Like all investments, buying gold bars should begin by shopping for the best price. Gold brokers have a variety of fees and charges that can impact the premium cost of the gold investment. It is usually a good idea to investigate the broker before committing to buy from them. Reputation within the industry is a good indicator of value. Obviously investors should avoid buying gold bars where there is a high premium attached to the gold. A good range to look for is anything that is spot price plus 10%. Even with this rule, ten percent is a lot. The closer the gold can be purchased to the spot price, the easier it is to make a profit. This is because it take less of a price jump to make the gold investment return on the investment.
Buying Gold Bars – Spot Price:
There are two separate spot prices that investors should pay attention too. The monthly spot price is a good indicator of what the market is doing. The daily spot price is set each day as the market closes. Both the monthly and the daily spot price are set by the New York Mercantile Exchange. Information about current spot pricing can be found on their website. The spot price of gold is important as a comparison to what the offered price of gold may be. If the spot price, of gold is $1000 per troy ounce, and the offered price is $1100 per troy ounce then to make a profit the price of gold must rise above $1100 per troy ounce. That is a ten percent mark up on the investment, and that is not included other costs such as brokerage fees or shipment and storage. Premium gold prices below 6% are an indication of where to buy gold bars.
The spot price is used to find the best bargain or the premium price of gold. Use the formula to find the mark up on gold and then compare this to the spot price. The formula will give you a percentage of cost over the spot price. To find the premium price of gold simply subtract the quoted price from the spot price. The answer is then divided by the spot gold price. This answer is then timed by 100 to give a percentage. Quoted price is $1100. The spot price is $1000. $1100-1000=100. 100/1000 = 0.1. Multiply .01*100 = 10%. The premium price of this gold is 10%. This means that if this gold is invested in then it will need to rise in value ten percent just to break even. In normal economic times, this is probably not a good investment. In today’s market, this may be an acceptable investment. Understanding where to buy gold bars from is a good starting point. Buying gold bars from a mint usually have a 4% mark up which makes the mint investment a better investment than any other investment that has a premium price that is higher than 4%. Mints make good places and should be added to the list of where to buy gold bars from. Price shopping the investment scene is the best way to find the lowest price, but consider any other fees that may be involved in buying gold. Cost’s such as brokerage fees, shipping fees, and storage fees can drive the price up. Including these in the premium price, can help to eliminate sellers that are maximizing their own profits.
Buying Gold Bars – Investing:
In investment plan should start with an investment strategy. Most gold investors use the Dollar Cost Averaging method as their strategy. Dollar cost averaging is a good method to consider when buying gold as a long-term investment. The strategy is to spend the same dollar amount each month to buy gold. This allows the gold investment to be averaged in terms of cost. This is the crux of dollar cost averaging. The benefit to using the dollar cost averaging method is that the risk of the investment is spread over all of the entire gold purchases. A secondary bonus to using the dollar cost averaging method is that managing the investment becomes a single item and not a micro management project. Dollar cost average is an investment strategy that allows the smaller investor to build an consistent portfolio. Dollar cost averaging also allows a consistent buying plan to put into practice. The result is that a long-term investment can build and mature on a budget.
Buying Gold Bars – Safety:
Gold has always been a good investment. If you are considering where to buy gold bars, then consider carefully where you will buy the gold. There are many places that sell gold. Gold can be purchased in the online market, from mints, and form private traders. Buying gold online can be risky. It is not a face to face deal and much is left to honesty. If you are buying gold bullion, and having it stored off-site then it is even more important to investigate the company you are doing business with.
Deal only with trading firms that are reputable. It is important to thoroughly research each trading house where you may sell or buy gold. When investigating various gold brokers look for consumer complaints. A good method to use when investigating determining where to buy gold bars is to contact any of the agencies the brokerage claims to be a member of. Most brokerage have a relationship with a mint. A mint is a good place to look for complaints regarding the trading house. A reputable brokerage will have a positive relationship with the mint. The mint itself is a good place to shop for gold. The mint pricing will give you a good estimate on what the current market is for gold. Another good tool is to look at their website. A trading website should be comprehensive and up to date. The information on the site should be presented in a professional manner. The information should be interactive with viable links to tools that a gold investor would use. The website should contain a full contact address someplace as well as a contact phone number and manager.
Research is needed before any purchase takes place. Research should consist of which type of gold bullion bars you are most interested in. Sometimes the mint or country of origin can make a difference to cost and profit. Buying gold online can help open the market to all kinds of options. Remember to compare your options using the spot price and the formula to find the premium price of gold. The process for buying gold is not difficult, but to get the best return on your investment will require that you do your homework.