How To Buy Gold

How To Buy GoldIf you are a beginner and want to learn how to buy gold, you should definitely get a good understanding of the basics so that you can get the best returns on your investment. One of the best strategies is dollar-cost averaging. This helps you to see the possible risks and minimize them in the long run. Dollar-cost averaging means that you put a certain amount of money aside for gold investment on a regular basis regardless of the price of gold.

Some financial advisers and money managers say that you should only put a small amount 3-10 percent of your portfolio in gold. But the brilliant investors suggest a higher rate – up to 25 percent. Regardless of the amount you decide to invest, there are always risks involved, just like any other asset. So learning how to protect yourself from risks is essential.

Types of Physical Gold for Investment

There are various types of gold that you can choose to invest in. While gold jewelry also stores value, the majority of the cost of jewelry comes down to craftsman ship. Also jewelry is of a much lower finesse than investment gold, making it a poor choice.

The main gold investment products are:

Gold Coins

These are typically in weights of 1/10 oz, ¼ oz, ½ oz, 1 oz. Although larger coins are available.

Gold Bars

Gold bars come in a variety of sizes from 1gm to 1kg and more.

Other Gold Coins

Aside from new coins, you can also choose to invest in US gold coins minted before 1933. There are other certified gold coins that also meet the appropriate standards and have been graded by NGC or PCGS.

With gold coins it is worthwhile to invest in the most popular ones and these are the American Eagle, American Buffalo and Canadian Maple Leaf. All of these are excellent choices and eligible for a Gold IRA.
It is worth understanding that the rarity of a coin due to age or limited minting increases the price you will have to pay for it. These `rare’ coins are what is known as `numismatics’. Numismatics demand a higher premium (the price over the actual gold price) but when it comes to selling these it is very difficult to recover that premium that you paid since most people buy purely based on the price of gold. Therefore it is recommended that you stick to investing in none-numismatics as part of your investment strategy.

Regardless of whether you decide to invest in gold bars or gold coins, all can be easily stored in your home in a safe or at a reputable paid service.

IRA Eligible Gold Investments

Previously the IRA eligible gold investments were limited to American eagle coins. This was the same for IRA silver investments. However in 1997 this changed as the Taxpayer Relief Act of 1997 was amended and other regulations were added.

This means that today you have greater options for investing in a Gold IRA. Several types of bullion and gold coins are now permitted so long as they are a minimum of 99.5 percent fineness. In addition to this bullion and proof gold American Eagles can also be used as gold investments.

Gold is a relatively secure investment and over the long term performs very well, as the stock markets and economies of the world are prone to cyclical downturns. Gold tends to shine brightest and get good returns at these times. Due to this, keeping your IRA account well-funded allows you to take advantage of gold investing.

To buy physical gold for your IRA requires you to use a trustee or professional. This person will help manage your self-directed retirement account. Based on the instructions you give them, the trustee will purchase gold out of the physical market and also store your coins and bullion for your IRA. This professional can also advise on tax rules and the types of gold eligible for your Gold IRA

When you decide to take money out of your IRA account there are some charges and income taxes to pay. These are based on how much you withdraw, which can be 10% or more if you are younger than 59 ½ years old. Your trustee can also withhold the taxes for you. This benefits you as it means you do not have a huge tax bill to pay when you file your income taxes. The trustee then sends the money to the IRS which qualifies as taxes withheld.

Getting the Best Gold Price

The live spot price of gold is always less than you will pay for physical bullion bars. The reason for this is that whatever size bar you are buying, there are obviously costs associated with its manufacture. This premium gets smaller as you purchase larger sized bars. This makes going larger in your bullion investments a wise move.

When you purchase gold bullion or gold coins, make sure you understand how high the premium is. The larger the premium, the more the gold price has to rise before you make a profit. Generally speaking anything over 10% premium is too much.

Gold coins are produced at a national mint and as a result have about a 4% mark up on the actual gold price. Add to this the retailer’s margin of anywhere between 1% and 3% means that you should be aiming for between 5% and 8% over the spot price of gold when you purchase.

Calculating the Gold Premium

When purchasing a gold or silver product for investing, knowing the premium is important for understanding when you are actually in profit.

To calculate the premium you simply have to:

  • Subtract the live spot price from the price asked for by the vendor.
  • Divide that number by the spot price
  • Multiply by 100

This will give you the premium

For example:

If the Gold Bullion has a price of $1,345 minus a spot price of $1,300 = $45

$45 divided by $1,300 = 0.0346 x 100 = 3.46% premium.

This means that to make a profit the gold price must rise by 3.46%

From a long term outlook, it is better to buy gold with the smallest premium. So buying larger gold bars and coins is the smartest thing to do.

However if you intend to use gold as money or simply wish to vary your portfolio, purchasing some smaller amounts at higher premiums is an option.


These are just some of the basics for beginning an investment in gold. Knowing the premiums and what kind of gold you can purchase for your gold IRA are important. In this way you can grow your portfolio over time.

If you are interested in learning more about how to buy gold, then click here to find out who we recommend to ensure your financial stability in the future.

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