High security, good liquidity, and low premiums. Can you think of a better combination? If this investment profile sounds attractive to you, look no further than gold bars and gold rounds. It’s no secret that we highly value the security of physical gold here at Wise Gold Investing, so it’s natural that these are two of our highest recommedations for investing in gold.
Gold bars and gold rounds are largely identical. Neither has a legal face value like coins, nor are they made for collectible purposes like medallions. The only real differences between the two are shape and typical sizes. Rounds, as you might suspect, are circular or oval in shape and are most commonly cast at sizes at and below one ounce. Gold bars vary more in shape than rounds, with the two most popular shapes being flat “international” rectangles (especially common for small bars) and the classic trapezoidal prism brick. Gold bars can be found as small as one gram and range all the way up to 400oz “Good Delivery” bars used on professional gold exchanges. In both cases they should be stamped with the manufacturer’s name or mark, the weight in gold, and the fineness. Optionally they may have a decorative mark, including denticles on the edges in the case of rounds.
For the purposes of investing in gold both of these products can be treated identically (so long as they are the same size). We typically refer to gold rounds and gold bars in tandem for exactly that reason, though occassionally we only reference one or the other, such as in a comparison between coins and rounds. Any time you see one or the other mentioned alone you can apply the advice given to the other.
Why Invest In Gold Bars and Gold Rounds?
As physical gold, bars and rounds have the highest security amongst all of the various gold investments. There is no replacement for holding your own physical gold locally when it comes to ensuring the safety of your investment. Even bullion vaults, for all of their benefits, can’t compete with having real gold in your hand at a moment’s notice.
Gold bars and rounds come in a variety of small sizes that are convenient for storage, easy to carry and conveniently valued for trade. You can buy rounds and bars as small as one gram (about 1/32nd of a troy ounce) or even one grain (1/480th of a troy ounce). If you found yourself in a situation where you needed to make purchases directly with gold these small bars could come in handy you wouldn’t want to be stuck with a kilobar valued in the tens of thousands of dollars as the smallest “bill” in your wallet!
Unfortunately, there are fairly static production and delivery costs for gold bars, regardless of size. This means the smaller bars carry a higher premium over the spot price than the larger bars do. This is problematic for investing in gold as minimizing transaction costs is necessary to maximize returns. Because of this premium we recommend switching to silver for the smallest sizes. Since silver is less valuable you can purchase larger silver rounds or silver bars and minimize the premiums over metal value. For example, currently a 1oz silver bar has the approximate dollar value of a 1gram gold bar.
Are there any disadvantages?
Not even bars and rounds are devoid of disadvantages, which is why there are several ways to invest in gold in the first place. Most apparent is that when it is time to sell you have to find a buyer yourself. This isn’t as hard as it sounds, even near or right at spot price, but it’s certainly not as easy as selling your gold ETF or having your bullion vault sell your gold for you on the London exchange. Large dealers and mints often buy back gold at good prices, providing plenty of liquidity. In times of fierce demand they may even pay more than the spot price.
Additionally, liquidity isn’t as high as what you would find in a bullion vault or with paper gold. This is especially true if you make unwise gold purchases that require appraisal or otherwise make it difficult for your buyer to verify authenticity. Always be sure to purchase gold bars and gold rounds that are properly marked and from a reputable mint or dealer.
Storage is a consideration with gold bars and rounds, however we don’t see it as a disadvantage. Obviously, storing the gold yourself costs little to nothing also means you have access to it yourself and can move and use it as you see fit at any moment. Additionally, any time you are investing in gold SOMEONE is paying storage for the physical product. It may be hidden in lower ETF returns or through account size reduction in bullion vaults, but it’s there. This is simply a universal cost of holding commodities regardless of the method by which you buy gold.
How To Store Your Gold Bars and Rounds:
Your storage plan should be well thought out and diverse. One of the chief benefits of gold is security so there is no reason to compromise that by putting all of your eggs in one storage basket. If you store the gold in your own home you’ll want to purchase a quality safe or store it separated in multiple non-obvious locations. Some portion of your gold should be held outside of your home in a safety deposit box or with a similar service, but by no means should you store all of your holdings with a bank. The more local the bank the better. Due to the MF Global incident you will want to stay away from storing your gold with any multinational high finance banks.
Protection of the gold itself is not especially necessary, though some keep their rounds and bars in plastic sleeves for safe keeping and to keep the surfaces from nicking and scratching one another. Remember, gold is soft so it can be marred by common metal objects. Try not to store unprotected gold with other metal coins for this reason.
Finally, while we try to avoid the sensational claims that are common amongst some metals investors, we would be remiss in our duties if we didn’t at least mention that governments have confiscated the gold holdingsK of citizens in several countries in the not-too-distant past. Because of this we recommend thinking ahead when deciding who to divulge your ownership of gold to. If nothing else, it is typically not wise to broadcast the presence of valuables in your home.
When everything is looked at together, we maintain that there is no better method of investing in gold. If you keep in mind our key recommendations for buying gold bars and gold rounds you can minimize the disadvantages they have while maximizing the advantages. While you should always diversify your gold holdings, the results are an unbeatable mixture of high security, easy access, and good liquidity that make for a good backbone of your strategy.