment. You’ll also get tips for finding a dealer you can trust and discover what professional storage offers that the banking system can’t. It’s the definitive guide for investors new to the precious metals market. Get it now.

 

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