Investing in Gold - a first time buyers guide

Investing in gold – a first time buyers guide

Buying gold can seem like a minefield, especially if you’ve never done it before so it’s important to understand what you’re buying and why it’s worth the money.

Lets get back to basics. Every gold bar has an intrinsic value based on the gold content, i.e. how much gold is in that bar and what is the value?

How much gold there is simply how much the bar weighs. Most bars are 99.99% gold, so if you purchase a 100 gram gold bar then at least 99.99 grams of it will be pure gold.

The value of the gold bar is based on how much the metal is worth in the marketplace at that time, commonly referred to as the spot price. This is the price at which the metal may be transacted and delivered upon right now.  

So, with a 100g bar the price its selling at is because of its weight and the price of gold. If the spot price suddenly drops, that bar of gold’s value will decrease.

On top of the spot price there is an additional variable. This added extra is determined by the type of product scarcity, refinery, mintage and year of the bar as well as dealer mark up.

Now that you know the basics of gold bars, it’s time think of your budget.  Once you establish how much you wish to spend, you’re ready to shop.

This is where things appear to get complicated. As you browse the store you notice that there are several different ‘brands’ of gold bars, and each one is a different price.... but you just learnt that a gold bars value is based on the spot price, so why is there such a big difference?

Remember the additional amount added on each bar? That’s where the price variation comes in, with each brand differing (often slightly and sometimes none at all) in price.

To put things in perspective, imagine you’re in a department store looking for a pair of denim jeans in a size medium. There are several different pairs, all exactly the same but they range in price. On closer inspection you notice the logo differs on each. You like the look of one so investigate that brand and find it’s British, something you like. Another pair is from a brand that has been around for over two hundred years whilst a different pair is made by an environmentally ethical company.

It’s the same with gold bars. An established retailer will showcase a wide variety of gold bars from an array of refiners. Choosing a gold bar is based on preference to a refinery, as well as the bar’s design and price.

A lot of people worry about selling their bar on. Will a buyer preference a certain brand? To a certain extend they do, but as explained earlier gold is gold. The value is in the weight, not the design.

There’s never been more choice than now in the bullion market. Consumers have a pick of retailers when deciding where to buy from so it’s important to select the right store.

Choose one that offers a good selection, to give you more choice. You need to trust that store, so do your research. Do they offer free advice? Can you pick up the phone and chat to an advisor about your decision? Make sure you read reviews to get a feel for the customer service and read their website, do they offer genuine help or are they looking for a quick sale?

Take your time and shop around. Investing in gold is a big decision and one you want to make with the right retailer.



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