How to Buy Gold
For thousands of years humans have coveted gold — and today’s investors are no exception. Whether you plan to buy the metal in the form of coins, bars or gold-backed securities, there are plenty of reasons to add it to your portfolio.
Gold is considered a “safe haven asset” because when prices for other investments, like stocks or real estate, drop sharply, gold doesn’t lose its value — it may even gain value as scared investors rush to buy it.
What’s more, some experts also see gold as the ultimate way to protect your savings against rising prices since it’s held value for hundreds of years.
But when does it really make sense to invest in gold? And what’s the best method? Here’s everything you need to know about how to buy gold in 2021.
Table of contents
- Should you buy gold?
- Different ways to buy gold
- How to buy physical gold
- How to buy gold-backed securities
- How to buy gold FAQ
Should you buy gold?
Owning gold can be a way to diversify your investment portfolio — which entails owning a mix of different assets, so that when prices for one type of investment decline, prices for others will be rising. Gold is also a good way to protect your savings from inflation. But, like with any investment, there are risks.
Because gold is volatile in the short term, and won’t appreciate in the long term like a stock or a bond, financial advisers typically recommend investing no more than 10% of your savings in gold.
Before purchasing physical gold or investing in a gold-backed financial instrument, make sure it fits with your financial, goals and risk tolerance.
- Gold is a tangible asset that is highly liquid, meaning that it’s easy to quickly find a buyer if you need to sell.
- Historically, gold has been considered a way to hedge against inflation, since the price of gold tends to keep pace with the cost of living.
- Gold can be used to diversify your investment portfolio because it tends to rally when other assets, like stocks and real estate, fall in value.
- Gold doesn’t produce income like bonds or pay dividends like stocks. In the long run, these other assets are likely to outperform gold.
- Gold prices can be volatile.
- There are extra costs associated with buying, selling and holding gold as an investment.
Using gold to diversify
While gold’s price can be volatile, gold prices tend not to move in tandem with stock and bond prices. And, in fact, during financial calamities when investors flee the stock market, gold prices often rally.
When the S&P 500 fell around 30% between November 2008 and March 2009, the price of gold was up by about the same amount.
This makes owning some gold, alongside stocks and bonds, a way to diversify your investment portfolio, smoothing your overall returns. Just keep in mind financial advisers typically don’t recommend investing more than about 10% over your overall assets in gold.
Different ways to buy gold
There are two main ways to buy gold: purchasing physical gold, or investing via a financial instrument like funds.
- You enjoy physical possession of a valuable asset
- Requires secure storage
- Gold dealers typically charge significant mark-ups when they buy or sell. In some cases these may be 10% or more of the gold’s value
- Much smaller mark-ups when you buy or sell
- No storage
- ETFs offer simple, beginner-friendly options
- You do not enjoy physical possession of the gold
- Some gold-backed securities are complicated
- Gold mining stocks tend to be more volatile than gold prices
How to buy physical gold
If you decide buying physical gold is the best fit for you, there are several options, each with their own plusses and minuses to consider.
Gold bullion bars
Bullion is physical gold of high purity — usually in the form of ingots, bars, coins or rounds (which are often confused for coins because of their circular shape, but are closer to gold bars in that they don’t have legal tender and don’t differ from one year to the next). Bullion derives its value from the content of the precious metal rather than the form of the metal. You can buy gold bars in different weights, from just a gram costing less than $100 to 400 ounces, costing around $700,000, identical to the ones held by governments in places like Fort Knox.
Investment-quality gold bars are 99.5% (995) pure gold, the international standard. Legitimate bars are stamped with the manufacturer's name, purity and the weight.
Gold bullion bars and rounds are generally sold and then mailed to you by online gold retailers, which can offer discounts for members of the military and for buying in bulk. Sellers will usually mark-up the price of physical gold, so you’ll likely pay more than the actual gold’s value. Some well-known retailers include:
- JM Bullion
- Provident Metals
- Westminster Mint
- Money Metals Exchange
Some retailers consider buying more than 100 gold bars (or 500 gold coins) a “bulk” purchase, but this will depend largely on the seller.
You may also be able to buy smaller gold bars, ranging from half a gram up to 100 grams, in stores that specialize in numismatics, pawn shops or some jewelry stores.
Several governments, including the U.S., as well as many private mints currently manufacture gold coins.
Some of the most well-known government gold mints in the world include:
- The U.S. Mint
- Royal Canadian Mint
- Royal Mint of the United Kingdom
- The Central Mint of the People’s Bank of China
- The Perth Mint in Australia
Some of the most well-known privately-owned gold mints in the world include:
- New Zealand Mint
- Sunshine Minting
- Austrian Mint
- South African Mint
- Geiger Edelmetalle
- PAMP Suisse
Coins issued by the U.S. Mint are technically legal tender, meaning that they could in theory be used to pay for goods at a retail store. However, the value of their gold tends to be much higher than their face value. For example, a one-ounce American Gold Eagle 2019 coin’s face value is $50, but its real value is more than $1,500 .
Collectible coins may have an even higher market value due to their rarity or if there is high demand. And remember, sellers will charge you more than the actual gold’s value.
Popular minted coins include:
- American Eagle
- Gold Buffalo
- Canadian Maple Leaf
- South African Krugerrand
- Vienna Philharmonic
- Mexican Gold 50 Pesos
- British Sovereign
- Australian Kangaroo
Minted coins usually range in size from one-tenth of an ounce to an ounce to accommodate different investors’ buying power. Their purity is usually between 22 and 24 karats, with the purity guaranteed by the mints that produce them.
You can buy gold bullion coins from:
- Directly from the mints that manufacture them
- Coin shops
- Online dealers
- Coin shows
When buying gold jewelry, keep in mind that the price you pay will be tied to the craftsmanship of the piece and that the amount of gold it contains will be just a percentage (karat) of its overall weight. In effect, this means you’ll be paying more money for less gold.
For instance, the most common type of gold used in jewelry in the U.S. is 14K gold, produced from 58.3% pure gold and 41.7% of other metals like copper and silver. Other common mixtures of gold are 18K, and 22K.
Some jewelry merchants take steps to reassure customers their gold does not come from areas of armed conflict. These pieces are often sold with the tags “ethical” or “sustainable.” For example, Fairmined jewelry may have a Fairmined stamp to assure it comes from a responsibly-managed community mine.
How to buy gold-backed securities
Buying physical gold comes with drawbacks — like price markups by sellers, and the need for storage — so financial advisors typically recommend you invest in gold indirectly, through securities like gold funds and stocks.
You can invest in many of the options below via a brokerage account.
- Charge a small management fee
- Typically own bars of gold stored in a bank vault
- Require familiarity with stock trading to buy and sell
Gold ETFs (exchange-traded funds) own physical gold on your behalf. In other words, the ETF may own gold in a vault in London, but you can sit in the U.S. and buy or sell that ETF from your couch.
Investors buy shares in the fund through a stockbroker, whether in-person or online. ETFs do charge fees, although these tend to be lower than fees charged by gold mutual funds. They may also be lower than what it costs to insure and store gold in a facility like a safety deposit box. On average, ETFs charge annual fees of 0.59% of assets invested ($59 per $10,000 invested), according to ETF.com.
While you’ll likely want to buy ETFs that actually own physical gold, there are funds that invest in companies within the gold industry, often either gold mining stocks or gold streaming companies that provide financing for gold miners.
Some of the popular gold ETFs that trade in the U.S. are:
- SPDR Gold Shares ETF (GLD)
- iShares Gold Trust ETF (IAU)
- SPDR Gold MiniShares Trust (GLDM)
- Aberdeen Standard Physical Gold Shares ETF (SGOL)
- GraniteShares Gold Trust (BAR)
- VanEck Merk Gold (OUNZ)
Gold mutual funds
- Costs vary
- Can be volatile
- Easy for beginners
Gold mutual funds typically invest in gold mining or refining companies’ stocks, though some own small amounts of bullion too.
Mutual fund fees tend to be higher than those of ETFs because they’re usually actively managed, meaning there’s a fund manager or team of people conducting research, analyzing potential stock-market investments and then making investment decisions for the fund.
Mutual funds can be purchased through a brokerage (in-person or online) or via online stock trading apps.
Some of the gold mutual funds that trade in the U.S. stock market are:
- Sprott Gold Equity Fund (SGDIX)
- Franklin Gold and Precious Metals Fund (FKRCX)
- Gabelli Gold Fund Class AAA (GOLDX)
- Invesco Gold and Special Minerals FD (OPGSX)
- US Global Investors and Prec Mtls Fd (USERX)
- First Eagle Gold Fund (SGGDX)
- Van Eck International Investors Gold Fund (INIVX)
- USAA Precious Metals and Minerals Fund (USAGX)
- Fidelity® Select Gold Portfolio (FGDAX)
Gold mining stocks
- Gold mining stocks tend to be more volatile than gold itself
- Stock prices reflect corporate management decisions, in addition to the price of gold
Of course, rather than invest in a mutual fund that pools money from multiple investors, you could also buy stocks in gold mining companies (often called gold stocks) directly.
Some of the major players in the gold mining industry are:
- Barrick Gold (GOLD)
- Newmont Corp. (NEM)
- Newcrest Mining Ltd. (NCM)
- Kinross Gold Corp. (K.TO)
- B2Gold Corp. (BTO.TO)
- AngloGold Ashanti (AU)
- Karora Resources Inc. (KRR.TO)
- Sibanye-Stillwater Ltd. (SBSW)
- Dundee Precious Metals Inc. (DPM.TO)
Gold futures contracts
- Can be volatile
- You can lose more than your original investment
- Not for beginners
Gold futures are mostly for professionals, not novice investors. Gold futures contracts are agreements between two parties to trade a certain amount of gold at a set price at a future time. When the contract “settles” or comes due, the seller delivers the gold to the buyer and collects the agreed-on price.
The contracts (whose value can also be settled for cash) can be traded among speculators who hope to make money by betting that gold will increase (or decrease) in value before the settlement date. Futures contracts are usually for 100 troy ounces of gold, while their prices are quoted in U.S. dollars per ounce. In the U.S., gold futures are traded in the New York Mercantile Exchange (NYMEX).
To buy (or sell) a futures contract, futures exchanges typically require traders to stake only a small fraction of the contract’s overall value. However, if the contract falls (or rises) the exchange can demand additional collateral on short notice. This feature of futures trading makes it possible to lose more than the initial amount of your investment — even before the settlement date of the contract — and makes futures trading too dangerous for most novice investors.
How to buy gold FAQ
What is the price of gold today?
As of September 28, 2021, the price of gold is $1,734.50 per ounce.
In the U.S. the COMEX is the primary exchange for gold futures, and therefore, the place where the most-widely quoted gold prices are set. The London Bullion Market Association also provides a twice-daily "fix" price used as a benchmark for large market participants.
In general, look for what’s known as the “spot price,” that’s the price at which buyers and sellers are willing to trade gold today, as opposed to some future date (specified in a certain month’s futures contract.)
Is gold a good investment?
Gold is considered a way to hedge against inflation and can be used to diversify your portfolio. It’s also a highly liquid asset, so you’ll be able to find a buyer for your gold when you need to sell.
However, don’t expect to get as high of returns with gold as you would with an asset like stocks.
Where can I buy gold?
You can buy physical gold from retailers like JM Bullion and APMEX, as well as pawn and jewelry shops.
You can buy gold-backed securities through your typical broker, like Fidelity or Charles Schwab.
Do you have to pay taxes on gold?
Profits from trading securities like stocks and bonds are known as capital gains and are taxed at special long-term and short-term capital gains rates. But the IRS looks at profits you earn from trading gold and other “collectibles” differently.
Gains from physical gold are taxed as ordinary income if you own it for a year or less and a maximum 28% tax rate if you own it for longer than a year.
It’s important to note the profits from trading gold ETFs are taxed as collectibles trading profits, not as capital gains like other stocks.
Are their ethical concerns with buying gold?
More and more investors are worried about the social and environmental impact of their investments, and gold mining can leave a significant toll on the environment and raises concerns around human rights and governance since gold mines are located in conflict-affected or otherwise high-risk areas.
In 2019, the World Gold Council took steps to implement guidelines for member companies, as did the International Council on Mining and Metals. Both require that participating mining companies publish information on their progress publicly, making it easier for consumers to find.
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