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Last update : November 2013
GOLD: Where to buy it - How to buy it
If you're thinking about buying Gold the first thing you need to understand is what's called the 'premium over spot'.

The spot price (sometimes called the cash price) is the price you'll see quoted on the TV or in the financial section of a newspaper.

The premium over spot is the profit for the Gold dealers, and ranges from 0.1% up to around 10% depending on how you buy your Gold and in what sort of quantities.

Many readers are no doubt looking to buy the physical metal via one ounce coins (the most common weight) and the premium of these in the 5%-10% range over spot Gold.

For example, if the spot price of Gold is currently $1,000 then –

  • A One Ounce coin will cost $1,060 (6% premium)
  • If looking to buy in Sterling then the Sterling/US dollar exchange rate will also play a factor and the price (using 1.60 as an example) will be around £662

Note, although Gold is priced in US dollars all UK Gold dealers will sell and buy in Sterling.

How to Buy Gold Coins and Bars

For most investors in physical Gold I'd strongly advise you to consider buying South African Krugerrands which are a one ounce coin.

The reason is simple - traditionally they've always had the cheapest premium over spot plus they're the most common Gold coins on the planet.

Note, just because they're South African coins doesn't mean the market for them is not global. A Krugerrand one ounce Gold coin is well known and traded around the world.

Yes, it's possible to buy fancier and more expensive one ounce coins but I would only advise you to do this if you have a specific reason. Perhaps a special edition or a reminder of a trip abroad (a Chinese Panda or a Canadian Maple leaf coin as examples).

However if your sole reason for buying gold coins is for the gold content, then buying the cheapest (premium over the spot price) is the best and most sensible strategy.

This is why the majority of Gold investors in the UK, including myself, stick with Krugerrands.

What about Gold Bars?

I prefer gold coins to gold bars because the bars are rather inflexible as they are traditionally cast in larger weights than one ounce.

Therefore if you owned 10 ounces (10 coins) and wanted to sell 2 ounces, that's easy with coins. But if you owned two 5 ounce bars it's not as easy to slice and dice your holdings.

Also, bars seem to be sold these days in grams with 28.3495231 grams = 1 ounce.

However Gold has always been priced in ounces so to have a certain weight in grams is just not as elegant when valuing your overall holdings.

But if you like bars then all the bullion dealers sell them in different weights from a few grams all the way up to the ones you traditionally see in movies (400 Ounces and if Gold is priced at $1,500 each bar is worth a cool $600,000).

Also, if you want to buy a sizable amount of Gold (in excess of £50,000) bars might make more sense.

Gold Coins Dealers
My number one tip for buying Gold coins is to only buy from well known dealers. Here's a big European dealer I've bought from in the past -

BullionByPost.co.uk

  • This dealer specialises in various sorts of Bullion whether coins or bars
  • If you want a certain coin from a specific country then they have a most comprehensive collection
  • All order are shipped fully insured
Buying Gold Coins – Pluses and Negatives
Pluses
  • You own and control the Gold, ie it's in your hands
  • Many people want ownership of the metal so they can hide money - Do not discount this fact and it's why people are often happy to pay a premium over spot
  • The metal can easily be hidden and in large quantities
  • Gold can be used to transport large amounts of money easily across borders and into different countries
  • And don't forget, Gold is a beautiful metal to look, touch and hold

Negatives

  • It can be stolen if it is not hidden or stored securely
  • Buying and selling physical Gold is more expensive than other methods (discussed below) due to the premium over spot
Going to Hong Kong? It's the cheapest place to buy Gold Coins
We all know the Chinese love their Gold so it's not surprising to learn that Hong Kong is probably the cheapest place in the world to buy Gold Coins.
  • Unsealed Coins (loose) can be bought for between 0.2% - 1% premium over the current spot price
  • Sealed (in a sealed plastic sleeve issued directly from the Mint) for between 3% - 5% premium over spot

If it was me I'd buy unsealed coins. Why pay more for a new coin directly from a Mint if all you're after is the Gold content?

The place to buy them is Queen's Road (one of the region's major roads) and from a well known bank (they all sell Gold) such as HSBC of Bank of China.

Note, China's official Gold coin is known as the Panda (one ounce in weight) and you might find these cheaper in Hong Kong than Krugerrands. Pandas, Krugerrands, it's the ounce of Gold that's important so my advice is to go for the cheapest. Having said that, a Panda is far prettier than a Krugerrand.

How to sell your Physical Gold
The number one problem with selling physical Gold is the reverse premium. This works in a similar fashion to a second hand car deal -
  • If you sell a car to the local dealer he could offer you £3,000
  • But the next day you would see the car for sale in his window at £3,500

Walk into any Gold dealer and it will be the same, the price he bids you will normally always be less than the spot price, and sometimes can be as low as 5% under spot. Clearly when you add the premium over spot to buy with the premium under spot to sell it's pushing 10% or even more.

So what to do?

Is there a way to sell your physical Gold for the spot price and maybe even get a slightly higher price to the current spot price? Maybe, and it's the auction site eBay.

However, since the initial writing of this article I've been told that the selling fees for eBay can be as high as 10%. So what I'd advise is doing some research, see what the current coins are selling for and work the commission back in.

eBay can also be a hassle, listing the coins, packaging them up, insuring the delivery etc. Take that into account as well.

Buy Gold Online : Secure Vault Storage

This is a very interesting way to buy Gold and Silver and it's also the cheapest re the premium over spot.

In 2005 BullionVault, a British company based in London was set up, and it works very simply.

  • Open an account (not only is this free but they'll give you a free gram of Gold (if Gold is at $1600 that's worth around $55/£34)

  • Deposit money and then use their secure website to buy or sell your Gold (in whatever currency you want)

  • The premium over spot to buy is an ultra cheap 0.80%. In fact there's probably no cheaper way to buy Gold

  • They also deal in silver

  • You can then choose to hold your gold in one of the company's secure vaults located in London, New York and Switzerland

  • Personally I love this option and strongly advise everyone NOT to store the Gold in their own country (because it will be out of the reach of the Government) so Switzerland looks the smart bet for UK buyers

  • Note, if you want to take physical delivery of your Gold, it's possible with BullionVault

Important: Gold Audit is published daily

  • The company's total Gold/Silver holdings are audited every day
  • The audit statement published on their website
  • At present the company holds over $1billion in customer bullion spread between their vaults in London, Switzerland and New York
If you're interested in finding out more check out their website because it's excellent and there's a wealth of information about the company and how it operates.
Not another 'award winning' company!
BullionVault won a Queen's Award for Enterprise in 2009.

Now, normally I automatically disregard awards because most of them seem to be marketing gimmicks. Look hard at most awards and they're either from minor company or organisation, or the award just happens to be from periodicals where the company is a heavy advertiser.

But a Queen's Award, like an Oscar, is a proper award. The company is also recommended by the World Gold Council.

Gold Scams
Fake Coins – Safeguard by dealing with well known dealers

Sadly as the price of Gold has risen so have the fake gold and other related scams.

Coins are normally what the scammers target with the most common being a substitute (heavy) metal on the inside with a Gold plate on the outside.

The easiest way to guard yourself against fake coins is to only buy through a well known dealer. For this reason I'd be happy to only use eBay to sell my Gold but not buy. Perhaps I am being slightly paranoid here because in the Gold community eBay has a good reputation for doing solid deals.

Here's a tool for spotting fake coins
If you're really worried about fake coins then why not consider buying a Fisch Fake Coin Identification Gauge. Last time I checked they were being sold for about $170.
Other Gold Scams
There are plenty of highly suspect firms in the marketplace. So as ever realise the internet is the best anti-scam tool ever invented.

Information is power as the cliché goes and it's so true when wanting to research what you're buying and who you're doing business with. As this website has long argued it's informed buyers that normally always get the best deals AND keep themselves out of trouble.

Ultimately the easiest way to avoid scams is dealing with either BullionByPost.co.uk or big name storage companies such as BullionVault. This is how I buy my Gold and advise others to do so and I've never been concerned about the validity of my holdings.

Buying Gold via the Stockmarket

There are two ways to buy Gold in the stockmarket –

  1. Directly, via what's called an Exchange Traded Fund (ETF), or
  2. Indirectly, via Mining shares

Both are tricky and you need to really know what you're doing as well as being an excellent researcher. So if you're comfortable operating on the stockmarket then investigate both but if not I'd strongly advise you stick with the physical metal.

I would also like to make you aware of the perils of dealing in Gold mining shares.

One would think logically that as the price of Gold rises so do Gold mining shares, and vice-versa. The trouble is the stockmarket is not always logical, as can be seen by the performance of mining shares over the last 5 years –-

  • Gold has risen by over 100%
  • But the majority of Mining shares have hardly risen and some of them have fallen!

This of course has infuriated those investors holding mining shares, myself included, as my gains have ranged from pathetic to miserly.

Will the shares move higher in the future (if Gold keeps rising), who knows but what I do know with hindsight is it would have been far better (and far less frustrating) to have invested directly in the shiny metal.

Summary: Only venture into the stockmarket if you know what you're doing and then beware that there's been a very perverse relationship between the price of Gold and the performance of the mining shares.

If you are interested in the stockmarket re Gold investments then here's the broker I personally use and they're very hard to beat (software, commissions, market access, free training etc).

Interactive Brokers
  • US based broker (with UK and European offices)
  • Very competitive commissions but NO TELEPHONE DEALING
  • Everything is run through the internet including customer support
  • This broker is aimed more at the professional trader
  • The signup process is a nightmare (all online) but I've been a client of them for the last 8 years and have no complaints
  • Interactive Brokers
Gold Buying Summary

If you want to own gold coins or bars then the 2 best and more importantly most logical ways for the majority of readers are –

  1. Physical metal in the form of Krugerrands bought from a well known Gold dealer such as BullionByPost.co.uk

  2. Purchase and storage of the metal (and Silver) via Bullion Vault

The first option is more expensive because of the higher premiums over the spot price. But you do get hold of the metal itself and that's a massive advantage to some people. This option is also somewhat inflexible as Coins or bars can take a few days to sell (you've got to visit the dealer and accept his price which may be lower than another dealer).

The second option is both cheaper and more flexible but your Gold (and/or Silver) is held in a vault and not by you personally. This option is also highly flexible in that your Gold and/or Silver can be traded in an instant wherever you have access to the internet.

I hope you've found this article useful and whatever option you choose, good luck with your Gold!

If you want to discuss any Gold related matters with me please feel free to email. Alex Green - apg@learnmoney.co.uk

The Billion $ Question - Where is Gold Heading?
Personally I think it's going a lot higher than it is today, maybe as high as $10,000 between now and 2015. Some points to consider -
  • Currency: Gold is now a de facto currency and with most governments in a race to the bottom (for their currencies) Gold has and will continue to strengthen

  • Anti Government Policies: Owning Gold is a vote against Government competence. So if you think the Politicians will make things better then sell your Gold. If not, if you believe most of them are incompetent and way out of their (economic) depth, just look at the economic mismanagement since 2000 and especially since 2007, then buy Gold and/or keep what you've got

  • Listen and Learn: So who to pay attention to?

    Jim Sinclair (see video at the bottom of this page)

    Probably the world's best market strategist and expert on global economics, Martin Armstrong - he always publishes great up to date reports on his website (see Radio interview at the bottom of this page)

    Kyle Bass - One of the planet's top Hedge Fund managers. When this guy talks on the economy I listen and listen closely (see video below)

  • Stand firm: Finally, realise that Gold is going to be extremely volatile so expect savage moves both ways. When they hit Gold, and they will, dumping the metal $100-$300 over a few weeks, stay strong and focus not on the current price action but the big economic picture which sadly due to total government economic mis-management and incompetence doesn't look good at all

  • Anti Gold Propaganda: Many buyers of Gold are considered crackpots and even ludicrously, un-patriotic for betting against their Government. But who puts this propaganda out? Those in charge because they hate Gold as it highlights their failed monetary policies. Also, Gold has been rising for 10 years so why listen to people with zero economic credibility who've been wrong for a decade?

  • Gold is still HATED (by most people) This is an interesting point and highly significant I believe.

    Even though the metal has been in a very strong multi-year bull market, arguably the best performing major asset of the last 10 years, it's still widely ridiculed and hated by the majority of economists, financial advisers, fund managers, market commentators, and most importantly investors. Scan a few websites and papers and read a few articles from the Gold bears and you'll soon see the scorn and distaste they have for the metal, and its investors!

    Check out this hilarious video where the dippy reporter argues that US dollars are a safer bet than Gold because dollars are backed by the US Government -



    I'm estimating here but I'd put the like versus unlike camp at least 75% in favour of don't like. Facts like this should resonate with you and also prove that Gold is far from in a bubble, bubbles after all are when the majority love the asset class and can only see it going ever higher

  • Nobody is talking about Gold's price outside of the financial markets - Again, this relates to bubbles.

    Think back to the internet bubble (1995-2001) and the property bubble (2002 - 2008) and ask yourself who didn't know and who wasn't talking about them?

    I don't visit ladies Salons that often but I'm sure there was loads of easy money stock and property talk there when the bubbles were in full swing. Same with pubs and bars, many people who weren't directly related to the stock or property markets were gossiping like crazy about the price rises

    That's the sign a real bubble and that's why Gold is far from in one. Few are talking about the metal or its price outside of the financial markets

    It's points such as these why I continue to like Gold, laugh at people who lazily use the word bubble, and want to accumulate more on any general weakness, see my Gold buying strategy section below
My Gold Buying Strategy
Updated: June 2012
  • I'm respecting the long term trend which is still very much up

  • Prices have been bashed from the highs ($1924) but this is good news for long term bulls as it will wash out many of the late comers

  • My strategy is therefore to look to take advantage of any further weakness

  • Now, this is an important point - RESPECT YOUR TIME FRAME

  • What I mean is if you're a long term investor in Gold it's ludicrous to start worrying about whether the price goes up or down today, this week or even this month

  • If you do get sucked in by the short term price action you're likely to be a buyer on the highs and a seller on the lows as emotion takes over

  • My order are to add to my current Gold investments at $1500 and at every $50 lower, so $1450, $1400 etc. My analysis says there's an outside chance that Gold could move to $1,000 but this is unlikely, even so I will be happy to be a buyer at that level

  • The perverse nature of my strategy is that if I start to buy at $1500 I want prices to continue lower (for the next several months) - this is what I mean by respecting your time frame, ie I'm focussing on where I think Gold will be in 1-4 years time rather than its price today or possible price next week/month

  • The better strategy (with hindsight) would of course be to buy all my Gold around the lows but who knows where that low will be? I haven't a clue where Gold will bottom so my simple buying strategy is designed to take advantage of any general weakness in the metal should that occur at multiple lower levels ($1500, $1450, $1400 etc)

  • To buy my Gold I'm using a combination of BullionVault and spread bets via FinSpreads (note: please don't get involved in leveraged products like spread betting unless you know what you're doing)

  • Also note that Spread Bets can be used to trade Gold for long periods, ie the trade can be held for many months and even years. But with a spread bet you never actually own any physical Gold

  • Any question please feel free to email me - Alex Green
Martin Armstrong interview - October 2011
Want to know just how much of an economic mess we're in and how it's likely to play out?
Excellent Jim Sinclair interview - Summer 2011
Kyle Bass - 2011 Meeting

  • The following video is about the current economic mess, not about Gold
  • Nevertheless, when Bass speaks we should all listen
  • What I like most about his views is they're always based on strong research, common sense and simplicity
  • The video is an hour long but it's well worth it
  • YouTube link


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