Key takeaways
- Gold has been used as currency for millennia and therefore, is considered a safe-haven investment during times of economic crisis;
- All data points to the fact that gold tends to outperform fiat currencies in the long run;
- Due to its nature and constant demand, gold bullion is designed to be a hedge against deflation and economical collapse;
- Gold bullion is easy to liquidate, transport and store;
- Because gold prices are usually less volatile than silver, it is considered a safer choice to protect your wealth;
- Gold bullion is the most default-proof investment and poses very little counterparty risk.
Precious metals are considered one of the safest investments during economic downturns. They are also one of the most popular options to own as tangible assets for your portfolio diversification.
Unlike other commodities though, precious metals have very few counterparty risks. Nearly all equities, bonds, fiat currencies, cryptocurrencies, and even real estate, involve some sort of performance or management from a third party. Physical metal can be owned and stored by yourself with no need for third-party involvement.
In addition, physical bullion does not require the work of others to retain their value. They are designed to protect against deflation.
From all precious metals, gold is definitely the most popular among investors and the most effective safe haven during a bear market.
Studies show that gold will consistently outperform fiat currencies in the long haul, as seen in the chart below.
Due to the pandemic and the uncertainty it brought to the market, the search for gold is on such a rise right now, that it caused the U.S. Mint to announce in early February of 2021 that it couldn’t meet the demand for gold and silver coins.
Whether you are a new investor or a seasoned one, this guide will help you understand the specificities of the gold market and how to safely start diversifying your portfolio with some insights on our years of experience on the market.
Popular ways to invest in gold
When we talk about investing in gold, there are typically three ways one can do so.
- Buying the actual physical precious metal;
- Buying shares of mutual or Exchange Traded Funds (ETFs);
- Buying mining companies stocks;
- Trading futures and options;
Mutual funds and ETFs sell their shares based on the price of the physical gold in the stock market, but it tends to fluctuate more than the actual asset’s spot price. With this option, your gold will be held by the fund manager or a custodian, while you only get a certificate of ownership (which might be worthless in the event of a major economic breakdown). Therefore, funds pose a greater counterparty risk than owning the precious metal yourself.
The same goes for mining companies. If it ends up being poorly managed, no matter how much the spot price of gold is rising, their stocks might not keep up. Some external factors also influence mining companies in the market, such as environmental and political crises.
Trading options and futures involve higher speculation, and as such, higher risks. The object of these contracts is buying or selling gold at a certain price and at a certain time. Options give you the opportunity to back out on the deal if you see the price of gold did not fluctuate in your favor, but you still lose the premium you paid to sign the contract.
Our experience shows that investing in physical gold could prove to be the safest of choices. When you own and store the precious metal yourself, you own a real asset that can be quickly liquidated in a time of need. You will also not have to worry about default or counterparty risks. Your investment will be in your hands.
Now, if you choose to put your money into gold bullion, there are, mainly, a couple of ways to do so: gold bullion coins and gold bullion bars.
Gold Coins
Gold coins are the most popular amongst bullion investors. They are all produced by sovereign government mints or private mints backed by a sovereign government. That means they are considered legal tender and carry a face value and denomination.
However, it’s needless to say their true value comes from their precious metal content (intrinsic value) and also from their semi-numismatic attraction to collectors.
Coins are typically considered to be top-notch quality products considering they carry the weight of a sovereign nation’s name, especially long-running series such as the South African Krugerrand, the Canadian Maple Leafs, and the American Eagles.
The most common size is the 1 troy ounce gold coin, but there are more affordable smaller sizes (1/2 oz, 1/4 oz, 1/10 oz, and even 1/20 oz) available in our stocks for those who are maybe just starting out or are not willing to make a big investment at once.
Here is a list of the most sought out gold bullion coins among our customers:
Minted by the U.S. Mint, these are arguably the most successful gold coins in the world today. They are composed of 91.67% gold and some small amounts of copper and silver are added to their alloy to increase durability, making them, officially, 22K gold (or “crown gold”).
The coin is adorned with the emblematic design of the original $20 Gold piece created by master coin engraver Augustus Saint-Gaudens. On the obverse, Lady Liberty lights us into a path of freedom with her torch, while on the reverse we can see an Eagle adding a branch to a nest where their mate awaits with a fledgling.
American Eagles are minted in four different sizes and denominations: 1/10 oz ($5), 1/4 oz ($10), 1/2 oz ($25), and 1 oz ($50).
The program has been launching new issues every year since its first strike in 1986 and is IRA eligible.
Also produced by the U.S. Mint, but unlike the American Eagles, Gold Buffalos are made with 24K gold bullion (.9999 fineness).
The designs on both sides of the coin were created by the American sculptor James Earle Fraser. The obverse depicts a Native American Chief with traditional headgear. It is said that Fraser combined the characteristics of three different Chiefs, each one from a different Native American tribe, the Big Tree, the Iron Tail, and the Two Moons.
American Buffalos are minted in the same sizes and face values as the American Eagles and are also perfect for IRAs.
First struck in 1979, the Canadian Gold Maple Leafs are annually issued by the Royal Canadian Mint and are definitely one of the most popular choices among gold coins.
Canadian Maple Leafs contain .9999 of fine gold ever since November of 1982 (previous issues were .999) and are IRA approved.
The obverse has portrayed different renditions of Her Majesty Queen Elizabeth II from different times of her life. The reverse is beautifully engraved with a maple leaf, the namesake of the program.
Gold Maple Leafs are minted in 6 different weights: 1 gram, 1/20 oz, 1/10 oz, 1/4 oz, 1/2 oz, and 1 oz.
The oldest gold bullion coin on the market, the Krugerrands were initially released in 1967 with the idea to increase gold ownership among common citizens in South Africa.
The coin carries the name of former South African president, Paul Kruger, and the word “Rand”, which is, of course, the South African fiat currency.
The obverse depicts the aforementioned political figure and on the reverse, we can see the Springbok Antelope, the national animal of South Africa.
Krugerrands are minted with 22K gold, meaning .9167 fineness.
Gold Britannias are the official gold bullion coins of the United Kingdom. The Royal Mint that produces them has more than a thousand years of history, dating back to 886 AD.
The Gold Britannia has been annually struck since 1987 and until 2013 the Royal Mint used 22K gold to produce them. However, since then they have been minting these bullion coins with 1 troy ounce of .9999 fine gold (24K).
An effigy of Her Majesty Queen Elizabeth II embellishes the obverse of these bullion coins and, on the reverse, the female warrior Britannia, the national personification of Britain, holding a trident and a shield is depicted.
Britannias are also IRA approved.
Gold Bars
Gold bullion bars are usually the choice of those looking to optimize their investment in terms of dollar per gold content. Bars are not legal tender, have no face value, and close to no numismatic value either. As such, they typically sell at lower premiums and their prices are based mostly on their precious metal content alone.
Bars are generally refined in private mints (with a few exceptions), and yet, most of the ones sold by us here at SD Bullion are also IRA approved, making them a perfect fit for retirement accounts.
The Royal Canadian Mint, the Australian Perth Mint, and the British Royal Mint are the sovereign refineries that make gold bars as well.
Some of the most regarded private mints that make gold bars include the Sunshine Minting Inc, PAMP Suisse, and Scottsdale Mint.
The most popular sizes include 1 oz gold bars, 10 oz gold bars, and 1-kilo gold bars.
Here is a list of the top seller gold bars at SD Bullion:
Arguably the most regarded private mint in the world, PAMP Suisse’s gold bars are protected with their state-of-the-art Veriscan technology that marks their products with unique metallic fingerprints.
The Lady Fortuna gold bars are adorned on one side by the persona that gives a name to it. She is blindfolded to indicate the uncertainty of the future.
On the other side, the refinery’s logo credits this gold bar with PAMP Suisse’s renown, along with the weight (1 troy ounce), the purity (999.9), and the product’s serial number.
- 1 oz Scottsdale Mint Lion Gold Bar
This prominent private mint from Arizona protects their products in Certi-lock essays to ensure their gold bars’ authenticity.
This bar is designed with the majestic crowned lion’s head above the words Scottsdale Gold.
Scottsdale Mint Lion Gold Bars are produced with 1 troy ounce of .9999 fine gold.
These Perth Mint Gold Bars carry 1 troy ounce of 99.99% pure gold and the weight of the Australian government’s name.
All Perth Mint Gold Bars sold at SD Bullion come in assay cards for improved protection.
The obverse of these gold bars is designed with the Perth Mint’s logo and the inscription “ 99.99% PURE GOLD 1 OUNCE”. The reverse is decorated with a series of kangaroos.
Some honorable mentions go out to Royal Canadian Mint (RCM) and Sunshine Mint gold bars.
Other Gold products?
If you would like to explore other options beyond bullion coins and bullion bars, gold is also widely used in a variety of products.
Another option for collectors and also investors is the 1 gram 24K Gold Aurum Notes, for instance.
1/10 Gram Aurum Gold Liberty Note (24K)
Aurum Notes, to put it simply, are composed of two layers of protective polyester containing an amount of gold (or other precious metal, for that matter) between them.
Another option would be to invest in historic and numismatic coins, such as pre-1933 U.S. Mint gold coins. Those were circulating gold coins up until 1933 when the United States Government, run by President Roosevelt, banned private ownership of gold in order to devalue the U.S. dollar and counter the economical crisis.
Foreign numismatic coins include Corona Austrian, Francs, and Franc Swiss, to name a few. Or, if you would like to go for something really historic, you might want to consider the Twelve Caesars set of gold coins that date back to the Roman Empire.
10 Corona Austrian Gold Coin
You might also be asking yourself “is gold jewelry a good investment?”. Now, to answer this question, you have to consider the fact that jewelry has a lot of added value to it, from the design to manufacture, in other words, all handwork that is put onto the making of the piece.
That way, you will hardly ever find gold jewelry close to gold’s melt value, unless you are getting a wild discount from a loved one. And when it is time to resell your jewelry, you most likely will not find a gold dealer willing to pay for the added value, meaning you might find yourself at a loss.
So, from a strictly financial point of view, gold jewelry is not typically considered a good investment in the eyes of investment experts, unless you are planning to wear it as a personal investment.
Gold Bars vs. Gold Coins
Now you might be wondering “should I buy gold bars or gold coins?” And our answer might not please you: it depends.
As we have mentioned before, gold coins are usually the go-to choice of investors. Because they are backed by a sovereign government and are legal tender, they are easier to resell, making them the more liquid option.
However, there is also a high demand for gold bars and they usually sell for lower premiums over spot, meaning you would get a better value for your dollar.
When it comes to storage, coins might be more convenient than bars, however, they are also easier to lose if you are not careful enough.
In a nutshell, when people are investing in gold bullion for liquidity, they tend to think about gold coins. If their investment is solely considering turning a profit in the long term, gold bars tend to be the way to go.
How is the gold bullion price formed?
Just like all commodities, gold prices will be determined, in the long run, by supply and demand laws. However, many small fluctuations will occur during a trading day (sometimes by the minute) according to the trades happening in derivatives markets, such as NYMEX, COMEX, and LBMA.
Some other factors like political and economical stability and market speculation also play a big role when determining the price of gold bullion.
Gold Spot Price
In short, the gold spot price is the standard price used in transactions for a single troy ounce of physical gold bullion.
However, you will not run into a dealer willing to sell you gold precisely at the spot price, otherwise, they will simply run out of business. Dealers add a premium that can vary from 1.5 to 8% above the spot price.
Gold performance chart from March 2020 to February 2021.
On our website, you will find the live gold spot price, along with an interactive chart showing you gold’s historical performance. That way you can plan your investments wisely, analyzing the best moments to buy and sell your gold bullion.
Buying Physical Gold vs Gold Stocks
According to specialists, diversifying your investment portfolio is the best path to financial security.
When you buy gold stocks from a mining company, though, you should keep in mind that your money is in the hands of somebody else to manage. No matter the fluctuations of the gold spot price, their stocks will rise or fall according to the success or failure of their operation.
The same goes for ETFs and mutual funds. Not only do they pose a higher counterparty risk, but they will also not be able to protect your assets in case a wide economical crisis strikes.
Our experience shows that investing in physical gold bullion could be the best way to extract the finest nuances of gold investment. Physical bullion can help you be liquid during a bear market and allows you to maintain control of your assets.
Buying Gold Bullion vs Silver Bullion
If you are a newbie in the precious metals market, another question that may come to your mind is “should I buy gold or silver?” Again, the answer might depend on your goals. It could even be that the savviest decision could be to invest in both!
Gold bullion is definitely the overall preferred option among investors worldwide. That happens due to the yellow metal’s rarity. The amount of gold mined each year is ten times lower than that of silver. That fact is directly reflected in the difference in price between these two precious metals.
Silver bullion has more industrial uses than gold, thus their prices tend to fluctuate more according to market speculation on its future demand. If industrial production is high, so will the price of silver. The other way around is also true. Low industrial production will mean lower silver prices.
Gold prices tend to be more stable in the short to medium terms, therefore gold is considered best to protect your wealth from deflation. On the other hand, silver might turn a higher profit, but also a loss if one decides to liquidate it at the wrong time.
All that being said, specialists would conclude that silver might be best for those still testing the waters of the precious metals market. Yet, another good first investment could be fractional gold coins (1/10 oz or 1/4 oz) or lighter gold bars (2 grams, 5 grams, or 10 grams), for they are also affordable and do not require a big acquisition.
Buying Gold vs Other Precious Metals
With time, expanding your portfolio even further to include more than one type of precious metal could prove to be very beneficial.
Let’s take a look at a few more options below:
PLATINUM BULLION
Platinum bullion is even rarer than gold bullion and, historically, has been more expensive than the yellow metal, especially during a period of political and economic stability.
Platinum has a lot of industrial uses, just like silver. That way, its prices are highly affected by industrial demand, especially the automobile industry.
Another big factor to determine Platinum spot prices is the fact that most of this metal mining comes from South Africa and Russia. Political instability in those countries might pull down Platinum prices.
Platinum is actively traded in the New York Mercantile Exchange (NYMEX) and the London Platinum and Palladium Market. You can keep up with its live and historical spot prices here at SD Bullion.
PALLADIUM BULLION
Palladium is also mostly mined in South Africa and Russia and is a byproduct of the extraction of other precious metals, usually platinum and nickel.
The electronics and the automobile industry, account for most of the demand for this metal, especially to produce catalytic converters for vehicles that run on gasoline fuel that help reduce the emission of harmful substances.
The discovery of these uses for palladium were paramount to turn this metal into a commodity, rather than a simple luxury. So much so that in 2017 the United States Mint expanded their American Eagle program to include Palladium coins.
1 oz American Palladium Eagle
COPPER
Copper rounds - random designs
Not usually in the investment spotlight, copper also has a good number of decorative, industrial, and manufacturing uses, thus making this metal a good option for further diversification of your portfolio.
Here at SD Bullion, you will find a wide selection of gorgeous copper rounds for sale.
Storage
Storing gold at home is a much easier task than storing silver. Because gold is 60 times more expensive than silver, the volume and weight of your investment will also be that much smaller for the same dollar value.
If you are wondering where to hide your gold bullion in your own house, think like a burglar. Where would you look if you wanted to rob the house? Those will be the places you should NOT store your gold. Try to think outside the box and remember to spread your bullion in multiple locations. That way, if you in fact get robbed, you increase the chances of keeping part of your investment.
However, it might be a good idea to keep some decoy coins at an obvious spot. If a burglar falls for your trap and finds them first, they might give up on looking for more.
Being discreet about your holdings is also important. Only share essential information and to people, you know you can trust. But keep a sealed legal will with the bullion locations in case, God forbid, something happens to you.
To help you with further ideas on how to safely store your gold coins and gold bars at home, we have prepared the following video:
Nonetheless, if you would feel more comfortable knowing there is an affordable place where you can safely deposit your physical gold, we are pleased to announce that SD Bullion has a solution for you: SD Depository.
SD Depository is a non-bank, fully-insured segregated storage depository with the lowest prices on the market guaranteed! For as low as $9.99 a month, you can rest assured your assets will be in safe hands, and new customers get the first three months free of charge!
For more information regarding our provided services, check out the page for SD Depository.
Gold IRA
If you are considering purchasing physical gold, it might be because you are a person who likes to keep the main control over your investments. By the same logic, a self-directed IRA could be a perfect fit for you.
With a self-directed IRA, you will be the one managing your retirement account and, with the same tax advantages as any other IRAs, you have broader options of investments you can choose to dedicate to the account, and that includes hard assets, such as physical precious metals.
A Gold IRA, in short, means a self-directed IRA in which you decide to include gold bullion. That way, any gains from reselling your gold coins or gold bars will be tax-free, as long as you keep the profit in your IRA.
To top it off, all 50 American states have either a full or partial exemption from non-federal garnishment, further protecting your investments. For instance, New York and New Jersey do not allow any creditor from accessing your IRA (the exception being tax debt).
Here is a list of popular Gold IRA products:
.999 Fine Gold Bars
American Gold Eagles
American Gold Buffalos
Canadian Gold Maple Leafs
Perth Mint Gold Coins
British Gold Coins
Chinese Gold Pandas
For further information regarding Gold IRAs and how to start opening your account, head on to our Gold and Silver IRA page.
Every one of our bullion products pages has the information if that item is or is not IRA approved.
Where to Buy Gold
If you have made up your mind about investing in Gold, the follow-up question should be “where to buy gold from?” While local brick-and-mortar precious metals dealers might be the first answer that pops in your head, consider the fact that they usually have to charge higher premiums for their products.
Basic laws of supply and demand apply here. Local dealers have fewer customers, therefore they have to ask for higher prices in order to maintain their storage, pay their own inventory insurance, and still turn a profit.
Online dealers tend to have a wider spectrum of customers and, as a consequence, are able to charge lower premiums.
SD Bullion has been in business since 2012 and has twice been featured in Inc Magazine’s 500 Fastest Growing Companies in the United States.
We believe in doing business the old-fashioned way with competitive prices, transparency, and discretion. After only 9 years in operation, we are proud to amount more than 100,000 satisfied customers.
Make sure to check our gold inventory and if you have any questions regarding one of our products or would like further information, our customer service is available over the phone at 1(800)-294-8732, or through our live web chat feature on the bottom right of your page, from Mondays through Thursdays, from 8 a.m. to 6 p.m. (EST) and on Fridays from 8 a.m. to 5 p.m. (EST). If we are not available at the office, send us a message on our “contact us” page or via e-mail at sales@sdbullion.com. We will send you a reply as soon as possible.
How to Sell Gold
If you are thinking about liquidating your precious metals, again the first idea could be to look for a local brick-and-mortar precious metals dealer. But the same logic applies. In order to turn in a profit, your local dealer will offer you a lower price for the buyback.
Our team here at SD Bullion is constantly buying gold and we are proud to offer you industry-leading rates.
For more information on our buyback process and pricings, click here.
