In Part I of this article, I laid out the basics of gold investing, discussing the good and bad points of gold ETFs, stocks, and physical bullion. I prefer the latter for a number of reasons, not least the ease of access to your gold, and the fact that gold bullion can’t lose its value in an instant like “paper gold” can.
Therefore, I suggest you stick to gold bullion in the early stages of your investment quest. It’s relatively easy to find and purchase, and you don’t have to worry much about quality or content.
A Quick Primer
Gold bullion tends to come in the form of rounds (coins) and bars, and you can acquire both formats in a bewildering variety of types. The best bullion coins are those struck by government mints, because they tend to be of trustworthy purity, weight, and size, and you needn’t have them assayed when you buy or sell.
One the other hand, gold bars often require assay, but tend to be less expensive to purchase, because of the lower premium over the spot price, especially when you buy in bulk.
Formats to Avoid
While they may seem tempting, don’t invest in gold jewelry or raw gold nuggets. Gold jewelry may be a form of portable art, and it tends to be lovely, but that’s what makes it a lousy investment. The artistic value may far outstrip the metal value, adding a huge premium to the purchase price.
And while gold jewelry will always be worth something, you can’t count on the artistic value remaining steady. Even worse, many would-be purchasers, especially pawn shops and even upscale jewelry stores, will offer you far less than what it’s worth, even for the metal value.
Nuggets can vary wildly in value, with most of their physical bulk often consisting of useless rock and dirt. Even the very best Alaskan nuggets rarely exceed 80% gold content. You’re much better off purchasing refined gold, despite the premium price you’ll have to pay.
If you decide to stockpile physical gold (and I do think you should keep some on hand), be absolutely sure to purchase it from reputable dealers. Never buy it sight unseen, and investigate the dealer as much as you can before you even approach them.
At the very least, check with the Better Business Bureau, and research the dealer on the ‘Net to see what others have to say. Your best bet is to deal with coin dealers and precious metal exchanges that specialize in bullion.
Again, coin bullion is often your best bet, since the issuer backs the purity, content, and weight. If you come across a fetching bar or two of unknown purity, ask the dealer if they’ll assay it at your cost. If not, don’t buy it.
Storing Your Gold
You’ve got two basic options when it comes to storing your bullion. First, you can put it in a safe deposit box in your bank; that way, you don’t have to worry about theft. The negative aspects are that you’ll have to pay as much as a hundred dollars or so per year, and you can’t access your gold when the bank is closed.
Otherwise, you can store your gold at home. Obviously, you’ll need a sturdy safe, which will cost you several hundred dollars at least; and there’s always the possibility of theft, especially if you don’t keep on the QT about your stash.
But that’s the nature of gold investing: there are tradeoffs all the way around, especially when dealing with the physical metal.