Many people have thought about buying gold during times of economic recession and stagnation in order to hedge their assets against a poorly performing stock market, an unfavorable movement in currency exchange rates, and other potentially shaky investments. Purchasing gold online can be fairly quick and convenient, especially when you know what type of gold you are looking to get. For those who want to take physical delivery of their gold and store it themselves, the main options are buying from a gold wholesaler, or buying gold online directly from a mint. If you do not need to actually have the gold in your hands, you can buy bullion gold online from a number of different accredited bullion providers.

Buying Gold from a Large Gold Dealer

Buying investment gold online from a dealer or reseller is one of the easiest ways of obtaining physical gold. Large gold dealer websites like APMEX, Kitco, and Goldline offer all sorts of different gold coins and bars from around the world. Certain investors may be looking at buying specific types of gold coins from certain countries, such as the popular South Africa Krugerrand, or Canadian Maple Leafs. Since the website acts as a reseller and doesn’t actually produce the coins themselves, they are able to offer a wide variety of gold coinage from around the world.

Gold dealer websites are also great for people looking to buy gold bars online as well. Since the dealers usually buy gold in bulk, they are sometimes able to secure slightly lower prices than the general public, and pass the savings onto the investor when compared to other dealer websites.  Most large gold dealer sites allow you to purchase all sorts of gold bars in different weights and sizes, depending on exactly what you want. The sort of price you can get from a dealer website usually ranges between 2% over spot price for large orders and around 4% over spot price for smaller, single orders.

The wide range of options when it comes to buying gold is what makes dealer sites a great choice if you have a pretty good idea of what you want, but want to look through what is available to see if there is any other gold product that may suit your investment needs in a better way. Generally, online gold dealers will be more than willing to assist you with every step of the gold buying process. They all have phone numbers available which can put you in direct contact with someone who can help you buy gold over the phone, or answer any questions you might have about a specific product. Most gold dealers will even store your gold for you once you buy it for a small fee if you don’t necessarily want or need it in your hands, but still want the option to have it delivered to you if you decide you do want to take physical possession of it.

A couple of the drawbacks to large gold dealer websites is that they will usually end up costing you a little bit more than buying directly from the mints that the gold came from. Whether or not that premium is worth it depends on a variety of thing, such as how fast you would like your gold, if you’d like your gold to be stored, and if you need support either while ordering or after you purchase your gold. In addition to this, there is a good chance that you will run into a credit card processing fee since investment gold dealers already run on pretty thin margins. To get around something like this, you would need to send a bank wire or money order since using a credit card might tack on an extra 2% to your total, which is pretty significant since it will just take you that much longer to recoup your investment.

If you want to be able to choose from a wide variety of investment gold products and get them relatively quickly, a gold dealer website would be what you are looking for in order to purchase your gold online. The support team at most sites can also help answer questions regarding how to buy gold online, including shipping and billing inquiries.

Buying Gold from a Mint

If you are looking to buy gold online directly from a mint, it helps to keep in mind that you will need to immediately take delivery of your gold since a mint will not store it for you. For most investors looking to get a few thousand dollars worth of gold as a hedge, this shouldn’t be too big of a deal, since a few ounces of gold can easily be stored in a safe deposit box at a bank, or a fireproof safe in your house. If storage isn’t an issue, you’ll have to figure out exactly what sort of coin or bar you want to purchase. Most mints will make a wide variety of coins in all different sizes and designs, and a lot of them will be quite a bit over spot price.

The premium on minted products depends a lot on how many of a certain piece will be minted. Generally, the lower the total number minted the more of a premium you can expect to pay. Chances are pretty good that you will be able to retain that premium when you sell, but only if you sell to someone who values it for having a rare piece instead of a run of the mill gold coin. If you are buying gold to use in case of financial disaster, stick to gold that  is priced only for its metal value.

Being able to have access to the most up to date collector gold coins is one of the big advantages of using a mint as opposed to a gold dealer or bullion service. Since investment quality gold comes in so many different forms on mint websites, you should ask yourself whether you are looking to buy based more on the price of gold or buy based on the perceived rarity of a certain limited edition run of a gold coin.  Large mints are also going to be extra diligent when it comes to shipping and processing your order, since their entire business deals only with taking an order from a customer and getting it out to them. They don’t have to deal with storage or buy-back fees, which means more people are focused on fulfilling the orders that they receive.

There are a couple drawbacks when it comes to buying gold online from a mint, the biggest one being that a lot of the specialty products are priced well above spot price. If you are looking to invest in rare coins made out of gold as opposed to just using coins as a medium to invest in gold, going through a mint website would be the way to go. Another setback is the time it takes to ship, if you can even get the gold product you want in your country at all. Since a mint only deals with coins and bars that are created from inside that country, you can end up waiting weeks if you want to get gold bars from somewhere like Switzerland or Austria.

For investment grade gold that you want to appreciate in terms of both intrinsic and numismatic value, buying gold from a mint is probably one of the best ways of making that happen. You’ll pay extra for it at first, but if you are confident that its value will rise, it should be well worth the initial investment. Keep in mind that you should only buy gold from well-known mints that are clearly marked with both the mint’s symbol and the fineness. When it comes time to sell, having gold that can be easily identified will save you a lot of hassle.

Buying Bullion Gold Online

Getting gold from a bullion vault is a great option if you are looking to purchase physical gold without actually having it in your possession. When you buy gold from a bullion vault, you are paying extremely close to spot price, usually at less than a 1% markup. This is due to the fact that the gold you are buying is already sitting in the company’s vault. Since the gold doesn’t move at all when it is being bought and sold, there are no handling expenses and you never have to worry about the pureness being compromised. Since you can’t take delivery of your gold, there is a mandatory storage fee, which usually is around .2%, sometimes lower, of the current spot value of your gold.

Bullion vaults are what big gold investors use when they are trading their gold, since they can buy at almost spot price and sell for usually just a couple of dollars per ounce under spot as well. One of the best things about bullion vaults is that you can take advantage of spot price fluctuations in the market if you are able to catch them happening in real time. Since most bullion vaults take fairly low commissions, a price rise or fall of a few dollars in the span of a day can be acted upon immediately.

There are many advantages to bullion vaults as opposed to other forms of buying gold online. The biggest advantage to any investor is the fact that you can both buy and sell so close to the spot price of gold, this makes short term gains possible since you don’t have to deal with credit cards fees, shipping fees, or high storage fees. It’s possible to get involved in some storage vaults for as little as $100, this low barrier of entry make gold investing possible for almost anybody who really wants to do it. Some major bullion vaults, like BullionVault, allow you to buy and sell on a moment’s notice so you can take advantage of a good price.

The major disadvantage to a bullion vault is the fact that generally, you cannot take physical delivery of your gold. It is possible to get physical gold out of some vaults, but you will pay a very high processing fee, and you won’t be able to put that gold back into the vault. For some people, this is a positive thing since they don’t want to deal with handling it themselves, but some gold investors may want to store it on their own terms in their own way.

Since you can buy gold online so easily, you don’t really need to travel anywhere to get investment grade gold when you can have it delivered to your house, or stored in a secure location. Owning physical gold is a common way to ride out tough economic times while at the same time having an investment that you can easily turn into cash.

What to Expect When You Sell Your Gold

Selling gold that you have in your possession is usually a pretty straightforward deal. You take or send your gold into a dealer or shop, they test the fineness, and then give you an offer based on the quality, quantity, current spot price, and how much they need to profit to cover their overhead. One of the most important things to keep in mind when you are selling your gold is that you will probably never get spot price for your bullion, and you won’t get anywhere near spot price for scrap gold. This is simply because places won’t be able to resell your gold for much over that price.

For most people selling jewelry, or some other sort of gold that either isn’t in coin or bullion form, the gold dealer might make you an offer from anywhere between 20% and 80% of what they can sell it for. The lower end of this range would be from pawn shops late at night, or from ads you might see on TV where you can mail in your gold for cash. The higher end of the range will come from jewelry shops and specialty gold buyers. If you have a lot of gold to sell you can get a higher premium on it.

If you are selling gold coins, you might be able to get higher than spot price because of the numismatic value of the gold, but that’s unlikely as most gold coins have essentially no numismatic value. The same goes for very fine jewelry, especially if it is very old or has some sort of documented history tied to it.

Places to Sell Gold

One of the first places that come to mind when someone thinks about where to sell gold is a pawn shop. Pawn shops are well-known for buying pretty much anything, but if you go into almost any pawnbroker’s store, you will find an expansive jewelry counter with plenty of gold. Pawn shops are one of the most popular places for selling gold because you can walk out with cash for your gold 20 minutes after you walk in the store. This can be handy in a pinch, or if you are just looking at selling gold jewelry or other pieces of gold you might have around your house.

Most major cities have dedicated gold buyers. These are people who make a living off of buying and selling gold, and they are always in need for more supply. Finding a gold buyer around your area isn’t very hard, most of the time, they advertise pretty heavily because they know there are plenty of people out there who have gold, but they may not be willing to part with it at a certain point in time. Later on down the road, they might think, “Hey, I’m wanting to sell my gold, who should I call?”, and the branding that the gold buyers have done around town would likely pay off.
Coin shops are usually good for selling gold, especially if you have gold coins, since they probably already have their own list of gold buyers, allowing them to give you money that day, then turn around and unload the gold on another buyer soon thereafter. It’s possible to sell scrap gold at coin shops, since most of them have the right tools needed to gauge the quality of gold that you have, but there are better places where you can get more money for when you want to sell your old gold.

Jewelry stores will often advertise that they can buy gold, since they do use so much of it anyway, especially the stores that specialize in creating their own jewelry. If you plan on selling gold to a jewelry store, call around to get their current offer prices before driving around town to 5 different places just to hear 5 different answers. Larger jewelry stores will usually tend to give more money for your gold than both smaller stores, and chain stores.

If you have a lot of gold for sale, you might be able to sell it to a gold investor. These investors are looking for physical gold to hedge against inflation and the stock market. Generally, they will not be interested in a couple of gold rings, but they would certainly be interested if you had gold bullion for sale, or a large amount of gold from the Treasury, or just investment grade gold in general. Finding a gold investor can be difficult, but if you talk to your financial advisor, they may be able to point you in the right direction, or they may know someone looking for some gold for sale.

Best Place To Sell Gold

Figuring out the best place for selling your gold can be very tricky, since it does depend on a variety of factors.

• Location – Selling your gold in a large city is a lot easier, and can potentially bring you more money since there are plenty of other people who want to buy gold as well, driving up prices.

• What’s in demand – In a down economy, bullion gold will be in higher demand than treasure gold.

• Supply – If there are a lot of people in a certain area looking to exchange their gold, you will still be able to find someone to buy it off of you, but you might get a lower price than you normally would.

• Season – The closer you get to the holidays, the more people are trying to spend money on gifts and parties instead of scrap gold or investment gold. At the same time, people looking to get extra money will be selling gold and the prices will go down.

• The kind of gold you have – If you have gold that is considered investment grade, sending it into a “mail-in your gold” program makes little sense. The same thing goes for very nice gold coins, taking them into a pawn shop when you can sell them to a coin dealer isn’t the best way of going about things.

• Who you sell it to – Jewelry stores may not be able to handle a large amount of gold, or may shoot you a lower price than normal if they think they can’t use it right away. The individuals you sell your gold to are all in their own unique markets and situations.

If you have gold bullion or proof gold coins, you can easily get 90% of the spot value, most of the times closer to 98%+ of spot value from people looking to buy gold as an investment. These people realize are buying not to turn around and sell it right away, but they are going to hold onto it. Since historic rates for gold have been trending higher, investors can afford to pay near spot price for your gold now, then sell it years down the road, hopefully for a profit.

The best place to sell your gold if you have jewelry or other small items could very well be a nice pawn shop. Pawn shops that cater to people looking to spend a decent amount of money can afford to give you more money for your gold than you might be able to get elsewhere. If they have their own gold smelting operation, or can sub-contract it out, they stand to be able to make more money the more gold they get, so they offer a higher price hoping to outbid their competition.

Selling gold coins to a coin shop is usually your best option when it comes to how much money you’ll get from selling, how easy the people are to deal with in regards to knowing what the coins is worth, and the ability to possible consign your gold for a certain percentage if the dealer would rather go that route.

How to Get the Best Price For Your Gold

Getting the best price for your gold depends a lot on who you sell it to. Besides the obvious differences in the people who buy gold as an investment as opposed to pawn shops and online gold companies, and what they can offer you, there are a few tricks you can use to make sure that you get the highest amount for your gold.

1. Call around – This is probably the best tip that can help you get the most money out of trading in your gold. Call around to jewelry stores, pawn shops, coin dealers, and gold buyers in your area to see what kind of price they can offer you for your gold. This works well when you try to sell your scrap gold, when you have a gold coin or a piece of gold jewelry, you may actually have to take it in so they can put a solid price on it depending on the condition.

2. Check online – There are plenty of places online that can help you find the best place to market your gold. Online gold buyers may enable you to send your gold in by insured mail, send you an offer, and if you accept it, send you a check. These mail-in programs are probably the most convenient way of selling gold online.

3. Take in your gold for an appraisal – If you have a lot of gold and you aren’t sure whether it’s 14k or 24, or if you have gold coins and you aren’t sure of their value, take it to someone who can give you an honest assessment of what the gold is worth. By having a firm number in your hand, you will at least know if someone is making you a fair offer, or if they are trying to lowball you when you sell your gold.

4. Always negotiate the price – When you sell, you’ll usually be able to talk to someone with the authority to make a deal with you. They do have to make a profit, but their first offer will always be their bottom price, with a little bit of negotiation, you can get them to raise their offer. You’ll win because you get more money, and they’ll win because they will still be able to sell your gold for a profit.

Selling Gold Online

If you decide that selling your gold online is the best way to go, you are going to have to choose among many different gold buying websites. These can be divided into two basic categories: scrap gold sites, and bullion gold sites.

Scrap gold sites will buy just about anything. If you have old jewelry, medallions, coins, even bullion – they’ll buy it. The down side is they are also likely to give you a really low price. Their typical customers aren’t investors – they are people who happened to have gold and now need cash, and are usually desperate. Hopefully you’ve taken our advice on buying investment-grade bullion and aren’t in that boat! Worse yet, you really have to read the fine print with these operations. Some of these placed let you ship the gold to them for free, but essentially hold the gold hostage if you don’t accept their (low) offer, charging you a high shipping fee to get it back. Especially if you’re dealing with small amounts of scrap gold this can devastate your returns and you’re almost stuck selling to them.

While the number of “mail-in your gold” ads have gone down over the past year, there are still plenty of TV spots that run which promise a lot of money for your spare gold. These services usually give you the least amount of money out of any buyer, mainly because they have to pay a lot of money for every TV commercial that they run.

Selling your gold at a scrap site is probably not the best idea for most people, especially if you live near a pawn shop or any of the other places listed above, since you will get quite a bit more money from those places. If you do decide to exchange your gold at one of these locations, be sure to check around for some customer reviews before you send anything in. People tend to talk about how much they were offered from online gold buyers, which means you can get a basic idea how much they are giving per ounce of gold.

The other kind of site is the bullion gold site. Most often, these are the exact same sites that you purchased your bullion from in the first place. In fact, some will even store it for you between purchasing and selling back to them (for a fee, of course). Almost invariably these guys only accept identifiable investment-grade bullion, including the common bullion coins and marked bars from well-known mints suck as Perth and Credit-Suisse. The good news is they pay top-dollar for this gold, often at or barely under the spot price. This is why you bought investment gold in the first place.

Pros and Cons of Places to Sell Your Gold

• Jewelry Stores – Pros: Plenty of jewelry stores to choose from, helpful staff in a professional environment, usually you’ll get a fair price for your gold. Cons: Some stores may not be interested in buying, you will get below spot price.

• Pawn Shops – Pros: You will get money for your gold immediately, you can negotiate the price, they will take about any kind of gold. Cons: Most pawn shops will give you below spot price, there may not be a lot in your area.

• Gold Investors – Pros: Usually will give near spot price for gold. Cons: Most of the time they are only interested in investment grade bullion or coins, may be very hard to find an investor in some areas.

• Coin Shops – Pros: They will offer a decent price for most gold coins, you might be able to consign instead of sell outright. Cons: Only interested in coins made of gold for the most part, there may not be too many in your area.

• Online Gold Buyers – Pros: Very convenient, usually don’t even have to leave your house to get your money, great prices from investment gold sites. Cons: Offer you the least amount of money for your gold (from scrap gold sites), it can take a couple of weeks from the time you wish to sell until you have your money.

So Where Should I Sell My Gold?

If you have investment grade gold bullion, the best bet would be to find a gold investor and sell your gold to them, or to sell directly to a large bullion dealer/mint. You’re going to get pretty close to spot price, and they will be interested in any good gold that you have. For scrap gold, if you can find a jewelry shop buying gold at a decent price, they would probably be your best bet, you’re not going to get spot price, but you’ll get more than at most other places. If you can’t, pawn shops in large cities that deal with a lot of gold or similar specialty gold buyers are your best bet. Avoid anything that starts with shipping scrap gold so your gold can’t be held hostage with shipping costs.

Guest article by Tom Cleveland of Forex Traders.

Critics of gold ownership have had a field day of late, finally being able to gloat that the precious metal has not been appreciating like gangbusters over the past several months. Yes, gold has been on a decline since last August, but consolidations are natural and good for the market. Brief respites allow for some profit taking and for new investors to come into the fold. Since the millennium crossover, gold has run up from roughly $300 an ounce to well over $1,800 in twelve years, a “six-bagger” so to speak. Few other assets have delivered such extraordinary returns for that same period of time.

The primary argument used against gold is that it has no revenue stream. Gold, like every other commodity, does not have a direct revenue stream; yet, you never hear this argument when people profess that raw real estate is a great long-term investment. In the case of land, one must also fork out a few dollars a year for taxes or improvements before true appreciation is a possibility. Commodity prices reflect both long-term trends and short-term events. In the case of gold, mining costs have risen, and as long as central bankers continue to expand their respective money supplies, the long-term prospects for the metal can only go up.

Many factors influence the price of gold bullion from day to day, but in our modern era of globalization, our economies are so entwined and interdependent that correlations exist between pricing behaviors for gold and other investment vehicles like stocks and currencies. The following chart for the past two years illustrates this point:

One unique occurrence over the past two years is that gold and the U.S. Dollar index have matched returns for the period. Stocks are a weak third, and the Euro and Aussie Dollar were in negative territory. There have been many articles written about how gold affects the forex market and vice-versa, but many of these relationships are often temporary and soon reverse, depending on the situations at hand in the market. The conventional thinking is that gold acts inversely with the U.S. Dollar, as can be seen where peaks and valleys converge where the green circles have been added to the chart.

Many currencies, however, resemble commodities in their price action. For the past year, it is easy to observe the similarity in pricing behavior for gold and both the Euro and the Aussie Dollar. The same can also be said for stocks in the S&P 500 for the same period. The Aussie Dollar is actually referred to as a commodity currency because its value is driven by the nature of exports from Australia – iron ore, coal, and precious minerals and metals, including gold. For these and many other reasons, gold can often be a barometer of the trending direction of the global economy.

As true gold believers are well aware, there are many other reasons to own this special yellow metal. In times of crisis, global capital will seek out “safe havens” in an instant, which typically become U.S. treasuries and precious metals, especially gold. On occasion, gold has also been a hedge against the scourges of inflation since it retains its value when other things are losing theirs. Future prospects are also good on the demand side, as well. Burgeoning middle classes in both China and India covet gold and with their newfound prosperity, it is only a matter of time before this shift in buying habits translates into price appreciation for gold.

The “Golden Rule” is to hold onto your investment bullion until global fundamentals shift, regardless of its loudmouthed critics.

A quick search on the internet will reveal a lot of conflicting information regarding the tax rules for selling precious metals, and for good reason. Nobody likes to think about taxes, after all, but they are absolutely an important factor when choosing the right investments. Depending on why you are investing in gold and your levels other income, the various tax rules may steer you towards particular purchasing and holding methods in order to get the highest returns.

In part one of this article series, we will give a brief overview of capital gains taxes and also talk about what we think is the most overlooked (but critically important) piece of information on the subject.

Taxes are an extremely individual issue, and much more complicated than can be fully covered in one article (or article series). As you’re no doubt aware, there are lots of rules and the IRS changes them on a regular basis. We are not tax advisers or tax lawyers. You should consult these sorts of professionals to discuss your individual situation before acting. It’s worth it – they will save you time and money.

What Are Capital Gains Taxes

The capital gains tax is a tax levied on any gains made when you sell investments. For example, If you bought stocks for $1,000 and later sold them for $1,500, you would be taxed on the $500 in gains made on the sale. This tax applies to a broad range of investments, including securities, real estate, and metals such as gold. In short, you are taxed on the profits you make when investing.

The tax rate on capital gains depends on a couple of factors. The first and most common is the duration you held the asset. Capital gains are split between short-term gains and long-term gains. If you sell an investment before a year has passed, you are taxed at the short-term rate. If you hold the investment for at least a year, you are taxed at the lower long-term rate.

The second, and less often quoted major factor in capital gains taxes is the type of investment. You will typically hear cited a tax rate of 15% when people are discussing capital gains. This is the long-term capital gains rates for securities. These are your stocks, bonds, and mutual funds – by far the most common investments. But not every investment qualifies for this low rate. Investment real estate has a capital gains rate of 25%. Metals (including gold and silver), unfortunately, are lumped in with art, wine, and a variety of other items as “collectibles”, which are taxed at a 28% rate.

Capital Gains Taxes Are Cited As A Maximum Rate

This is one point I rarely see brought up, which is unfortunate because it is very important when determining the actual tax rates of your investments. The capital gains tax rates you see quoted, including all of the rates I cited above, are maximum rates. What this means is that the gains are taxed at the same rate as your normal income, up to the maximum rate specified. So if your total income, including the capital gains, leaves you taxed at a lower rate than the maximum, you will not be taxed at the typically cited rate. For the 15% long-term capital gains rate for securities this doesn’t come up very often, but for gold and the collectible rate of 28% it can have a substantial effect.

This is best demonstrated by example:

In 2012 the 28% tax bracket starts at $85,650 ($142,700 for married filing jointly). Let’s say you’re married filing jointly. If your ordinary income is $50,000 and your capital gains from selling gold are an additional $20,000, putting your total income at $70,000, your gains will only be taxed at 15% – exactly the same as the rest of your income. If, however, your ordinary income was $50,000 and your capital gains from selling gold are an additional $150,000, you’d pay taxes at a higher rate, like this:

• 15% for the gains between $50,000 (your ordinary income) and $70,700 (the top of the 15% tax bracket);
• 25% for the gains between $70,700 and $142,700 (the top of the 25% tax bracket); and
• 28% for the gains between $142,700 and $200,000 (your total income)

Had your gains come from long-term stocks instead of gold, all of your capital gains would have been taxed at the 15% rate since that is the maximum for that investment class. So you can see that the capital gains tax for gold isn’t necessarily 28% – it depends on your total income.

That’s it for part one. In part two (not released yet!) we’ll cover the various forms of gold buying and the rate they are taxed at.

In an age in which every other form of investment seems plagued with high unpredictability, gold seems to have become a preferred choice. The market endurance power of this precious metal has been tested by history and the results show that come what may, the value of gold always manages to hit a mark above others. It comes sans the tag of nationality and is unanimously accepted as the unchangeable asset value par excellence. As an investment tool therefore, it’s great, and for your IRA, a boon.

Yes, IRAs can now be furnished with physical gold (and silver too) and considering that the price of gold is on an upward surge in the economy and likely to increase manifold in the future, that your golden retirement years will get the best of ROI can be guaranteed. What’s more, they are excused from all kinds of capital gain taxes and hence, enable the investor to build up a huge savings over a period of time.

Financial experts also recommend the diversification of the retirement portfolio with precious metals as they have confidence in the concept of asset allocation.  Since 1998, IRAs have been associated with physical gold and the results and the returns have always been amazing.  And contrary to what you may think, it’s easy to get started too.

IRAs That Accept Physical Gold

To begin with, not all IRAs will accept physical gold as investment. For one, the IRA must be self-directed. In a conventional form of IRA, all decision making power lies in the hands of the brokers, more so, if you had originally set it up in connection to your job. In that case, most likely, you do not have a clue as to who the broker is or what the investment strategies of the investment company are. Expert estimate shows that till date, almost 96% of IRA investors don’t try to reach beyond what is offered to them on their custodial company platter. It may feel good to sit back and watch the professionals at work but ultimately it can leave you with much less than what you are entitled to. Renovating your traditional IRA and making it a self-directed one therefore is essential – it can help you to diversify the investment portfolio, as also put a part or whole of the retirement corpus into a Gold IRA.

So gear up and enquire with your current broker. Ask if you can put REAL physical gold into your IRA account. Yes or no, it is advisable to shop for deals to see if there is a better rate available. You will be required to pay an annual storage fee (as IRS regulations require that the precious metals in an IRA are to be in the custody of an approved custodian/depositary), and a maintenance fee too. If you are converting your traditional IRA into a gold IRA, you will also need to shell out a one-time conversion fee.

Self –directed IRAs can hold different asset types and that too in any number, but if you are looking for the best ones, there are 2 most reputable and popular precious metal administrators in the field who tender services for individual investors – New Direction IRA and Goldstar IRA. Many of the big names in banks offer metal administration services, yes, but for investors who prefer independent choices and also want to give big fees a miss, these specialized companies are the best.

For your information, Gold Star doles out custody for almost 20,000 IRAs (self-directed) with assets amounting to above $700million.

Goldstar had HSBC as its depository earlier but recently they have tied up with Delaware Depository Service Center or DDSC as their sole depository.

New Direction IRA has multiple franchises working independently all across the country offering self-directed gold IRA services. And it is not tied to a single depository. The investor is free to exercise his choice here, and therefore, at liberty to shop for the best storage rates.

Bullion That Is Eligible For a Gold IRA

American Gold Eagle Coins – this is the approved bullion for a gold IRA. Some other bullion coins that meet the eligibility and fineness standard are also there and these include Canadian Gold Maple Leaf coins, Austrian Philharmonics, Australian Kangaroo Nuggets and Perth Mint’s Lunar Series. These coins are all .999 fine, i.e. 99.9% pure and qualify as legal tender. Fine gold bars with .995 purity, manufactured by refiners approved by the COMEX (The Commodities Exchange) are also acceptable.

Gold coins already held in your possession or coins with 91.67% purity like the Krugerrands as also old American gold coins of 90% purity are not considered as legal investments for gold IRA.

The US mint and many others too, fabricate 2 versions of bullion coins-

1)      Standard Mint State

2)      PROOF version

Buying PROOF versions of the gold coins is a common mistake noticed on the part of the buyers. The PROOF coins are constructed to a superior standard containing specially designed planchets and manifold strikings. They are breathtakingly beautiful, yes, but that adds to the price, ultimately making them costlier than the Mint State Coins, although they are at par in their gold content.

The premium price that you pay for Proof Coin will however not increase the value of your investment and you will end up getting less gold value for the money spent.

Note that for investing in a gold IRA, you just can’t pick up coins from your local coin retailer – for that you have to open a self-directed IRA account and let your administrator do the rest. Now, what does an IRA administrator do? To begin with, they are the ones who handle all the funds. Whether you open a new account and fortify it with an express deposit or rollover funds from your current IRA or some other 401K, they will use this money to pay the coin/bullion dealer for buying physical gold.

Neither you nor your administrator holds/exercises control over the physical gold investments in your account. As mentioned earlier, the IRS rules specify that all bullion assets in a self-directed gold IRA, must be kept in a depository – an approved and insured specially secured zone to stockpile precious metals.

Gold ETFs and IRAs

A Gold ETF is yet another option of investing gold in your IRA, since an IRA is equipped to hold multiple kinds of assets. A good example is SPDR Gold Shares. If you prefer to buy paper gold, the ETF might be your preferred choice as it offers you gold value in the form of exchange traded fund. The 28% tax that an ETF is charged with can also get exempted through this (since ETF contains gold, it is measured as a collectible and also taxed at almost twice the charge of capital gains). This has been enabled by yet another IRS regulation –

“Shares of ETFs in the form of a trust that mirror the price of physical gold and silver do not constitute an acquisition of a collectible if they are acquired in an IRA.”

Therefore, gold ETF in a gold IRA is not slapped with the 28% tax rate that is applicable on collectibles.

However, the advantage of putting physical gold in your IRA account is unique – you can actually hold the physical possession of the gold at the time of your withdrawal, which precisely means that you have the liberty to cash-out your IRA in real gold, when the time of accessing your investments arises.

After deciding that investing in gold is the right move for them, many investors want to know: how much gold should you invest in compared to their other assets? Does gold follow the normal rules of diversification? Should gold be held in place or stocks, or in place of cash? One thing is certain: understanding the particulars of gold in portfolio diversification is important to making wise decisions. We’ll answer these questions in this look into how much gold you should invest in.

What kind of diversification does investing in gold give me?

Gold provides a particular kind of asset diversification. Consider this: Investing in gold has two primary goals. The first is as a simple security blanket. In case of financial disaster, the likelyhood of gold emerging as at least a temporary currency is quite high, so holding some physical gold locally that can be used in such an emergency is one role. This goal has little to do with portfolio diversification. You can’t exactly buy bonds to serve this purpose, after all. The second goal is use as a countercyclical currency alternative, and it’s this role that is important when considering diversification.

Investing in gold is much more similar to investing in a currency than it is to investing in stocks or bonds. When you invest in a stock or bond, you are giving money to a company that will use it to do something productive: build factories, hire workers, or otherwise create products and services to sell. When you invest in a currency, however, you aren’t investing in productive growth. Instead, you buy the currency due to expected future changes in the purchasing power of the currency. You think at some future time each unit of the currency will be able to purchase more of the products and services you want. When you buy stock you are using the investment to build value. When you buy currency you are using the investment to hold value.

These currency holding opportunities are more or less a vote of no confidence in the other investments that are available to you. For example, if the entire market is dropping in value you can leave the market entirely, move to dollars, and then buy back into market at a later point when your dollars have more purchasing power. Trading in currency alternatives is no different. If the value of the dollar itself is dropping, or if markets are trending downward, then gold and similar investments will rise in relative price, preserving the value of your current stock of wealth. In the case of gold, there is some demand as an industrial product that gives it somewhat of a price floor, but the majority of the large movements in the price of gold are related to its current demand and value vis-a-vis other currencies and as a hedge against market-wide movements that occur during recessions.

What kind of diversification doesn’t it give me?

If you talk to a financial advisor about your portfolio, he may say something like “you are too heavily weighted into tech stocks. You should diversify out into, say, energy stocks to reduce risk”. What the advisor is talking about is sector diversification. Unlike asset diversification, sector diversification doesn’t recommend that you leave stocks or bonds or currencies, it simply recommends that you not have all of your stocks or bonds in one industry, or (less commonly) not hold all of one currency.

Gold certainly provides sector diversification – after all, it isn’t a tech stock or manufacturing bond – but it doesn’t excel at it. There may be times when gold outperforms one stock sector but not another, however the relatively high transaction costs of most forms of gold make it a bad purchase for the level of trading activity required to keep ahead of these short term trends. Gold fares better as an investment with longer reallocation terms and less fickle trends.

Are there any exceptions?

The exception to this is gold mining stocks, which can be treated a a sector along with the stocks that mine other metals and materials. In those cases you really are investing in a company that will use the money for productive value gain. In this case, there is a whole other set of information outside the scope of strictly investing in gold that needs to be considered. There’s a wealth of information on the internet that applies to all stocks, including those of mining corporations. When breaking down your portfolio to see how much gold you own you can probably treat mining stocks as any other non-gold asset.

So How Much Gold Should You Invest In?

We recommend between 10% and 25% of your total savings in normal times. This should give plenty of room to cover for variations in individual strategies and situations. In extreme times you may want to expand your gold allocation. Remember, the goal is to maximize risk-adjusted returns, so keeping 75% in stocks while they tank into oblivion just because you’re already at your 25% limit is not wise gold investing!

It is fairly common today for dealers to attempt to convince investors to buy European gold coins. They pitch a couple of standard marketing lines that get investors thinking the coins have advantages over bullion coins that warrant the high price.

The first claim is that the coins have some special numismatic value. In reality, European coins in particular have very little numismatic value. While the occassional old U.S. coin has gained special value that causes them to trade at higher than bullion prices, this simply doesn’t happen with European coins. Even if it did occur, it probably wouldn’t do you any good because collectors tend to collect the coins of their own country. You would have to trade with someone in the European country the coin came from to redeem it for the full numismatic value. They’ll point to the fact that the coins are quite old (and they are, by American standards) without informing investors that age alone does not create value. Gold coins were very common in Europe and can be bought readily at bullion prices in those countries. Indeed, this is exactly how the coin dealers acquire them in the first place. The dealers buy European gold coins in bulk at bullion prices and resell them in America at marked up prices. Wise gold investors shouldn’t be buying numismatic coins in the first place, but if you are looking at coins don’t be fooled into buying foreign bullion coins at collectible prices.

The second claim is that the coins are non-confiscatable. Because a large number of European gold coins predate the 1933 Exeutive Order that confiscated gold in the United States they say this coins are exempt from confiscation. We already exposed this marketing ploy in another article, but it bears repeating. There is no law or statute that prevents future confiscation of any gold. Period. Anyone telling you this is either grossly misinformed or, more likely, outright lying to you. In either case you shouldn’t be doing business with them over something as important as your gold invesments.

What about European gold coins at bullion prices?

So it’s apparent that investors shouldn’t buy gold coins from Europe that are sold as collectible prices, but what about buying European coins at bullion prices? We still don’t recommend doing this. As you’ll find by browsing prices at various mints and dealers, the cost of true bullion coins are already higher than the costs of gold bars and gold rounds. This doesn’t necessarily make bullion coins a bad investment because they do hold one advantage: exchangeability. If you are buying properly marked bars and rounds from reputable mints this advantage doesn’t mean much when dealing with other gold investors, however these coins are readily recognized by both gold investors and the average person. This means that you won’t have to go through expensive verification processes to trade them. This is especially important if you are purchasing gold coins to be used in a financial disaster situation. In such an event, people will be wary and only the most common and trusted items will be readily tradeable.

Based on this you probably already see the trouble with European coins. Since these coins aren’t as common in the United States they don’t have the same exchangeability as more common coins or even recognizable bars and rounds. The European coins are stamped in the language of the country of origin, which in most cases is not English, so there’s no easy way for potential buyers to verify the coin’s identity on the spot unless they are already knowledgeable about coins. Moreover, European coins rarely have the gold content of the coin marked on them, so verification almost requires a very expensive full metal assay. European coins were also cast in a variety of sizes that we would now consider non-standard. Buyers in America don’t want 6.92 gram coins and .1947 oz coins. They want coins in full or fractional ounces that are familiar and easy to calculate with.

We always recommend evaluating whether or not you need to buy gold coins instead of bars or rounds. If you do decide that the ease of trading is worth the hit to your returns, we only recommend purchasing the most common bullion coins in full or simple fractional ounces. The American Gold Buffalo, American Gold Eagle, Canadian Maple Leaf, and South African Kruggerand are your best bets.

A special note to our readers that aren’t in America: This is obviously a U.S.-centric article. If you’re from a European country or elsewhere some of this advice may change. In general you still only want to buy gold coins that are stamped in the language of the country you expect to sell them in (presumably the country you live in). Additionally, you have the option of working with coins stamped in English as they are recognizable world wide. That said, most coins available to you don’t have the gold content stamped on them so they . If you really want to hedge you might hold a mixture of the most common coins of your country and more common, properly marked english language coins such as the South African Kruggerand.

The bottom line is this: Why would you pay the coin premium for exchangeability without actually getting a highly exchangeable item? This is what you’re doing if you buy European gold coins (or coins that aren’t optimal for your location). It’s wasting money, and that’s not wise gold investing.

An unfortunate number of coin dealers, especially those dealing in numismatic and semi-numismatic coins, promote everything from myths to blatant lies concerning their products. One of the most common is to tell investors that the government might confiscate gold as it did in 1933 – unless the investor buys their old numismatic coins, which are somehow exempt from gold confiscation. This argument sounds reasonable (after all, risk of loss is a factor in any investment), however when examined it amounts to nothing more than a deceptive marketing ploy. They use this line to fear-monger investors into purchasing their overpriced collectibles instead of making wise investment decisions. In this article, we’ll touch on the gold confiscation story, whether you should be worried about it, and why no coin is exempt.

The basis of their claim that the gold coins are not confiscateable comes from the 1933 Executive Order 6102 from President Roosevelt. This Executive Order required all Americans to turn in gold in exchange for Federal Reserve Notes at a rate of $20 an ounce. Written into the Order are a few exemptions, one of which exempts “gold coins having recognized special value to collectors of rare and unusual coins” from confiscation. The Order goes no further in defining what qualifies as a rare and unusual coin, nor does it target gold medallions and other collectible but non-numismatic gold items. In spite of this, dealers peddling medallions and older gold coins push this line because they can sell their overpriced products more easily with the spectre of gold confiscation looming over the investor.

There is simply no excuse for making such claims. Even if the coins these dealers are selling would have been exempt from President Roosevelt’s Executive Order, and most of them certainly wouldn’t have been, this doesn’t mean their coins would be exempt from a future confiscation. That Order has no legal affect on future Orders doing basically the same thing. Moreover, Executive Order 6102 was repealed in 1974 by Gerald Ford at the same time as Congress returned to Americans the right to own gold. A few years later, in 1977, the ability of the President to regulate gold outside of wartime was removed by Congress, which includes gold confiscation orders.

Unfortunately, the U.S. Goverment ignores laws on a regular basis, so even if at some time in the future the coins these dealers are pushing were made exempt, there is no reason to believe that the law couldn’t be changed to allow for gold confiscation at some time in the future. There is simply no claim to be made by anyone that their gold will never be subject to confiscation. Unfortunately, most investors don’t know the difference and fall prey to the claims. They end up investing in gold in a way that destroys their ability to make returns, eventually selling the coins for much less than spot as they have to be examined by an expert or full-melt assayed to have their gold content verified.

Wise gold investors stay away from these kinds of ploys. Any time you are being offered gold at a substantial premium over the spot price you should immediately be wary of the validity of the investment.

Gold has risen by more than 400 percent in the last 10 years and the forecast is that it will continue to rise. Domestic demand from China and India is strong and fears of higher inflation due to more quantitative easing are among the factors drawing investors to the gold market. Becuase of these factors, investing in gold is on the minds of many. Those that pursue the investment quickly learn that there are many ways to invest in gold, each with its own advantages and disadvantaves. One of those ways is through gold mutual funds.

When investing in gold, the high level options are buying physical gold, buying shares in individual gold mining companies or investing in gold mutual funds. Most gold funds invest primarily in companies that are directly involved with mining, distributing or processing precious metals. They can also invest in gold securities, buy actual bullion or buy stock in companies that are indirectly affiliated in some way with gold or precious metals, such as a company that makes mining equipment.

There are some benefits and some drawbacks to this style of gold investment. As is usually the case when investing in gold, some of the advantages of investing in gold mutual funds are also disadvantages. The key factor in deciding whether these investments are right for you starts with goal setting. Here are some things to consider when determining if gold mutual funds are a good fit for your investment goals.

Fund management

As with other mutual funds, gold mutual funds are directed by a fund manager. They are a good way for a new or inexperienced investor to get into the market because it puts the work of researching companies into the hands of professionals. Mutual funds are convenient for the investor because the investor does not have to make the decision when to buy, sell or hold; those decisions are made by the money manager. This convenience comes with a higher degree of risk. If the fund manager makes a bad decision, the entire investment could be in jeopardy.

Diversification and risk

Gold mutual funds are attractive compared to buying shares in individual mining companies. Because most funds hold equities in several gold mining companies, there is a certain amount of protection in that if one company has problems the other companies may still perform well. However, the success of the investment is dependent on the company’s management capabilities rather than the price of gold.

Mutual funds that heavily invest in mining companies can return a lucrative profit but also carry a large amount of risk because they are subject to uncontrollable events. Political instability or labor unrest in the country where the mine is located, and natural disasters such as an earthquake or flooding are unforeseen events that can adversely affect your investment.

There is also a certain amount of volatility when investing in mutual funds. Some funds allow hedging, shorting and option writing. These activities can be profitable, but carry a high degree of risk.

Fees

Many mutual funds charge a load fee, or sales charge. This fee is usually a percentage either of the amount being invested or the value of the stock being sold. It can be as high as 5 percent.

Another fee assessed by mutual funds is a management fee, which typically runs around 1.5 percent of the amount invested in the fund. This fee is assessed each year and goes toward paying the salary of the fund manager and covering expenses incurred by the fund.

When researching which gold mutual fund to invest in, investors need to pay attention to the fund’s portfolio turnover. This measures how often shares are bought and sold within a fund. The higher the percentage, the more transaction fees will be incurred by the fund. These transaction fees are passed on to the investor and reduce the return on investment. In addition, look at the fund’s expense ratio, which measures the operating costs of a fund. A high expense ratio will also reduce the investor’s return.

Also be aware that some funds may charge a penalty to cash out before a certain length of time has elapsed.

Initial investment

Many gold mutual funds require a minimum investment to join the fund. This minimum can range from $1,000 to $10,000. For minimums on the lower end, it is just as easy to buy coins or bullion and take actual possession of the gold. With a minimum on the higher end, an investor could begin investing in physical gold much quicker than it would take to save $10,000.

Another drawback to mutual funds is that some funds are closed to new and current investors when a specific amount in assets is reached.

Tax implications of gold mutual funds and retirement

When shares in a mutual fund are sold for a profit, the investor is assessed a capital gains tax. If the fund has a high turnover ratio, it could mean more distributions that are taxable.

The Internal Revenue Code allows IRAs to own specific gold coins, such as American Gold Eagles and Canadian Gold Maple Leafs, if they meet guidelines as to purity. It is difficult, however, to find a trustee willing to set up the IRA, work with a dealer on the transfer of money and coins and arrange for the storage of the coins or bullion.

Although they are allowable by the IRS, some IRAs do not accept physical bullion as an investment method. In this case, investing in gold mutual funds might be an advantage.

Historical performance of gold mutual funds

Investing in gold through a mutual fund might seem to provide peace of mind if you choose a company that has been in existence for a number of years. However, that is not a guarantee of stability. Sixteen gold funds have terminated since 1989; nine have changed management. One gold fund was opened in 2002 and one closed in 2001. In today’s market, the past performance of a mutual fund is not an assurance of future performance. Electronic traded funds An electronic traded fund is an open-ended mutual fund. A gold ETF is often referred to as “paper gold” because the investor does not actually own the gold. Rather, the investor owns a piece of paper that acts as a substitute for gold.

Gold ETFs are risky because there is no guarantee the ETF is actually buying and storing the gold in a physical location. The gold is not required to be audited and an investor might find it is not there when it is time to redeem the paper for the gold. Even if gold is actually being bought and stored, an ETF is risky because there is no way to guarantee the amount of physical gold equals the number of shares outstanding.

Although the ETF is passively managed, it still incurs some management fees, and the return on investment is reduced by expenses for fund management.

ETFs trade throughout the day, which adds increased volatility. ETFs can experience price surges and dips as they react to constantly changing news.

When it comes to investing in gold, nothing beats having the physical gold in your possession. Physical possession eliminates the risks and fees associated with gold mutual funds, assures you financial privacy and ensures your asset is available when you need it.

If you’re anything like me, then you’ve been eyeing the buzz around investing in gold. We’re certainly not alone. Gold is a hot topic right now, and thanks to continued Fed and Congressional action (not to mention the disaster that is Europe right now), it looks like it will continue to be for quite some time.

This shouldn’t be surprising. Gold is up an astonishing 400% in the last decade – over 60% in the last year alone. Currency values are plummeting. The stage is set for continued inflation. Investing in gold has made more than a small number of fortunes recently and everything is in place for that to continue. Now is the time to learn about this form of investing so that you are prepared.

It should also come as no surprise to you that the key to investing in gold is not simply going out and purchasing some any way you can, waiting a while, and then selling it any way you can. If it was that easy everyone would flock to gold investing and those fantastic returns would disappear. No, the actual purchase is the easy part. Knowing what form to use when making a gold investment, how and when to buy gold at the best price, how and when to sell gold at the best price, and how your gold investment is helping you achieve your goals is the tricky part.

Investing in gold, like with any other investment, can be approached foolishly or wisely. Investing the wise way is what I want to help you with. Most people wouldn’t just go out and purchase any old stock without some research, and those that do will seriously hurt the returns they can see from their investment. Gold is no different, and blindly investing in gold can reduce your returns dramatically.

Through this site I want to provide you with the tools, advice, and information you need to make better gold investments. Before we do that, however, we’re going to need to know what those goals are.

Investing in Gold The Wise Way: Goal Setting Drives Strategy

Most of us don’t have the money to buy gold just for the fun of it. Instead, we’re investing for a reason. We have a goal. Some need to maintain the value of assets accumulated over long careers. Others want to set themselves up for high growth so that they can retire early. Some might set aside money that needs to grow enough to pay for a child’s college tuition.

Whatever your goal is, if you don’t want to rely on blind luck then you need to let that goal determine your strategy. Successful investors have a plan – a method – for making sure their gold investments work for them instead of against them. They understand that planning strategy are necessary for success. These things are important for any investment, but are especially important when investing in gold.

Gold can be purchased in a variety of forms, each of which has its own set of benefits that make it the right investment for certain goals. Unlike those working with most other financial instruments, those investing in gold need to concern themselves with storage and handling, liquidity when it comes time to sell, and even whether to purchase physical gold versus a gold ETF or stock in a mining company. These decisions can’t be made intelligently until a goal is identified.

Before you continue reading, put some thought into your goal for investing in gold. Then, read the list of how to buy gold below for tips on matching the different purchasing options to your goal. Really consider what properties an investment needs to have, such as security or liquidity, to meet your goals.

Ways to Buy Gold and the Goals They Are Best For

Coins and Rounds

One of the most common methods of investing in gold is the gold coin or gold round. Coins and rounds are physically the same. The main difference is that coins are legal tender and rounds are not. Gold coins also tend to have some sort of collector’s value while the vast majority of rounds only represent the value of the gold itself.

For those investing in gold the goal is to buy gold as close to the spot price as possible, which makes rounds generally a more attractive purchase than gold coins. That said, if you can find gold coins close to the spot price then it is probably a good buy. The American Gold Eagle, American Gold Buffalo, South African Krugerrand, and the Canadian Maple Leaf are your best choices for true coins close to spot.

The bottom line: Coins and rounds are fantastic for investing in gold. They are real, physical gold that you can hold in your hand and keep in your safe or safety deposit box. The importance of that can’t be overstated. They are small enough to be useful for barter and liquid enough to readily sell for cash. Because they can come in fractional ounces they open up gold as an investment for those with smaller budgets. Coins more so than rounds suffer from a collector’s premium, but that premium can be a boon later if it appreciates in value.

Gold Bars

Gold bars can be split into two broad categories for the investor to consider: small and large. Small bars act in every way like gold rounds. They are not legal tender, are sized for liquidity and barter, and have a relatively small premium over spot. Small gold bars are sometimes marked in grams instead of ounces or fractions of ounces.

Then there are the large bars. These are the bars people imagine when they think of Fort Knox. Large bars are minted in standard sizes of 100oz and, more commonly, 400oz for use as “Good Delivery” bars on professional gold exchanges. “Good Delivery” doesn’t mean that everything else is “Bad Delivery”, it just means that the mint that created the bar is a known, monitored agent in the market. This means those bars can be bought and sold more or less remotely without verifying authenticity. If you’re slinging around half a million dollars for a large amount of gold, you really want to know that the bar is as pure as the stamp says it is.

The down side of large bars is that the bigger the bar, the fewer buyers there are available. The up side is the bigger the bar, the lower the premium over spot. For individuals investing in gold, there are specialized bullion vaults that let you buy into their stock at lower weights. These vaults do most of their selling on large bullion markets with 400oz Good Delivery bars so you get the benefits of access at lower budgets with smaller premiums. They can be a good deal, but usually you don’t physically receive the gold so it’s not for everyone.

The bottom line: Small gold bars, like coins and rounds, are a fantastic investment for those who want the security of physical ownership mixed with better liquidity and conveniently valued denominations. Larger bars, either bought personally or through specialized vaults, provide the best prices possible. The convenience factor is lower compared to non-physical ownership and this form of investing in gold is also not available to the majority of IRAs.

Gold Bullion ETFs

Gold Exchange Traded Funds (Gold ETFs) are stock-like securities that let people investing in gold buy into a trust managed by the ETF. The ETFs actually own gold, and typically keep it in bank vaults used on professional exchanges (the Fort Knox-like vaults full of 400oz Good Delivery bars). Liquidity is extremely high, but returns are chipped away over time by built-in management and storage costs.

The bottom line: This is a good investment vehicle for those with existing brokerage accounts who like the idea of investing in gold but don’t want to mess with delivery and storage. It is obviously not a good investment for those investing for the purposes of hedging against financial disaster or who want the security of having the gold in their physical possession.

Gold Mining Stocks

Instead of physically investing in gold, you can gain exposure to gold through mining company stocks. While this has benefits, mining stocks have their own set of issues that add to the complexity of the purchase. Mining companies have to contend with politics, environmental legislation, falling new discoveries, and rising extraction costs. There are certainly good deals to be had out there if you can find the right company, but compared to investing in gold directly this is a whole other creature entirely.

The major benefit of gold mining stocks is taxation. Gold mining stocks can be held inside retirement accounts and are taxed at the normal capital gains rate.

The bottom line: For investing in gold I would choose a different route, but for investing in a company (who just happens to be in the business of mining gold) this can be a worthwhile sector to consider. This is also a good investment for those who want exposure to gold inside an account that physical gold can’t sit in, like most IRAs. Like Gold ETFs, this is not a good investment for those concerned with hedging against disaster or who are looking for physical possession of gold.

Gold Certificates

Certificates are a special vehicle for investing in gold issued by mints, banks, and other entities. These come in two varieties, allocated and unallocated.

Allocated gold certificates are a simple certificate of ownership. You purchase the certificate from a bank, which provides you with a reference to the bar(s) that are allocated to you. For example, you could buy a gold certificate giving you ownership over the 100oz bar #1000 in their vault. When you buy gold certificates you don’t have to worry about transport and storage of anything other than the certificate, though this service comes at a price in the form of a premium over spot built in to the certificate price. All in all you are giving up flexibility for convenience.

More common today are unallocated gold certificates. In these cases, there is not a specific bar of gold with your name on it. Instead, you are effectively paying the company now for delivery of gold later. The company now has a liability on its books because it owes you gold. It is fractional reserve banking, except with gold instead of dollars. Because of this you run the risk of losing your entire investment if the company goes insolvent. This introduces unnecessary risk in your gold investment. If you are investing in gold you should steer clear of any unallocated certificates as they introduce unnecessary risk into your investment.

The bottom line: Investing in gold through unallocated gold certificates is just a bad idea! Allocated gold certificates are better, but are outclassed in convenience by gold ETFs and outclassed in security by physical ownership.