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How to Buy Gold Coins Online and Avoid Fraud

Gold coins are a smart buy for any investor. They’re highly liquid, portable, and an unbeatable long-term store of value.

But if you’re just getting into the gold market, deciding what to buy and who to trust can be daunting—especially because there is no shortage of gold scams. To avoid getting ripped off, investors should understand everything they can about the market and industry best practices.

This guide will explain what you should know before you buy gold coins online: Why buying online is smart and convenient, how pricing works, which coins to buy, how to find an honest online dealer, and which red flags should send you running for the hills.

Why Buy Gold Coins Online?

Doing business with a local coin shop gives you the peace of mind of being able to see the gold before you buy it and take it home with you that day. However, you’ll find better prices online.

The reason is twofold: online dealers have low overhead costs (no brick and mortar store to maintain), and they can get multiple wholesalers to bid for your business so you get the lowest price.

As we’ve discussed before, one of the biggest advantages of buying gold online is storage capability. By utilizing this feature, liquidity of the metal is maximized since there’s very minimal chance it is damaged in transit.

The best online dealers will provide an online interface to sell the metal anytime. As soon as gold has broken the chain of custody, it immediately becomes less liquid and more difficult to sell.

Be sure you fully understand the ramifications of taking gold out of the chain of custody before taking the delivery.

There are some other advantages when you buy gold coins online, which are laid out in this table:

Benefit Why it matters
24/7 trading and account management Makes precious metals investing as easy as trading ETFs or stocks.
Shared trading platform An online dealer operating on a shared platform with institutional investors gives you access to volume pricing.
Option to automate purchases Instead of chasing the market, automating incremental buys lets you dollar-cost average into your position.
Buy-and-store programs A dealer that offers fully allocated, non-bank, third-party storage saves you from having to source vaults and coordinate delivery yourself (more on this later).
Gold IRA programs A fully integrated IRA program lets you buy gold coins online, arrange storage, and assign custodial services in one simple transaction.

Now that we know why buying gold online is a no-brainer, let’s dig into pricing and other details that you have to know to get the most out of your investment.

Spot Price vs. Ask Price

The real-time price of an ounce of gold is called the spot price, and it pays to know what it is before you buy gold coins online.

When visiting different dealer websites, you’ll notice their ask prices are higher than gold’s spot price. The difference between the two is called the premium. Dealers charge a premium to recoup the fees they paid to their wholesaler and to make a profit.

Coins are more expensive to produce than gold bars, so their premiums are higher. However, as we’ve written about previously, it is worth paying a little extra to hold gold in smaller, more liquid amounts.

If you ever wanted to sell a portion of your holdings, it is easier to find buyers for coins than bars. And since coins are legal tender, there’s no need to authenticate the metal before you sell it.

Fractional sizes (1/2, 1/4, 1/10, 1/20, and 1/25 oz.) are available, but while they are highly liquid and fairly affordable, 1 oz. gold coins are the better buy. This is because minting costs are fixed regardless of the size of the coin, so you pay a higher premium for fractional coins than you do when buying 1 oz. coins.

If you've ever felt confused when trying to buy precious metals or wasted hours searching for the lowest commissions, you need to read Investing in Precious Metals 101. Download it now—free!

How to Find a Reputable Dealer

When you buy gold coins online, you assume an inherent risk. You have to trust that the dealer will fulfill your order and is selling you the real thing.

Because of this, it is never a good idea to just pick a dealer without doing your research. Here’s a checklist for vetting dealers before you buy gold coins online:

✔  Be sure they’re selling bullion, not numismatic coins

✔  Find out how long they’ve been in business

✔  Make sure they have a physical address

✔  Google the business name to read customer and industry reviews

✔  Check consumer protection agencies for complaints filed against the company

✔  Be sure the dealer guarantees delivery within 14 days (30 at the absolute most)

✔  If you plan to make a sizable investment, place a small test order for delivery first

✔  Contact customer service

Your experience with customer service can tell you a lot about a company. If you call to ask a few questions before you buy gold coins online and their reps are pushing a sale on the spot—or trying to steer you into buying other products like numismatics or “limited-edition proof sets”—it is probably a company you want to avoid.

A good dealer will answer your questions without pressuring you to buy anything.

Buying from eBay or Other Marketplaces

Some investors have great experiences when they buy gold coins online from eBay or similar marketplaces. It is a convenient way to buy, shipping is often free, and there’s no state sales tax. A mix of gold dealers and private sellers post products on the site—sometimes for less than you’d pay at a local coin shop.

To determine whether a seller’s asking price is fair, use the “Advanced Search” tool to find listings for the product you’re looking to buy, and check the ones that have recently closed to see how much the coin sold for. This will give you an idea of how much other sellers are asking for the same product and can help you figure out whether you’re getting a competitive price.

If you see something you’re interested in buying, be sure to check out the seller before you proceed with the transaction. Deal only with sellers who have a 100% approval rating (or close to it), and read their buyer reviews to be sure others have had good experiences buying from them.

A word of caution: eBay is not ideal for investors who are new to the precious metals market.

While there are reputable sellers on eBay, it’s just not the best place to buy gold coins online if you’re not a knowledgeable investor. Thousands of fake gold coins are sold every month on the site, and there’s nothing stopping someone from misrepresenting what they are selling or artificially driving up bid prices.

If you don’t have experience with buying gold coins, it’s probably not worth the risk.

Want a precious metals expert to guide you through the market? Download our Investing in Precious Metals 101 e-book for all the insight and information you need to invest like a pro.

Choosing the Right Coins

Gold coins represent a convenient and affordable way to begin investing in precious metals.

They are easy to value and sell at any time, but depending on where you live, the market will be stronger for certain coins over others.

In North America, the US and Canadian coins are typically more sought after (and therefore more liquid) than a coin from Turkey or Australia, and vice versa.

Here are our recommendations for the best gold coins to buy:

Gold American Eagle        

  • Produced by:  US Mint
  • Composition:  22-karat gold
  • Purity:  91.67%
  • Year released:  1986
  • IRA approved:  yes

American Buffalo  (Gold Buffalo)

  • Produced by:  US Mint
  • Composition:  24-karat gold
  • Purity:  99.99%
  • Year released:  2006
  • IRA approved:  yes

Canadian Maple Leaf

  • Produced by:  Royal Canadian Mint
  • Composition:  24-karat gold
  • Purity:  99.99%
  • Year released:  1979
  • IRA approved:  yes

Vienna Philharmonic

  • Produced by:  Austrian Mint
  • Composition:  24-karat gold
  • Purity:  99.99%
  • Year released:  1989
  • IRA approved:  yes

South African Krugerrand

  • Produced by:  South African Mint
  • Composition:  22-karat gold
  • Purity:  91.67%
  • Year released:  1967
  • IRA approved:  no

It’s generally best to purchase gold coins most closely aligned with the market they’ll eventually be sold.

Prices will vary by geographic region for the same coins, so an investor should pay close attention to bid-ask spreads in each location. While a 1 oz. American Eagle may be the most economic in North America, it will have different value if held in Europe or Asia.

For example, an investor in North America should purchase either an American Eagle or Canadian Maple Leaf as these will be the most liquid. An investor in Europe would most likely be better off with an Austrian Philharmonic or a gold Britannia made by Great Britain.

However, if the metal is held in storage with an online dealer offering ample liquidity, it’s less of an issue.

Avoiding Fraud

Just because you’re new to the precious metals market doesn’t mean you have to be vulnerable to every crook out there.

When you know the fakes, scams, and cons to avoid, a shady dealer will immediately raise a red flag. And while sometimes even seasoned investors get ripped off, arming yourself with information is your best bet for success when you buy gold coins online.

Here are a few of the most common ways investors lose money in gold scams:

Getting hit with hidden fees
When you buy gold coins online, your dealer should list all fees upfront. Once you’ve got a quote for shipping, delivery, and insurance, there shouldn’t be any surprises.

Accepting “free” storage offers
If a dealer offers to keep the coins in escrow—or if the company has a free storage program—buyer beware. There’s a chance you’re being sold imaginary gold. You should be able to take physical delivery of part or all of your holdings at any time, and delivery should happen in a reasonable time (days, not weeks).

Falling for Bait-and-Switch Tactics
Remember what we said about calling customer service while vetting dealers? Here’s why. Some companies, once they’ve got an investor on the phone, push them to take their allocation and use it as a down payment for buying more bullion. In other words: They pressure customers into financing their investment. While it sounds great to own five-times as much gold as you have money for, leveraging your investment is a bad idea. Don’t do it.

Storing Your Gold

Another important detail to work out before you buy gold coins online is where you’re going to keep them.

If you’re just buying a few coins to hide at home, that’s easy enough to do. A home safe can be a decent option, but if it’s not bolted to the floor, it can easily be stolen—not to mention that if you’re a victim of a home invasion, the robbers can force you to open the safe.

When push comes to shove, the insurance and safety issues of keeping gold at your home are too great to ignore.

There are three other options to consider. Here’s what to know about each:

Bank Safe Deposit Box
Your neighborhood bank is close to your home, convenient, and keeps your safe deposit box items relatively secure. They can be a good, easy solution if you don’t own a lot of metal.

The downside is that the contents of your safe deposit box are not insured against fire, theft, or natural disasters like hurricanes or tornadoes. If the bank folds or a “bank holiday” is declared, access to your gold can be seriously delayed.

Private Vaulting Facility
A dedicated vault will give you private, secure protection for your gold with the major advantage of operating outside the systemic risks of the banking sector.

But paying for private, allocated storage can be expensive, and you may need to have your metals audited before the vault will accept them for storage. If you want to diversify across multiple facilities, you have to do all the legwork of sourcing them and coordinating delivery yourself.

Buy-and-Store Programs
We mentioned this briefly above, but one of the biggest benefits of working with an online dealer is the availability of buy-and-store programs.

Several large dealers are linked to private, non-bank vaults. You can buy gold from them, and they will transport it directly to a depository with a separate custodian (never store gold at the bullion dealer).

The convenience of this option can’t be beat; it removes the risks that come with home and bank storage and the hassle of sourcing private storage yourself. Some online dealers even make it possible to diversify your holdings internationally. And you can manage it all online.

Closing thoughts

Investors have more choices than ever before for buying precious metals, but the most convenient and cost-effective way is to buy gold online.

The best dealers are established, have good online reviews, can guarantee delivery at any time, and offer full-service investing. Dealers that offer buy-and-store programs add a layer of ease and security to your investing.

Finding the right dealer for you takes time and a little legwork, but once you’ve done business with a company you can trust, they can take care of your precious metals needs for years to come.

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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