Guide to Buying Gold Bars

26 Jan 2017

By Dean Arif, MY Bullion Trade:

If you’re looking to buy physical gold at the lowest possible price per gram, there’s no better choice than gold bars. Coins may be more attractive, but all that manufacturing and packaging comes at a price. Gold bars, on the other hand, are the backbone of the industry, what everyone from average investors to central banks buy and store. In other words, you can’t go wrong buying gold bars – provided you follow these four tips.

The Advantages of Buying Gold Bars

Tip #1: You’ll get more grams for your currency with bars than coins.

The primary reason investors choose a gold bar because it’s less expensive than a gold coin, premiums per gram, are lower because coins have more intricate design and thus higher labour and machining costs. Coins may be better looking, but you’ll pay extra for that beauty.

The other advantage of gold bars is that they’re easier to store. A gold bar takes up less space than the same number of ounces of coins as circular shape have gaps when you stack them together. In fact, rectangular bars were originally designed specifically for ease of stacking and storage.

Buying gold bars doesn’t compromise any of the core advantages of gold: they’re portable, private, liquid, and will last forever.

Pick the Best Gold Bar Size for You

Tip #2: Buy 100 grams gold bars to meet future needs as they come up. If you have a high net worth, buy both small and large bars.

One of the first decisions you’ll have to make when buying gold bars is what size to purchase.

Gold bars come in different sizes and weights. They’re as small as one gram (sometimes called wafers because they’re so thin), and as big as 400 ounces. It’s these larger sizes that central banks, exchanges, and ETFs buy.

Generally speaking, the bigger the bar, the smaller the premium per gram. That’s because it’s less costly to produce a kilogram gold bar than a 5 grams gold bar.

But that doesn’t mean you should buy the heaviest bar you can afford. Just the opposite, in fact…

• Big bars do not offer the divisibility smaller ones do. When you sell a big bar, you are liquidating a sizable chunk of your saving. It’s more practical to sell multiple smaller bars to exchange the exact amount of gold for the exact amount of currency you need.
• Fewer potential buyers. Not many people can afford to buy, say, a 400-ounce bar. If you have smaller sized bars, you have a greater pool of customers.
• Lower counterfeiting risk. Counterfeiters prefer big bars, because they’re worth a lot more.
• Avoids the need for an assay. The bigger the bar, the more likely it will require an assay to be sold. An assay adds an extra expense, is inconvenient, and will delay your payout.

The advantage of buying a large gold bar is that the premium per gram will be smaller. But you lose these other advantages when you purchase the biggest bar you can. High net worth individuals could buy a large bar, provided they also have some bars denominated in smaller weights.

On the other hand, don’t buy gold bars smaller than 50 grams, as the premiums are significantly higher. If you can’t afford more than one 50 grams of gold, consider buying several smaller bars so you capture the advantages above. Either way, owning gold is better than not owning gold.

So the first step in knowing what to look for when buying gold bars is the above.

The second thing to look for when buying gold bars is the stamping and hallmark.

Gold Bar Brands Matter – Choose Wisely

Tip #3: Buy only gold bars with a recognized hallmark and proper stamping.

Proper stamping and a recognized hallmark mean you’re getting a reputable gold bar. There are some private mints in the world that don’t include all of this information, which could mean it’s not a pure gold bar or has low quality. It’s important that you know how to make sure your gold is real.

Stamping: a reputable gold bar should have its weight, purity, refiner, and a serial number stamped on it.

It’s important to buy gold bars with these markings. Without them you don’t know what you’re getting, and a future buyer will probably demand an assay.

There’s an easy way to assure your gold bar has proper stamping, and that’s to buy bars with a:

Reputable hallmark: A hallmark simply refers to the brand of the bar – the refiner or manufacturer that minted the bar. You want a well-recognized hallmark so that you know you’re getting a high quality bar, and also so that you’ll have no difficulties someday in selling it. A good hallmark will allow you to sell the bar virtually anywhere in the world. It is highly liquid.

Here are some of the world’s most highly regarded refiners:

• PAMP Suisse
• Argor-Heraeus
• Metalor
• Valcambi
• Sovereign mints such as the Royal Canadian Mint and Perth Mint.

There are others, such as the Sunshine Mint and Republic Metals (this is not an exhaustive list).

The easiest way to avoid getting ripped off is to buy a reputable brand. And if you buy a recognized hallmark it will have all the proper stamping a pure gold bar should have.

Where to Buy Gold Bars

Tip #4: Buy your gold bars from a reputable dealer only – one with plenty of positive customer ratings, a buyback policy, and no pushy sales people.

Perhaps the most important thing you can do is buy your gold bars from a reputable dealer. A trustworthy dealer can provide sound education, help you avoid pitfalls, and steer you toward the best products for your needs.

How do you know if you’re dealing with a reputable bullion seller? Look for these things:

• Years in the business. Give preference to those with lots of experience. Check for repeat customers – buyers wouldn’t return if they had a negative experience. Search the dealer on Google and Facebook for credentials.
• An educational dealer or website. The biggest tip-off you’re dealing with a “sales-oriented” dealer is if they promote only the most expensive products. For example, if they try to steer you away from gold bars and into rare coins, which have higher markups. Trust your gut feeling here! if the dealer doesn’t feel right, there’s plenty more to choose from. A good example is MY Bullion Trade’s commitment to education through our regular blog posts and talks.
• Larger dealers. Look for dealers that have strong volumes, because they will have greater flexibility. A small dealer, in contrast, may have limited product selection or be unable to fill a large buy or sell order. Be sure to ask about delivery times, it’s a red flag if they don’t ship within 24-48 hours of your payment clearing.
• A buyback policy. Will the dealer repurchase what you buy from them? If they don’t have this policy in place, you better shop elsewhere. Not only do you want the dealer to still be around when you need to sell, you want some kind of guarantee that you won’t get stuck without a ready buyer (though any gold dealer should buy a gold bar from you). There’s another advantage to a buyback policy: these dealers tend to give customers who’ve bought from them the best resale price.
• An online store. Once you’ve identified some reputable dealers, consider the advantages of online ordering vs. a brick-and-mortar store: it’s quick and easy, can be done at the comfort of wherever you are. And believe it or not, many online dealers are cheaper than your local shop even after paying for shipping, since overhead is generally much lower.

If you’re new, I suggest you compare three dealers. Be sure to compare total cost: commission, bank transfer fees, shipping and insurance. And consider that cost isn’t the only factor when buying gold bars: ease of ordering, delivery promptness, customer service, and buyback policies are all important to consider in where you shop.

One effective method for first-timers is to buy from two different dealers, so you can compare service, delivery, and cost. It also provides you with two vetted sources for future purchases.

Gold bars are one of mankind’s most definitive forms of money – they’re a tangible asset, are highly liquid, and will protect your portfolio from financial crises. Owning gold bullion at this point in history is a wise move.