Should You Buy Gold in 2020?

Buying physical gold has always been the most reliable way to invest in the precious metal. There is something about having physical possession of the asset that makes all the world of difference in gold. While there are plenty of modern computer investing systems available today, easily reachable with the Internet, their investment options on computers and paper don’t beat the true value of gold in hand. If the world were to end tomorrow and humanity had to start all over, gold would still likely be treated as a universal valuable commodity and the basis for a new exchange currency all over again. Thankfully, such apocalyptic possibilities are more the fare of Hollywood and Hobbit moviemakers than reality, but there is a truth in that assumption. Below we go into some of the details why.

Today’s channels for buying gold can be counted on one hand. One can buy gold in raw form, but this isn’t very useful as a commodity as it needs to be melted and refined to be worth anything. The second option is to buy gold from a private dealer who smelts the gold in bulk bars with a measured quantity identified. This method is far more practical and useful as these bars can be resold. Or the third option, which is bar far the most conservative and safe, buy bullion from a stable government in the form of coins or bars. This final method is backed both by the authority of the given government as well as the quantity and quality of the gold being stamped on the coin or bar. It’s about as certain as one can be about the value of a gold holding without testing it.

For hobbyist investors, coins make a more sense. They are smaller and easier to handle, store, and appreciate. They are also far easier to sell faster. Bars, on the other hand, work better for someone who wants to invest in a higher quantity of gold but doesn’t want it jingling around in multiple pieces that are easy to lose. Depending on the weight, one bar can easily be the equivalent of 16 troy ounce coins.

Gold as Portfolio Hedge

A Bit of Background on Gold Bars

Most gold bars are issued by private smelters/dealers. Government mints do have a few of them but they are not common as government-issued bullion. In most cases, the bars that are available to the public will be in really tiny values of 1/10 oz to as much as 1 kg, with a range of choices in between. A common bulk purchase can be had with 500 oz bars. That said, bars are heavy. The bigger the bar, the more concentrated weight involved, which one has to consider. There’s a practical side to investing in bullion that catches up with a person when one gets over 100 oz.

Within the bar market, there are two types of bars one can invest in: cast or minted. Minted bars are a far more professional approach, often finished well and provided with a professional stamping. They almost always the choice provided by a government mint. Cast bars are produced from melted gold, often scrap gold product that dealers have bought in bulk. The gold is melted down and then poured into a bar mould. The casts produced can look a bit rougher but they are market tradeable and ready. However, not every cast is accepted on sight, and cast bars often times get tested more than minted bars.

Background on Gold Bullion Coins

Gold coins are the most popular form of bullion and have been so for centuries. New Zealand is no exception in this regard, and the country produces its own coins as well as most other established governments. That said, some of the most popular bullion coins are recognizable, including the South African Krugerrands, British Sovereigns, the Canadian Maple Leafs, the U.S. Eagles and now Buffalo coins, and both Australian and Chinese bullion coins as well. The beauty of the coins is that they are far easier to handle, secure, purchase and sell, often being the same size as regular currency coins. Their range is measured and obvious weight signs from 1/10 oz to 1 oz choices. All tend to be 24 karat gold, but there are some choice items that have more purity than others. Bullion coins are great for establishing new accounts because they are far smaller in cost than bars.

1oz Perth Mint Gold Cast Bar

Where and How to Buy Bullion

There are really two ways to buy gold bullion NZ assets: either buy it in person from another party, either private or a dealer, or buy online. Much of this choice, however, tends to be dictated by location. If one is in a city, there are lots of locations where to purchase physical bullion, especially coins. However, if one is fairly outside of an urban area, online buying and shipping might seem more attractive, especially for smaller gold sizes like coins versus larger bars.

Physical gold sellers, as mentioned earlier, are present either as businesses or private sellers. Businesses are licensed and generally include specialized gold bullion dealers, jewelry dealers, general sellers, and pawn shops. Private are essentially anyone with gold bullion form to sell, ranging from professional collectors and buyers to the average person with no background in precious metals at all. Obviously, the level of safety in a purchase ranges from very safe with specialized dealers to complete high risk with an unknown private party.

Online gold sellers also fall into all the same categories as physical sellers, but the risk of loss, fraud and crime seems to skyrocket with online selling. Much of that has to do with the fact that being online seems to create a perception of anonymity in some people, which makes them willing to do more shady behavior than would occur in person. That said, there are plenty of safe channels to buy gold online as well. If one sticks with known and established gold bullion dealers who proactively use secure courier services, the risk of loss or problems is minimal to almost none.

A key factor in buying bars or coins from reputable dealers is the fact that all transactions are fully documented on provision, sourcing, and licensing. This is important. If you are going to engage in regular bullion buying and selling, you will also be involved in an income-generating activity. And that means taxes on your gains when selling. To pass a tax audit safely, having your paperwork in order helps tremendously. The same can’t be said with purchases from private buyers or second-hand sellers. One is lucky if a receipt is even provided in some cases.

Whether online or in-person, every gold bullion sale is going to have two additional costs over the market price of the gold involved, a premium markup and a commission. Many times the two are combined as just a general markup. Both are additional means of how the dealer makes a profit as a business in addition to any market gain on the value of the gold involved. It’s also an offset if the gold market falls and the dealer is taking a loss on the value.

Buying in New Zealand can take some conversion work as well. Many gold prices are quoted in U.S. dollars, especially online. However, what that means in NZ dollars can be misleading until fully converted. So be handy with a calculator online or next to you on a desk as well as knowing the current currency exchange rate.

Finally, don’t forget there is still a cost for shipping delivery. If online, you can expect to pay the full cost of shipping on top of the price paid for the bullion bought. More secure services cost more in courier costs. You may be given options, but you can pretty much assume that lower-cost services also mean less secure transport. Higher-cost travel typically includes insurance, which is a key protection for you if something does go wrong.

Saving and Investing through Gold Buying

Gold Bullion Storage

With your gold bullion purchases starting to add up, at some point you’re going to need something better than a bank deposit box to store your gold. There are a couple of choices ranging from whatever you might develop for your own security to very secure institutional safety. But the biggest factor a serious bullion buyer needs to be concerned with after planning security to buy bullion NZ gold is sufficient storage space. Many regular buyers work with multiple forms of storage, ranging from a home security box to a bank deposit box to a bullion dealer for secured holdings. Home storage and bank deposit boxes are good for small holdings, but once a buyer gets into a serious collection of bullion rented secure storage a dealer’s holding is probably a better idea. The differences vary but all are very safe with the exception of personal home storage, which is only as strong as one’s own home security.

Final Things to Consider

There is no question that gold is a great alternative for investment and value protection. But, like any valuable asset, it has risks associated with gold as well. By understanding what you are pursuing, what costs are involved, how it will work for your personal portfolio interests as well as what you need to have in place to make things work, you will be far more successful upfront and over time. One of the best protections you can have with gold or any other investment is making informed decisions versus rash, emotional jumps. Gold can be a great way to protect value as well as to grow it, but it doesn’t come automatically. MyGold can help you get started with your first gold bullion purchases, education, and even storage options. With a long-standing reputation and business practice, MyGold is one of the best places to buy bullion NZ gold with your first investment.