How to buy gold: Tips for owning and investing

Key points

• Gold is often considered a good hedge against inflation.
• You can buy gold through a licensed local or online retailer.
• Consider how gold fits into your overall investment portfolio.

When you think about investing, you may think about the stock market or the funds you buy in your workplace 401(k). Gold is a lesser-known investment that many experts still consider an excellent addition to portfolios.

Gold was used as an investment and currency long before the stock market was created. Aside from its use in jewelry and decorations, it was first used as currency as far back as 1500 B.C. in Egypt. Its value has been (and continues to be) driven by production, demand, market volatility and the value of fiat currency.

In a 2021 Gallup poll, 18% of Americans considered gold the best long-term investment. It ranked third in the poll behind real estate at 41% and stocks/mutual funds at 26%.

While gold can be a good option for someone looking for a low-risk investment, it also comes with unique challenges.

Is gold a good investment?

Whether physical gold — also known as gold bullion — is a good investment is debatable. Many financial professionals believe there can be a place for it in your investment portfolio.

But gold doesn’t serve the same purpose in a portfolio as many other investments. It’s not necessarily thought of as a wealth generator as much as a hedge to offset volatility in the stock markets. 

“Historically, gold has been the best hedge against inflation due to its consistent demand by governments and industrial usage,” says Ryan Sullivan, an investment advisor and owner of the registered investment advisory firm Off the Beaten Path Financial. “Gold has periods where it tends to outperform and periods where it underperforms.”

The S&P 500 Index, often used as a proxy for measuring the stock market’s overall health, took a nosedive last year amid inflationary pressures. The S&P 500 lost 19.4% in 2022, its worst year since 2008. Meanwhile, gold eked out a 0.4% gain. But over the past five years, returns from the S&P 500 handily outperformed gold at 45% compared to 38.9%.

Gold also doesn’t produce income from interest or dividends, the way that stocks and bonds can. It also may not experience the capital appreciation that stocks do. 

But as Sullivan notes, it can be used as a hedge against certain investment risks, including inflation. With inflation reaching a 40-year high in 2022, this benefit as a hedge may seem attractive.

Ways to buy physical gold

If you’re considering investing in gold, you have a few options for how to go about it.

Licensed retailers

One option for buying gold is to visit a licensed retailer with a physical storefront. Buying gold this way is similar to buying any other product. Just as you’d walk into your local grocery store to buy produce, you can walk into your local metals dealer to buy gold.

Of course, more research goes into finding a good metals dealer, as you’ll want to ensure the retailer is reputable.

“If something seems too good to be true, it probably is,” says Collin Plume, CEO of Noble Gold Investments, which advises clients on precious metals. “It’s best to pay for the peace of mind that you’re dealing with a reputable and trustworthy company.”

The U.S. Mint has a directory of local retailers on its site that sell America the Beautiful Silver Bullion, American Eagle Silver, Gold and Platinum Bullion and American Buffalo Gold Bullion Coins. You can view the directory here to see if there’s a local retailer near you.

Online gold retailers

Another option is to buy gold online. These days, there’s no shortage of metals dealers online, where you can buy gold and have it shipped to you or a storage location. Popular online retail sites include American Precious Metals Exchange (APMEX), JP Bullion and Wholesale Coins Direct, to name a few.

“Buying gold from an online retailer is almost as simple as making any other purchase online,” Sullivan says.

One benefit of buying gold online is that your location doesn’t limit you. The options are far more plentiful. On the other hand, buying online may also mean you can’t as easily vet the dealer and the product. This creates a higher risk of falling for a scam.

Gold bars vs. gold coins

Another decision you’ll have to make when buying gold is whether to buy bars or coins. For someone new to gold investing, this decision can feel overwhelming. Just know that both options have pros and cons.

The biggest difference between gold bars and coins is the size. Gold bars usually start around 1 ounce (though some places sell them for as small as 1 gram) and can be as large as 1 kilogram, approximately 2.2 pounds. 

Gold coins, such as American Eagle Gold coins, are available as large as 1 ounce and as small as a tenth of an ounce.

Gold bars have a higher gold content, at 99.5% pure gold. But coins can be more attractive for other reasons.

“There are many highly coveted gold coins that are sought after for their uniqueness,” Plume says. “This added level of demand means that gold coins are on average valued at higher prices than their gold bar counterparts, despite the fact that gold bars are often larger and more pure than gold coins.”

When buying either gold bars or coins, you’ll select the weight and quantity. If you buy gold bars, you might be responsible for delivery fees and insurance.

What to consider before buying gold

There’s a lot to consider before you add gold to your investment portfolio. Of course, you’ll want to ask yourself many of the same questions you would before buying other investments.

“Before investing in gold, it’s important to consider factors such as your investment goals, risk tolerance and overall portfolio diversification,” says Daniel Seder, a chartered financial analyst and managing director at the registered investment advisory firm Blue Chip Partners.

There are also considerations unique to gold:

1. Insurance

Gold is different from many other investments because it’s a physical asset that can be stolen or damaged. As a result, acquiring insurance to protect your assets is important.

“In most cases, insurance is a necessary evil — you hate it until you need it,” Seder says. “Insurance is important when buying gold because it can protect your investment in the event of loss or damage.”

Before investing in gold, factor insurance costs into your overall budget.

2. Reselling 

With any investment, it’s important to consider its liquidity, meaning how easily you can turn the asset into cash.

Beware that gold isn’t as liquid as other investments. With stock investing, you can sell an asset almost immediately through an online brokerage account. But with gold, you have to find a buyer yourself. 

You still have plenty of options for reselling your gold, including online retailers and the dealer where you bought it. When you initially buy the gold, ask the dealer if they repurchase assets.

3. Quantity

There are several reasons to consider the quantity of gold you want to purchase. First, because gold is a physical asset, you’ll have to plan for shipping, storage and insurance, which can increase your investment costs.

But you’ll also need to consider the quantity from the lens of your overall investment portfolio. Gold is just one part of a well-diversified investment portfolio. If you buy too much, you could end up with an asset allocation that’s less than ideal. 

Only you can decide what percentage of your investment portfolio should be devoted to gold, but be sure to balance it with other assets that can help you reach your financial goals.

4. Storage

If you’re considering buying gold, you’ll have to plan how to store it. Some investors store gold in their homes, often in a locked safe. Others opt for a safety deposit box.

Many companies specialize in storing gold and other metals. While you’ll have to pay to store assets there, it could relieve some of the headaches of handling storage yourself. 

That said, storing gold with a depository can become expensive fast. You might spend around $10 minimum monthly for storage plus additional fees with a private depositary. Fees charged may relate to the amount of gold or metal stored. For example, the Texas Precious Metals Depository charges 0.5% in annual fees for storing gold amounts of $100,000 or less.

Is gold bullion worth buying?

Buying gold bullion can have several advantages. It’s generally considered to be a good store of value and can provide a hedge against inflation. It’s also a way to diversify your investment portfolio with an asset that isn’t closely correlated with other investments.

On the other hand, gold has some unique challenges, including shipping, storage and insurance. 

Additionally, investing in gold has a clear opportunity cost: The money you could be making from other investments. 

Gold doesn’t provide income comparable to interest earned from bonds, dividends earned from stocks or rental income earned from real estate. It also doesn’t necessarily experience the capital appreciation that other assets do.

Ultimately, it’s up to each investor to decide whether gold is worth buying. Yes, it has some advantages. But your portfolio won’t necessarily be lacking if you opt out of investing in physical gold. You can also gain exposure to gold through other investments, such as investing in gold mining stocks, gold-focused funds or gold futures and options.

Gold ETFs and mutual funds are an excellent way to invest in the metal itself and metal mining companies, such as Newmont (NEW) and Barrick Gold (GOLD). These funds also offer a lower-priced option for gold exposure with increased liquidity. And with this option, you don’t have to worry about storing your physical gold. 

Frequently asked questions (FAQs)

Can I buy gold from a bank?

Some banks in the U.S. sell gold and other metals. But this isn’t common, and you’ll have more options if you shop through a metals dealer or retailer instead.

How do beginners buy gold?

Beginners can buy gold through a local licensed retailer or an online retailer. You can also opt for gold stocks and exchange-traded funds instead, which eliminates some challenges that come with traditional gold investing.

How much does it cost to buy gold bars?

As with other assets, the price of gold bars fluctuates. The price will also vary depending on the size of the gold bars. As of March 6, 2023, the price of gold was $1,989 per ounce.

Is gold a good investment?

Whether gold is a good investment is subjective and largely depends on individual investment goals and risk tolerance. Gold is often considered a safe-haven asset due to its ability to provide a hedge against inflation and market volatility. However, it also comes with certain risks, such as fluctuations in market prices and potential lower returns compared to other investment options. 

Additionally, gold can be a speculative investment and may not provide consistent returns over the long term. To determine if investing in gold is right for you, it’s important to carefully evaluate the pros and cons and to consider how it fits into your overall investment strategy.