So now I want to talk about buying and selling gold.
First – who’d want to own gold?
It costs money to store.
It doesn’t pay a yield.
To make any sort of return, some people say, you need to have your money invested in gold for years, even decades…
If that’s not enough to put you off buying gold, they scream that gold is a relic from a bygone era…
A time when markets weren’t electronic.
When gold belonged to insular countries…
Yet these are the exact same arguments many people make FOR owning gold.
Gold was the epicentre of the monetary system for over 3,000 years.
It was only 40 years ago that the world was taken off the gold standard to be replaced by fiat currency – paper money, in other words.
Historically, gold is how families retained and passed on wealth from generation to generation.
And they had every reason to…
In times of market panic, the price of gold can rise.
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When inflation took hold, the purchasing power of gold remained.
When deflation spread, the purchasing power of gold still remained.
But that brings up an important point about investing in gold…
Buying gold — and silver for that matter — isn’t a about making a quick buck.
It’s seen as a wealth protection measure – an opportunity to hedge against market uncertainty and the falling value of fiat currencies.
If you worry about these kinds of things, buying and holding some gold might help you sleep better at night.
So let’s talk about how you do it…
First: what kind of gold should you buy?
To some people, it’s important to own at least some physical gold. By that I mean gold bullion and coins.
It depends on your view of ‘portfolio insurance’. You could choose to have a % allocation of your net wealth in physical gold.
The idea here is that gold will do well when the stock market or property market doesn’t.
There’s no guarantee, however.
So, how do you get your hands-on physical gold?
If you’re a first-time gold buyer, stick with recognised bullion dealers.
There are many dealers spread across Australia. Here are just some of them:
Please note we are not affiliated with any of these dealers.
These are the largest bullion dealers in Australia.
The best way to get started is to visit a reputable bullion dealer, either in person or through their website.
You don’t have to buy from a bullion dealer in your state.
Most of them will ship to any address, as long as you can sign for the delivery in person.
So you can buy from a bullion dealer in Brisbane even if you live in Melbourne.
Bullion dealers offer gold from various mints around the world, so shop around to see what you can find.
Be warned, though: all bullion dealers must adhere to the same anti-money laundering regulations as banks.
Which means that if you are buying online for pick-up in person OR courier delivery, your identity will need to be confirmed by a bullion dealer.
Generally, a passport or driver’s licence is sufficient.
In addition, the AUSTRAC Anti-Money Laundering and Counter-Terrorism Financing Act 2006 applies to transactions over $10,000 (including equivalent foreign currency amounts).
Which means that you should be prepared.
If you walk in with wads of cash over $10,000, the bullion dealer will have to report the transaction to AUSTRAC.
If you don’t want the government to know about the transaction, keep the cash transaction below this amount.
So once you have your bullion or coins, the next step is to decide where to store it.
This is very important.
You may be tempted to keep it at home.
In fact, there’s a large range of web pages that come up with ideas on how to hide gold and silver around your property.
I understand the desire to keep your precious metals close.
But storing it at home is highly risky.
For starters, you can’t insure gold kept at home.
Basically, if your bullion is lost or stolen, you’ll never be able to recoup it.
Remember, gold is money… You need to treat your gold and silver exactly as you would cash.
Once it’s gone, it’s gone for good.
If you do decide to keep your bullion at home, install a top quality safe.
I’m not talking about the sort of safe you can find at Bunnings.
There are countless YouTube videos available to show you how to crack open one of these with only a little bit of force.
If you do choose to keep your bullion at home, never, under any circumstances, tell anyone where you keep it.
Another popular — and probably more secure option — is to organise secure storage for your gold.
Banks do offer safety deposit boxes for hire.
But then your gold would be stored with a bank.
And you may decide that you don’t want to have it anywhere near the financial system.
Many Australians are often surprised to find out that the contents of their seemingly private bank safety deposit boxes aren’t that safe at all.
You may not know this, but Aussie banks can exercise their right to access the contents of your safety deposit box at any time!
For this reason, consider private storage companies.
Firms like Guardian Vaults, Kennards Self Storage, Custodian Vaults and Fortis Vaults all offer personal safety deposit
boxes for a small fee.
Even better, they are privately owned. So you won’t be storing your gold with a bank or government authority.
Just note that we don’t endorse these businesses, nor do we receive a commission for recommending them to you.
The other, and often cheaper, option is to have a bullion dealer store your gold for you.
Many bullion dealers offer to store gold on your behalf.
This means that when you buy your gold, you don’t take physical delivery of it.
The bullion dealer holds it for you.
If you plan on buying large quantities of gold, this may be the best option for you.
Now, when you ask a dealer to store it for you, there are two types of storage available: allocated and unallocated.
Allocated storage is simple.
Each gold bar (no matter what the size) is given a unique serial number for bullion dealers to track.
If you choose allocated storage, the bars you buy go into a pooled storage unit.
In allocated storage, the serial numbers of each bar will be noted down on a ledger, and they will be taken off the market and ‘allocated’ to you on the dealer’s ledger.
In other words, while all your bullion bars will be stored in one collective vault, no one will be able to buy the bars you have because they have been allocated to you — and only you.
The alternative is unallocated storage.
Unallocated storage is also pooled.
However, you don’t have serial numbers of bullion bars written down next to your name.
Instead, you have a set number of bars (or ounces) allocated to you on the ledger, with no claim on any particular bar in the vault.
Put another way, say you buy five one-ounce gold bars, giving you a total of five ounces of gold.
If you select unallocated storage, you will have a claim to five ounces of bullion in storage.
But you don’t ‘own’ any particular bars in storage.
Unallocated storage costs are often slightly cheaper on a yearly basis.
However, whichever method you choose, make sure it’s right for you.
And now the fun part — deciding what type of bullion to buy.
Believe it or not, there a few different types to consider…from cast bars to minted bars to coins.
Coins are visually appealing and highly collectable.
Yet their intricacy and detail come at a cost.
Basically, the fancier the coin, the higher the price you pay.
The advantage of coins, though, is that they come in much smaller amounts.
Some coins are 1/10th of an ounce, giving investors a small way to start accumulating gold.
However, because of the premium that comes with buying a detailed coin, it can take longer for the purchase cost to reach the spot value of gold per ounce.
Minted bars are another way to buy gold and are quite popular.
They tend to be simple; the appeal of them is the neat mould of either gold or silver.
Much like coins, minted bars can be bought in amounts smaller than an ounce.
You can buy a minted gold bar for as little as one gram of gold (the minimum minted-sized silver bars and coins are generally one troy ounce).
If you are buying gold for yourself to hold over the long term, minted bars may be the right fit for you.
You can buy minted bars from half an ounce up to a kilo. They make for neat, stackable storage.
And because of the low casting costs (no fancy detailing), they are relativity cheap to invest in.
Finally, you have the option of buying cast bars.
If you are after the cheapest way to access precious metals, this is the bar for you.
With cast bars, there’s no intricate minting detail. Just a
lump of precious metal with the mint’s stamp on it.
Efficient, and the lowest cost way to access precious metals.
If you are buying gold in large quantities, cast and minted bars are often the way to go.
Remember – while there are times when the gold price moves up quite quickly, owning gold isn’t about turning a quick buck.
It’s a decision to invest in something other than a paper asset that can be exposed to government and central bank manipulation.
That being said, there is a form of gold known as ‘paper gold’ that some precious metals investors prefer to the physical stuff.
I’m talking about things like Exchange traded funds (ETFs) that have 100% exposure to gold price movements.
‘Paper gold’ can be a useful tool to trade the gold price.
Now that gold can be freely traded on most major markets, its price experiences volatility at times, as with any other asset.
There has even been times when the gold price has moved US$100 per ounce in a day.
An example of this was when Donald Trump was elected as US president on 8 November 2016.
The gold price tends to react to geopolitical events. Sometimes it swings wildly in price – which can create short-term investing opportunities.
Now, taking advantage of short-term price gold price movements isn’t for every investor.
Yet if this is something that interests you, gold-backed ETFs have been created for this purpose.
There are many ETFs listed in Australia now.
Here’s a list of ETFs backed by 100% physical gold holdings.
Remember – we are not endorsing these investment vehicles. Nor do we receive a commission from any of these providers. This is merely to give you an idea of what’s out there:
All these ETFs are priced in Australian dollars, meaning they include what’s known as a currency hedge.
A currency hedge means that the value of gold in US dollars has been automatically converted to Aussie dollars for an ETF.
That’s one of the benefits of buying gold ETFs listed in Australia as opposed to overseas exchanges.
The reason for this is simple.
Gold is priced in US dollars.
Australian investors have the double-whammy of being exposed to gold price movements AND US-dollar price fluctuations.
While this is part of the risk associated with buying and selling gold, it can add an unnecessary complication for investors.
By choosing ETFs with a US dollar hedge, the AUD/USD exchange rate has already been calculated for you.
In other words, what you see is what you get.
Meaning you don’t have to fiddle around with your own calculations in what the gold ETF is worth in Aussie dollars.
Okay, that’s gold covered. Next, I want to talk to you about a new and exciting investment vehicle that’s about as far removed from gold as it’s possible to get…