Buying gold should be on most investors' "to do" lists, if it hasn't been done already.
Gold has long been hailed as the best way to hedge investments over the long haul. It's a tangible metal that is able to retain its value over time and endure the volatility of economic downturns.
Gold is meant to be a long-term investment. Assets like these are meant to provide investors with a means to diversify their portfolios and offset more frequently traded stocks.
The following are key tips to keep in mind when buying gold.
Determine the Type When Buying Gold
When investing in gold, you've got options.
Bars and coins: A classic way to invest in gold, bars and coins offer investors something tangible to hold onto. Many investors like the idea of investing in physical gold bullion bars and coins because it protects them from credit risks that are often associated with other types of gold investing.
Of course, along with owning physical gold comes the task – and ultimately the cost – of storing it. Whether it's in a safe at home or in a bank vault, it costs money to house your precious gold.
Gold futures: These contracts promise gold delivery in the future at a specific price. The amount of gold, delivery time, and quality remains static, while the price of the contract itself can change. Since the price of a gold futures contract is often inversely related to gold's spot price, a dip in one can mean an increase in the other.
Trading futures contracts can be a complicated and risky endeavor that should only be reserved for those with plenty of experience.
Certificates: A more affordable option compared to buying physical gold is to purchase certificates. This is a more cost-effective approach because you don't actually own the gold. Instead, you invest with other investors in a privately owned pool.
Exchange-traded funds (ETFs): These funds give investors the opportunity to benefit from owning gold without having to buy – and ultimately store – physical gold. ETFs are ideal for those who are more conservative in their investment strategies and are looking for a more cost-effective way to invest in the precious metal. They allow investors to be exposed to gold through many funds that track either futures contracts or own physical bullion.
Stocks: Investors also have the option to invest in gold mining companies. As prices for gold increases, so do the value of the stocks, and ultimately the profits. The opposite is also true.
Buy Physical Gold in Bulk
If purchasing physical gold is your preferred investment route, consider buying in bulk.
The larger the amount of gold purchased, the lower the cost per ounce. A one-ounce bar purchased on its own can cost double the value of the gold as a result of labor and fabrication costs, among others. On the other hand, a larger bar will have a better rate compared to the value of the gold.
Buying in bulk goes for coins as well. Rather than purchasing coins individually, bulk purchases typically come with cheaper unit prices, which can translate into significant savings. This is known as "value density," according to Money Morning Resource Investing Specialist Peter Krauth.
Compare Gold Prices Among Dealers
The price you pay for your gold will depend on what the dealer charges for it. Much like other items, the price of gold can vary from one dealer to the next. Comparing prices should always be a prerequisite before investing in physical bullion bars or coins. Ultimately, your task is to pay the lowest price over spot.
Many dealers also charge a premium on their gold, so it's wise to become familiar with what these are as they can significantly hike the price of the gold you're buying relative to its actual value.
Whichever route you take when buying gold, now is a good time to invest in the precious metal. To know everything you need to about buying gold, download our report: The Essential Guide to Buying Gold & Silver.