Over the last few weeks at Strategic Intelligence, Jim Rickards and I have been talking about the benefits of owning physical bullion.
It’s all part of Jim’s thesis. That the big four economies — the Eurozone, US, Japan and China — will devalue their currencies through inflation. At the same time, they’ll manipulate the price of gold.
As I’ve been talking about the reasons why you should own physical gold, many readers have written in asking how to buy the shiny stuff.
So today, I’ll give you a rundown on where to start.
When it comes to buying bullion, the first decision you need to make is where you are going to keep it.
Do you want the bullion dealer to store it for you? Do you want to keep it in a safety deposit box? Or would you like to keep it at home?
Physical gold can’t be insured for private investors — at least in Australia — so I don’t recommend keeping it at home.
As a bullion investor myself, I understand the desire to keep it close.
If you really want to keep that shiny metal at home, I strongly urge you to install a top quality safe, well hidden from anyone.
Let me put this another way. You don’t want just any old safe from Bunnings. YouTube is full of videos on how to crack a safe. Begin your research with these videos and you’ll quickly realise how useless chain store safes are.
I’m speaking from experience. At my old house I had a safe bolted to the floor. After watching one of these videos I tried to hack my own safe. I put a pin in the right spot and with a few whacks, I had the door open in 20 seconds.
I can’t emphasise enough the importance of researching the type of safe, and that it must be hidden. And do not tell anyone that you have physical gold stored at your home. Never, ever.
Arranging storage through your bullion dealer is a popular option. Especially if you are buying large quantities.
Places like the Perth Mint offer both allocated and unallocated storage.
That is, if you don’t take physical delivery of your gold, you can keep it stored with them, either with your name on it or not.
If you have allocated storage, it means the bullion dealer writes down the serial numbers of the bullion bars next to your name. Those bullion bars are now allocated to you only.
Unallocated storage is where the amount of bullion you purchased is stored in a pooled vault. So you don’t have any serial numbers allocated to you, rather just an amount of gold set aside for you.
Finally, you can take physical delivery of the bullion bars, and pay to have them stored in a security deposit box you have access to at your leisure.
Which storage method you choose is up to you. However, there are different fees charged for each method. It’s about choosing the one that makes you feel most comfortable with your investment.
Once you’ve decided how you’ll store your gold, you need a dealer to buy the bullion from.
The companies below are the major bullion dealers in Australia. Please be aware that we are not affiliated with them. This is just a list to get you started:
I have bought some bullion in the past from some of the companies listed above. Again, I’m not recommending any particular one to you.
These dealers are based in different cities across Australia. Generally they will arrange shipping to you. You must be there at the other end to sign for the gold, for obvious reasons!
Before I go any further, remember this. Any reputable dealer will have to identify you if you are buying online. This means your will be required to provide certain identifying documents on who you are. But the process isn’t too difficult.
Now, you can buy gold and silver on eBay.
I don’t recommend being a buyer on eBay, especially if you’re new to bullion. As a general rule, steer clear of eBay, as you can’t guarantee what you’re buying until you have it evaluated.
Whereas when you buy from a dealer the purity of the bullion is already known.
Another question I get regularly: Are any limits on gold that Australians can hold?
To my knowledge, there are no limits on personal gold holdings in Australia.
One of the advantages Australians have is the government doesn’t really consider it anything other than a shiny trinket we can dig up and sell to China. Therefore, we are left alone to buy as much as we want.
And the final question — and the most common one I see — is what type of gold to buy: bullion, coins or ingots?
The answer depends on the amount of gold you’re going to buy, and what you’re going to do with it.
If you want to buy several ounces, then bullion bars are the way to go. Storage is easier and these are the most cost efficient to buy due to the casting process.
As for coins and ingots, there is a case for and against.
Both coins and ingots attract a premium above the gold spot price. This is because they’re a decorative item. Put simply, they cost more to cast. And that cost shows up in the price you pay per gram or ounce.
But they make good gifts. Unlike bullion bars, which only come in sizes of an ounce or higher, coins and ingots are cast as low as one gram.
If you are buying per gram, be aware that you will pay slightly more than the physical spot price of a gold ounce. But it is only marginal.
The Perth Mint does commemorative gold and silver coins each year. And Gold De Royale offer ingots from some of the finest gold refineries around the world.
Hopefully, this information helps you get started when buying and selling gold.
Editor, Strategic Intelligence
Ed Note: This article was originally published in Money Morning.