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Investors want to know how to buy gold now as prices today have slipped to levels not seen in years.
First, here's what's been weighing on the gold price.
A strong rally in the U.S. dollar, the risk-off trade amid a six-year bull run in stocks, and the anticipation of a rising interest rate environment have all taken some of the shine out of gold.
Tuesday morning, gold futures were up $5.00, or 0.47%, at $1,670.50. Yellow metal prices rose $9.10, or 0.09%, to $1,065.30 an ounce Monday. The modest two-day bounce followed strong selling pressure last week that sent gold prices down 1.9%. That marked the sixth weekly decline and left the gold price at levels not seen since February 2010.
The gold price stumbled 6.7% in November after a 2.4% advance in October. Last month's decline was the worst for the precious metal since June 2013. The gold price is now down 10% year to date.
Heightened odds of a U.S. Federal Reserve interest rate hike at the FOMC's Dec. 15-16 meeting has ignited a dollar rally. That was the key catalyst for last month's gold price swoon, Money Morning Resource Specialist Peter Krauth explains.
But the U.S. dollar could retreat in 2016 as markets become accustomed to the (assured) slow pace of the Fed's tightening cycle.
That's good news for the gold price. And precious metal investors are taking advantage of the current price dip to buy more gold now.
American Eagle gold coin sales totaled 97,000 ounces in November. That was up from 34,000 ounces in October and 60,000 ounces from a year earlier. Year to date, the American Gold Eagle sales tally is 801,000 ounces. That compares to 506,500 ounces through the same period in 2014. All but one of the four differently sized 2015-dated Gold Eagles has sold out.
That said, here's how to buy gold with prices sitting at these low levels.
How to Buy Gold: Coins
Gold can be bought and held in a number of ways. The best way is to own physical gold.
Money Morning Global Credit Strategist Michael E. Lewitt likes gold coins, which can be purchased from a number of reputable dealers.
"The dealers I like personally are Kitco, Blanchard, and JM Bullion," Lewitt explains. "These firms offer a wide variety of newly minted coins, historical coins, and rare coins, as well as coins from different countries, such as American Gold Eagles, which are my favorite, South African Krugerrands, and Canadian Maple Leafs. You can choose from different weights, ranging from 1 ounce down to 1/10th ounce (and Kitco even offers 1/20th ounce)."
Don't pay more than a 5% to 8% markup over the spot price. That's the typical premium, according to the U.S. Mint.
How to Buy Gold: Alternatives to Coins
Things to consider when buying gold coins and bars are shipping and handling fees, storage fees, insurance, and liquidity - which is why some people prefer not to buy physical gold.
There are a number of other ways to buy gold. They include via exchange-traded funds (ETFs) or closed-end funds.
Just remember that when you buy a gold ETF or a gold share, you are not buying gold; you are buying a proxy for gold.
"PHYS is a big shareholder in CEF and is currently waging a war on CEF's corporate governance practices up in Canada, where both are located," Lewitt detailed. "CEF is a closed-end fund that owns about two-thirds of its assets in gold and one-third in silver and can often be bought at a discount to the spot price of gold and silver (it owns both), which is why I like it. Recently it was trading at nearly a 12% discount to net asset value. PHYS charges a 0.35% management fee and a 0.07% administration fee. U.S. individuals can elect long-term capital gains treatment on units held for more than one year."
Lewitt is avoiding gold mining shares.
While they provide indirect exposure to gold, they also come with the headaches of investing in an operating company. Mining companies are often a highly leveraged play on gold due to their highly diluted play on their primary product.
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- U.S. Mint: Bullion Sales/Mintage Figures
- Reuters: Gold Heads for Biggest Monthly Fall in 2-1/2 Years