Gold coins represent a convenient, affordable and low risk means of entry into the arena of gold investment, since fractional coins as small as the 1/20oz Australian Gold Nugget can be purchased, although a 1oz gold coin would be a better option as the premium will be proportionally lower. Ownership of such a hard asset is far better than a paper promise, which the issuer can default on, and is uncorrelated to stocks and shares that can lose substantial value in a market downturn. So the decision is not whether to invest in gold, but how best to buy it, and from where to buy gold coins.
Before you Buy
Do your research before taking the big step of laying out your hard earned income, so that you are sure of what you need to be looking for.
Don’t allow yourself to be diverted into buying products that don’t offer you the value, security and liquidity of physical gold, in the form that you have decided on.
Where to Buy Gold Coins?
Also do your research on precious metal dealers, to determine who is most reputable and reliable. There is a wide variety of options available, including on-line purchasing, auctions, exhibitions and local and international gold bullion dealers who all sell gold coins.
Buying Gold Coins Online
The advantage of buying gold coins online from on online dealer is that the premium will most likely be lower than buying from a high street storefront, because the dealer’s overheads are lower.
However, unless the dealer will store the gold for you in an allocated account, which most online dealers won’t do, the cost of delivery will add to the bill. Should the online dealer offer allocated storage of the gold you purchase, it is best that the actual storage is undertaken by a reputable third party custodian, but not a banking firm.
And then, of course, there is the question of trustworthiness. Fortunately, the internet has numerous review sites that you can check on, to see if an online dealer is reliable. One way of doing this is to note if the website is linked to the ‘Trustpilot’ review sites, and read the reviews to evaluate its reliability.
Avoid sites that don’t provide information and transparency, and focus on limited promotions and ‘specials’. Sites should indicate both ask and bid prices, as well as insurance and shipping fees, and should guarantee shipping within less than 48 hours of confirmation of payment, and delivery within 7 business days. Payment options should be offered via a secure third party payment service. Make sure all costs are quoted and that there are no hidden ‘surprises’.
A further signal that an online site is not necessarily trustworthy is the use of ‘bait-and-switch’ tactics, where you are enticed to the site by a low commission on a gold bullion coin, but when going further, find that you are pressured to purchase a numismatic coin or other item.
A growing number of reputable dealers now have an online presence and this is a growing medium for making gold purchases, owing to the ease of operation, low premiums and improved internet security.
Auction Websites
Buying gold coins from individuals or dealers on auction websites obviously presents a high degree of risk, and the possibility of being scammed or sold a fake is very real.
A reputable website such as eBay might be a safer bet, but it is still essential to look at reviews and buyer feedback to determine the reputation of the seller.
Since it is easy to get carried away in a bidding war, it is a safer bet to go for the “Make Offer” or “Buy It Now” listings. Sellers using auction websites often look for premiums that are well above the norm, so you need to be checking the gold spot price regularly, as well as the currency exchange rate if you are in a different currency zone. Also check whether shipping fees apply.
With free shipping and no sales tax, you just might be able to find a bargain, but be sure to do your due diligence before making that offer or purchase.
Expositions and Gold Shows
Precious metals expo’s and gold shows may very tempting to visit but the novice investor should avoid making any purchases and buying gold coins. Most of the gold coins on show will be numismatics, which are not suitable vehicles for investment purposes, unless one is an experienced collector.
Any bullion that is on show is likely to be small in variety and probably offered at a high premium.
TV and Radio Promotions
Commercials advertising gold on TV and radio represent a substantial overhead to the seller, since airtime is not cheap. This means that the advertising costs will have to be recovered from the unsuspecting buyer in the form of a high premium, making this one of the most expensive ways of buying gold.
Cold Callers
Never buy gold from a cold caller, as there is a high likelihood that the operation is being run from a ‘boiler room’, and the ‘dealer’ can disappear without trace overnight – with your investment funds if you have been duped into paying.
Local Gold Dealers
If you prefer to build a relationship with the person you buy your gold from, and hope to negotiate better buy-back fees, then you could look for a local gold dealer of good repute.
Local dealers usually handle small amounts of gold coins or bars, and, in the USA, orders exceeding $100,000 may be subject to reporting to the relevant authorities.
Be aware that when buying from a local dealer that the overheads of keeping a shop will be factored into the price, even though you may be saving on shipping costs. The larger the shop the better will be the product variety and perhaps also the price, but always do your due diligence before making any decisions on where to buy gold coins.