Gold has been an investment asset and store of value for centuries. To this day, investors include gold in their portfolios as an inflationary hedge and diversification asset. During times of market volatility and an ongoing increase in inflation, gold is an attractive investment option.
Buying gold at the lowest possible price is critical to maximizing returns and mitigating your investment risk. In this guide, our team at Learn About Gold discusses the cheapest way to buy gold.
The Cheapest Methods of Buying Physical Gold
Before discussing the most affordable ways to buy gold, you should understand how the spot price of gold works. The price of gold is constantly fluctuating, and the spot price of gold is the live standard for gauging the going rate for one troy ounce of .999 fine gold.
An algorithm electronically derives the spot gold price from supply and demand figures in the futures derivative markets. The London Bullion Market Association (LBMA) in the U.K. and COMEX in the United States operate in this futures market, and these organizations set the spot gold price daily. In theory, spot gold prices are the same across the world.
However, gold investors can never buy gold at the spot price. When buying gold from a dealer, you’ll notice that gold bars or coins trade higher than the prevailing spot price. This markup is the “premium over spot” of gold.
For example, suppose the spot gold price is $1,700, but you buy a one-troy-ounce .999 fine gold coin for $1,800. In this case, the premium over spot is $100.
A gold dealer’s profit margin is only one factor influencing the premium over spot for precious metals. Other factors include the costs of fabricating, refining, and transporting the physical gold. Numismatic value, rarity, and collectability can also increase premiums.
Buying Gold in Bulk
You take advantage of economies of scale when you buy physical gold in bulk. In other words, by spreading various fixed-cost items across more units, you reduce the premium you pay per unit. These expenses include shipping, administrative fees, insurance, and packaging costs.
Dealer discounts are another potential cost advantage when you buy physical gold in bulk.
Generally, mints, such as the United States Mint and the Royal Canadian Mint, only sell gold at wholesale prices to authorized purchasers. Private mints might sell physical bullion in bulk to buyers who are not licensed numismatic coin or precious metal dealers.
Some physical gold products, such as the Canadian Maple Leaf coin, are popular for bulk orders. These packages, or “monster boxes,” contain 500 coins and carry a relatively low premium over the spot price.
Buying Gold From Jewelers
When buying gold jewelry, stick to reputable jewelers. Ideally, the jeweler you choose should be a Jewelers of America member. The members of this organization sign a code of professional conduct, committing to honest disclosures about the nature of the physical gold pieces they sell.
The purchase price of a jewelry piece depends on its gold content, design, and brand name. A jewelry piece might feature another shiny metal, such as platinum, silver, or palladium, which will affect its price.
Purchasing Gold From Traders
You can purchase gold coins, bars, and jewelry pieces in peer-to-peer trades on trading apps or other marketplaces.
The advantage of these platforms is that traders tend to compete on price, especially when selling standardized physical metals such as American Gold Eagle coins or smaller gold bars. Consequently, traders can’t sell physical gold bullion at prices exceeding its numismatic value or generally accepted premiums.
Buying Gold Through Banks
Central banks, such as the U.S. Federal Reserve or Bank of England, buy investment-quality gold bars for the same reasons you might want to add precious metals to your investment portfolio. Gold promotes stability, provides a hedge against inflation, and mitigates investment risks.
However, most commercial banks in the United States don’t sell physical gold and silver to the public. If a bank does sell gold and silver, you can expect its inventory to lack variety. That said, banks generally don’t sell at excessive premiums.
Buying Gold Through Dealers
The easiest way to buy gold cheaply is to visit an online or local dealer. Choosing a dealer from the United States Mint database will give you peace of mind that you are buying from a trustworthy and reputable seller.
Dealers generally sell all types of physical gold bullion, and you don’t need to meet various licensing requirements to buy gold coins and bars in bulk. Dealers sell physical gold at different premiums, so you should monitor gold’s price before buying.
Cheapest Form of Physical Gold To Buy
Owning physical gold in coins or bars can be emotionally satisfying. Unlike securities, IRA funds, or other assets, you have complete physical control over this physical commodity.
However, holding physical gold and silver has several drawbacks. For example, you need to safeguard your precious metals and take out insurance, which increases costs.
It can also be challenging to sell your physical gold pieces at their total market value. For example, in a private, urgent sale, the selling price of an American Gold Eagle coin minted under the gold standard might only reflect its partial numismatic value. Choosing the cheapest form of physical gold to buy can offset these drawbacks.
Why Are Gold Bars Cheaper Than Gold Coins?
Generally, a pure gold bar costs less per ounce than a coin. For example, a 1995 one-ounce American Gold Eagle MS-69 PL NGC costs around $11,000. On the other hand, a one-ounce bar costs around $1,830.
Gold bars generally have a lower premium over spot prices than coins because a bar’s production cost is relatively low. Unlike coins, the rarity and grade of a bar are irrelevant. Instead, the price of a bar depends primarily on its weight.
Bars also have a lower price per ounce because they are easier to produce and store in large quantities. For example, a gold bar doesn’t require special protective packaging.
The Least Expensive Gold Coins
Even though bars are relatively cheap, coins are worth considering if owning gold in small quantities is one of your investment objectives. Some of the most affordable gold coins include:
- Canadian MapleGrams
- Congo World Wildlife Bald Eagles
- Chinese Panda Gold Coins
- $5 U.S. Commemorative Gold Coins
- Fractional Britannia Gold Coins
How To Determine if You’re Overpaying for Gold
The melt value of gold and its spot price are among the many factors that influence the price of gold bullion. Determining the melt value of a gold piece is relatively straightforward.
One troy ounce of gold equals 31.1 grams. For example, if the spot gold price is $1,700 per troy ounce, the melt value of a one-gram gold piece is $54.66 ($1,700/31.1g).
Before you buy gold bars or coins, calculate the melt value of the piece. Then subtract the melt value from the piece’s selling price to calculate the premium.
Is It Cheaper if You Buy Gold Online?
The cost of pure gold purchases is generally the same for online and brick-and-mortar purchases. However, shipping can potentially ramp up your purchase costs when buying online, so look for a dealer who offers free shipping or in-store pickups.
Is It Safe To Buy Online?
You can safely purchase gold online, provided that you buy from a reputable seller. Choose a dealer from the United States Mint database to mitigate your risk of financial loss.
What Country Is the Cheapest Place To Buy Gold?
China is one of the countries offering gold and silver at the lowest premiums. However, buying precious metals from foreign sellers rarely makes financial sense, as you might need to pay high shipping and insurance fees. However, there are no duties on gold coins and bullion imports.
Is It Safe To Buy Gold Offshore?
You can safely buy gold bullion offshore and import it into the United States. You must declare all precious metals you are importing to one of the Customs and Border Protection officers. If the value of the purchase exceeds $10,000, you must complete a FINCEN 105 form.
What Is the Best Time for You To Buy Gold?
Historically, the price of physical gold has been relatively low during the following periods:
- Early January
- Throughout March and early April
- During the second half of June to early July
Alternatives To Investing and Purchasing Gold Bullion
Investing in gold and other metals doesn’t produce cash flow. As a result, some investors choose to invest in cash-flowing, gold-based businesses instead. Investing in conventional securities, such as stocks and exchange-traded funds, can be more affordable than buying physical bullion, especially since you don’t need to pay storage or shipping fees to hold these assets.
If your investment capital is relatively low, and you want to generate returns from your gold investments, consider one of the investment options below.
Gold ETFs or Gold Mutual Funds
A gold ETF (exchange-traded fund) or mutual fund tracks the performance of multiple gold mining companies and other businesses in the gold industry. Buying gold ETFs and gold mutual funds can be an effective strategy to diversify your portfolio while taking advantage of gold’s stability.
The leading gold ETFs and mutual funds to consider include:
- iShares Gold Trust
- VanEck Vectors Junior Gold Miners ETF (GDXJ)
- SPDR Gold Shares ETF (GLD)
- Franklin Gold and Precious Metals Fund (FKRCX)
- GraniteShares Gold Trust ETF (BAR)
When considering a gold ETF or mutual funds, remember that these funds can own gold or gold stock — for example, shares in gold mines.
Gold Stock Market
The overall stock market allows gold investors to gain exposure to the gold price while enjoying capital growth, optimal liquidity, tax advantages, and even dividend income. For example, a gold stock can be a share in a gold mining company.
Are you considering moving your gold funds to the stock market? Some of the gold stocks to consider include:
- Barrick Gold (GOLD)
- Newmont Mining Corporation (NMC).
- Royal Gold, Inc. (RGLD)
- Dundee Precious Metals Inc. (DPM)
Gold Futures Contracts
Gold futures are commitments to buy or sell gold at a future date at a specific price. These gold investments are highly speculative, and you need a brokerage account to engage in futures trading. Successful gold futures traders have extensive industry knowledge and monitor the gold price and their accounts closely to ensure that they make informed investment decisions.
Gold futures contracts offer plenty of leverage, and you can potentially generate high returns with a relatively low investment. However, if the metal’s price moves against you, you will need to give up large margins to maintain your contract, preventing the broker from closing your position at a significant loss.
Gold-backed cryptocurrencies are digital currencies that track the market price of gold. These digital tokens work according to the same mechanisms as conventional cryptocurrencies, and you can use them for transactions.
The gold backing of these cryptocurrencies keeps excessive price fluctuations at bay. As a result, gold-backed cryptocurrencies are relatively stable. These digital currencies can also hedge against inflation because their value increases with the metal’s market price.
You can buy and sell a gold-backed token on conventional exchanges or redeem your tokens in exchange for physical gold.
Things To Consider When Buying Gold
Before you buy gold, you should ask yourself the following questions:
- How much gold should I buy?
- Should I buy gold coins, bars, or jewelry?
- Which asset type fits my investment objectives: physical gold or a security, such as a stock or ETF?
Now that you know the essential information necessary to start your gold investment journey, you can begin searching for the most affordable gold products. At Learn About Gold, we can help you make informed gold investment decisions. Contact us via our online form to learn more about diversifying your asset portfolio.