Ah, gold. It’s rare, widely accepted, and something other than what governments can print at will. For these reasons, certain people—fondly referred to as “gold bugs”—have consistently made significant investments in the honey-coloured metal. They are not alone in these chaotic financial times.

Since purchasing gold is considered the “purest” form of investment, it is also a popular choice. You are the owner of the actual yellow metal, a valuable asset that is impervious to hacking or erasure and can withstand natural disasters that wipe out paper money and digital bank accounts.

Let’s examine purchasing and making investments in real gold.

Why invest in gold?

Gold is a valuable asset that is immune to inflation and serves as a hedge against economic disasters. It is often appreciated during economic slowdowns, such as the Great Depression and the COVID-19 pandemic. 

Investing in gold can diversify a portfolio, with many financial advisors suggesting keeping 5% to 10% of the portfolio in gold, potentially up to 15% during crises.

How do you invest in physical gold bars?

It’s essential to comprehend the language used in the gold investment industry before jumping in. It not only gives you the ability to make educated decisions, but it also gives you the confidence to traverse the market successfully. Before you ever consider purchasing gold, make sure you are aware of the following: 

Bullion 

Bullion refers to gold in its tangible form, which is typically bars or ingots. When most people think of investing in gold, they think of bullion.

 Troy ounce 

Precious metals are measured in troy ounces to help maintain consistent purity and weight standards, although avoirdupois ounces are often used in the United States. Approximately 31.1 grams makes up a troy ounce, which is heavier than an avoirdupois ounce, which weighs 28.35 grams.

Spot price

 A troy ounce of gold is now worth this in the market. Because supply and demand, geopolitical concerns, and market emotion all affect price swings during the trading day, the current price is continually changing.

 Premium

 The price you pay for a gold bar is higher than its spot value. The premium is an additional expense that goes into paying for distribution, manufacturing, and a nominal dealer fee.

Liquidity

The ease with which gold can be sold is referred to as liquidity. Gold bars are a highly liquid asset since they are well recognized. They can be sold rapidly and at a price that doesn’t drastically change.

 Assay

 A report on quality assurance is basically what an assay is. It confirms the gold’s weight and purity and is typically given in the form of a little, card-sized certificate. A gold bar that has gone through this verification process is known as an assayed bar.

Advantages of physical gold

Gold is an excellent investment due to its intrinsic value, which reflects the cost of living. It acts as a counterweight to stocks, travelling in the opposite direction of the stock market.

  • Gold is also seen as a haven during uncertain times or socio-political turmoil, as seen in the 2016 Brexit vote, where its price rose over 10% in one month. 
  • Owning gold appeals to individuals concerned about global market collapse or government currency backing.

Drawbacks of physical gold 

  • Storing gold at home is expensive due to the risks of theft or loss and requires insurance. 
  • It’s also illiquid, taking days or weeks to settle and requires shipping.
  • Physical gold doesn’t generate income or profit and only appreciates if prices rise, but this can be compromised by time, effort, and assessment costs.

How to buy gold?

Gold is priced by the troy ounce, a 2.75 grams higher unit than a traditional ounce, known as the “spot price.”

There are some points to keep in mind when you buy gold bars:

  1. Know when to buy
  2. Understand how gold prices are determined
  3. Find the right dealer
  4. Have a storage plan