How to Buy Gold

by James & Miel on August 23, 2008 · 0 comments


With the high price of gold and the weakened dollar, some might consider whether gold is a good investment these days.

First of all, if you have any serious money you’re probably better off buying stocks or investing in real estate. Unlike stocks and real estate, precious metals have not had good historical returns and don’t produce income.

However, if you really want some gold, there are several ways to go about buying it.

1) Physically:

If you want to take actual physical possession of the gold, there are a number of options.

A) Ebay: Small amounts of gold are typically available on ebay. If you’re cash constrained, you can get grams of gold, 1/10 oz coins or 1/20 oz coins or smaller bars. In most cases all you have to do is buy the gold through ebay and the seller will send it to your home address.

B) Find A Local Dealer: If you look around there is usually someone in your local area who specializes in selling precious metals. Typically they’ve got a name like “Coin and Stamp” or “Jewelery and Coin”. The phone book or google can get you their number pretty quickly.

Here is a tip, before you go to your local dealer, check the spot price of gold. This way you will know how much the metal is worth on the open market. Once you know this, you’ll have a better basis for determining what a fair price is or isn’t. Most metal trades at only a couple of dollars above the spot price. For example, if the spot price of gold is $800 an oz and a dealer wants to charge you $900, look elsewhere because you should be able to get it for spot plus a small mark up, – usually like $20 to $40.

Ebay and coin dealers and ebay are often a good way to go when you’re on a budget.

2) Electronically:

A lot of people want exposure to precious metals without the bother of taking possession of the metals themselves. There are some ways to buy gold electronically that minimize the hassles associated with actual physical possession of the gold.

A) Pool accounts. Kitco.com has an interesting service whereby you buy gold, but the company agrees to hold onto the metal for you. This way you can still profit from price increases, but don’t have to deal with the bullion itself. Click here for kitco’s website. Goldmoney.com has a similar deal. For these accounts, you need to sign up via the companies webpage.

B) Exchange Traded Funds and Mining Stocks. In addition to direct ownership of gold, there are a number of investment funds and gold mining companies you can invest in. While these types of investments do not involve direct ownership, the performance of these classes of securities is highly tied to the price of gold.

There are a number of good postings on which funds and gold mining stocks to consider, and since we DINKs don’t know much about this section of the market, you might consider getting started with a posting from MSN.com or seeking alpha.

Lastly, if you are a travel buff like Miel, you might just head to the gold souk in Dubai or Doha to get the real deal. You’ll spend more getting there than you’ll likely to get back as a return, but the experience is worth it!

Best,

James & Miel



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