November 15, 2016
A Dynamic Commodities Exclusive
Gold is a beautiful precious metal. The first time I picked up a gold bar and held it in my hand, it sent shivers down my spine. There are no other metals like gold in the world and that is why it has been the ultimate sign of wealth and store of value since the first human picked up a gold nugget floating down a stream. The way that gold reflects light has made it an ornamental metal for thousands of years. Gold has played a critical role in the global financial system for many centuries and that continues today. Most central banks around the world hold the yellow metal as part of their foreign exchange reserves. More than 30% of the gold produced in the history of the world today sits in the vaults of governments as a reserve asset.
Many individuals also hold gold as security against inflation or political events that could make the price of the precious metal move higher. Some people hold gold as it is an instrument that could be flight-capital during times of political upheaval. While the standard of trade for central banks is a 400-ounce bar, that gold ingot is worth around $492,000 at a price of $1230 per ounce.
Smaller investors tend to buy smaller bars, wafers and coins. The gold that trades on the COMEX represents a 100-ounce bar worth around $123,000. However, there are smaller bars like kilos, ten, five and one ounce bars and wafers that can be as small as 1/10 of one ounce or one gram. When it comes to other investible gold instruments, coins minted around the world in solid gold also trade at prices that reflect their metal content plus or minus numismatic premiums or discounts.
When looking to buy or sell physical gold, the most important thing is to find a reputable dealer. There are many scams in the market because of the high value of the precious metal. Look for a dealer that has been in business for a long time. Additionally, find three dealers and compare prices as premiums and discounts can vary from dealer to dealer. Check the better business bureau in your area to make sure that there are no complaints and do some due diligence on the internet about the dealers who are considering.
When buying gold, ask for a guaranty and a weight and assay certificate to prove that the coin or bar you purchase is gold and the weight and content are what the dealer represents. Ask the dealer what the difference is between buying and selling prices for the particular gold. Dealers are in business to make money, but you must be comfortable with the width of the bid/offer spread.
When selling gold make sure to get a quotation from more than one dealer. Compare their prices to the price of nearby COMEX gold futures before you agree to buy or sell the precious metal. The best consumer is an educated consumer, so before you decide to buy or sell physical gold, do some homework and find a dealer who can work with you and who will treat you fairly.
Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities