What Is the Best Gold Bullion to Buy?

Gold bullion is a tangible asset and potential investment for wealth preservation. It can diversify portfolios and act as a hedge against inflation and economic instability. Owning physical gold offers security for many investors, given its historical role as a store of value.

Understanding Gold Bullion

Gold bullion is physical gold in the form of bars or coins, produced for investment. Its value is tied to the market price of gold, unlike numismatic coins whose value comes from rarity or historical significance. Bullion is available as gold coins and gold bars. Gold bars are refined, rectangular blocks, ranging from small gram sizes to kilograms. Gold coins are minted by government or private mints, often having a nominal face value, but their worth is based on gold content.

Key Factors for Purchase

When considering a gold bullion purchase, several factors influence the suitability and value of the investment. Understanding these criteria helps in making an informed decision.

Purity

Purity, or fineness, indicates the proportion of pure gold. Investment-grade gold bars are typically 99.5% pure, while coins range from 90% to 99.99%. For example, 24-karat gold is 99.9% pure, and 22-karat is 91.67%, with other metals for durability. Higher purity is generally preferred for investment bullion.

Premium Over Spot Price

The premium over spot price is an additional cost above gold’s current market price. This premium covers manufacturing, distribution, dealer markup, and other associated costs. While the spot price reflects the market value of unrefined metal, physical bullion carries this extra charge. Smaller or intricately designed items often have higher premiums due to increased fabrication costs.

Weight and Size Options

Weight and size options offer flexibility for various budgets. Gold bullion is commonly available in weights like 1 troy ounce, 10 troy ounces, 100 grams, or 1 kilogram. Smaller sizes, such as 1-gram bars, are accessible but carry a higher premium per ounce. Larger bars, like 10-ounce or 1-kilogram options, have lower premiums per ounce, making them cost-effective for substantial investments.

Authenticity and Reputability

Authenticity and reputability are paramount when acquiring gold bullion. Purchase from trusted dealers to ensure genuine products. Investment-grade bullion features hallmarks or assay certificates, verifying purity, weight, and manufacturer. These indicators assure the bullion’s quality and origin.

Liquidity

Liquidity refers to how easily an asset converts to cash without significant value loss. Gold bullion is generally liquid, but some forms are more readily traded. Gold coins, especially recognized ones, offer greater divisibility and are easier to sell in smaller quantities than large bars. Larger bars may have lower premiums but are less suitable for partial liquidation.

Popular Gold Bullion Options

Several gold bullion products are widely recognized and highly liquid in the investment market. These options typically meet the purity standards required for investment-grade gold and are produced by reputable government or private mints.

Gold Coins

Gold coins are widely recognized and liquid. They typically meet investment-grade purity standards and are produced by reputable mints. These coins generally carry slightly higher premiums than gold bars due to their intricate designs and minting costs. Popular options include:
American Gold Eagle: 22-karat (91.67%) purity, with silver and copper for durability. Its legal tender status and government backing ensure acceptance.
Canadian Gold Maple Leaf: Known for exceptional purity, often 99.99% fine gold.
South African Krugerrand: A 22-karat coin, it was one of the first modern bullion coins and is globally recognized.
Austrian Philharmonic: A 99.99% purity coin, favored for its distinctive musical instrument design.

Gold Bars

Gold bars offer a direct way to invest by weight, typically with lower premiums than coins. Common sizes include 1-ounce, 10-ounce, 100-gram, and 1-kilogram bars. A 1-ounce bar balances affordability and lower premiums compared to smaller gram sizes. For larger investments, 10-ounce and 1-kilogram bars are favored for their low premium per ounce. These larger bars are produced by well-known refiners and valued for their gold content, making them cost-effective for bulk purchases.

Storage and Selling Considerations

Once gold bullion is acquired, secure storage becomes an important aspect of ownership. Various options exist, each with different levels of security, accessibility, and cost.

Storage Options

Secure storage is important once gold bullion is acquired. Options vary in security, accessibility, and cost:
Home storage: Offers immediate access in a secure safe. Requires significant security measures against theft and damage. Amount stored should align with comfort and insurance limits.
Bank safe deposit boxes: Provide external security in a financial institution’s vault, with annual costs. Access is limited to bank hours, and contents are not typically insured by the bank, requiring separate coverage.
Third-party vaulted storage: Offers professional security with guards, surveillance, and comprehensive insurance, for a fee based on gold’s value. Provides high-level protection for larger holdings, though it means relinquishing direct physical possession.

Selling Gold Bullion

When selling gold bullion, understanding the process and factors affecting price is important. Reputable online and local dealers are common avenues. Online dealers offer competitive rates and streamlined processes, sometimes with insured shipping. Local dealers provide immediate payment; obtain multiple quotes for a fair price. The selling price is influenced by the current spot price, bullion form, and dealer’s buy-back premium. Maintain documentation like receipts and assay certificates to verify authenticity. The IRS classifies physical gold bullion as a collectible. Long-term capital gains are taxed at a maximum of 28%, while short-term gains (held one year or less) are taxed at ordinary income rates. The cost basis for capital gains includes the purchase price plus associated costs like premiums or storage fees.