Gold bullion should be viewed as an essential part of everybody’s investment portfolio.
For myself, one of my mentors and investment guru's, Robert Kiyosaki Editor, Rich Dad Poor Dad advises gold, real estate and oil.
I choose a network of investment professionals to guide me in my investment decisions.
There are many ways to invest in gold:
You can buy gold directly in the form of bullion or coins.
You may also purchase stock in a company that produces gold.
You could buy gold futures or gold options
You may decide to invest in a gold ETF
However, for this post I am going to discuss ‘how to invest in physical gold' and so you would buy gold directly in the form of bullion or coins.
Your next question should be when is the best times to buy gold? and historically this has been the beginning of January, early April or early July.
Where to buy physical gold
It is possible to buy physical gold from a coin shop located close to your main town which can be convenient. You must do your research as to the purity of the gold before making a transaction but that’s also where you will pay the highest premiums. You should also consider the safety of walking around with gold on your person.
Do you wish to buy your gold over the phone or would you prefer to buy online with a company specialising in buying and selling gold bullion and gold coins who has built a strong track record of honesty and reliability.
Questions you need answering is
How to fund your account?
This will depend on the company you choose to deal with. More often than not you would fund your account by a check, bank wire or ACH transfer.
What is the minimum investment?
Again this depends on the company you deal with. Some companies state no minmum purchase required or offer $100 to open your account and regular monthly subscriptions to purchase 1oz gold bars
Will you be charged Sales Tax?
If you are a United States citizen, depending on your state of residence, it is your obligation to report and pay sales tax on any metal you purchase for delivery. You may also be responsible for taxes on any realized gains made in your positions, depending on the type of account you’ve chosen.
Will you pay VAT?
VAT is not applicable for metal going into storage or delivered to a US address. However, if you have your metals delivered to an overseas address, VAT may apply, depending on local laws and the storage location your order was sent from. Be sure to consult local tax laws before taking delivery.
Storing your precious gold
- Keeping it at home
- Bank safety deposit box
- Third party storage firm
Keeping it at home
If you keep your gold at home where is it going to be safe?, if you hide it too well from possible intruders, will you remember where you have hidden it. A home safe is another option. One that’s built into your house and concealed is best. If you buy a safe, you should buy it with cash, and install it yourself as best you can, the fewer people know you are buying gold and storing it on your property, the better. Also you need to ensure you have the gold insured for loss.
Another problem with storing gold at home is the liquidity factor. If you choose to sell your coins or gold bars you may need to get them to a dealer to sell them and also you may need to have them refined so that the dealer can verify the gold content and all this takes time and incurs costs. You could keep a few coins at home for an emergency, but more than that and your next step is going offsite for storage.
Bank safety deposit box
Bank safety deposit box's are relatively inexpensive and come in different sizes. The bank doesn’t insure the contents of a safety deposit box, you have to buy separate insurance, which can be expensive, and it’s hard to get for precious metals in safe deposit boxes. You also have the security risk going to and from the bank.
Bank hours are limited, as is your opportunity to get to it. However, again it is a question of liquidity and whether you can get access to the box for a quick resale. American Eagles, gold bullion coins are guaranteed by the federal government, have inherent liquidity because they are bought and sold by coin dealers, banks and commercial dealers without question.
Third party storage firm
Once your gold holding outgrows your safety deposit box or the amount you hold, signals it’s time to diversify, the next step is to consider the most secure storage of all: a private, precious metals vaulting facility, known as a depository.
In addition to benefiting from secure, specialised bullion vaults that are insured, you obtain good geographic and political diversification for your gold and have exceptional liquidity because you can sell your metal 24/7 and have the proceeds wired the same day to your bank account anywhere in the world.
Investors should always ask if their investment is being held on or off of the holding company's balance sheet. If held off the company's balance sheet, investor assets are held separate and apart from those of the company, and thus, they will not get tied up in bankruptcy proceedings should the company fail.
I will be reviewing different physical gold trading companies in future posts so please bookmark this site for more in-depth information on how to buy physical gold.
If you have any comments or questions please leave them below.