Welcome to my "Are Gold Bars A Good Investment?" article!
Diversifying your investments is the best way to protect yourself during an economic crisis. It is of utmost importance since we cannot fully predict when these crises will occur. You can invest in various ways such as stocks, bonds, real estate and many more. However, one of the best ways is to invest in precious metals, specifically gold.
If it is your first time, there are several forms of gold products, one of them are coins and bars. But in this article, we will be focusing more on gold bars. What are they? Are gold bars a good investment? We shall find out the answers to all of your questions about them!
What are Gold Bars?
Before anything else, let us first get to formally know what gold bars are. Gold bars are distinct due to its rectangular shape.
It is an even block of gold with a fineness of 99.99%. Gold bars are available in various sizes. Among the popular ones are the 1 oz., 10 oz, 400 oz., and 1 kilo, all of which are made of .999 pure gold.
Smaller gold bars can be minted, in which they are shaped by pressing them in with heavy machinery. Whereas large gold bars can be casted with the use of various molders.
For the investment grade gold bars, there are specific factors to look out for such as their weight, purity and their value. Basically, for gold bars to be considered as investment-grade, they must meet certain weights, purities and values.
Additionally, the logo of the mints or refineries which made the gold bars, must be engraved on them. This is to avoid counterfeiting and ensure that the gold bars are real and authentic.
Due to these measures, it is very easy to find out whether the gold bars you have purchased are real or not.
How are Gold Bars Created?
Ever since the discovery of gold, the process involving its refining have evolved too. Currently, gold bars may be minted or casted.
Gold-cast Bars
Casting, also known as molding or pouring, is 6000-year old gold refining method. The process is designed to be straightforward.
Gold will be exposed to high temperature for it to melt to liquid. This will remove all impurities and other substances from the pure gold. Afterwards, the liquid gold will then be poured into a mold.
It must be allowed to cool off and then it will take the shape of the mold. Once it will be released, it will become a cast gold bar and it will be engraved with the manufacturer's details and logo.
Gold-cast bars are usually rough on the edges. Moreover, they have lesser premiums due to how easy the process it undergoes. But, gold-cast bars can still be sold based on its spot price.
Minted Gold Bars
On the other hand, we have minting. It is a more expensive and time-consuming process of making gold bars. Moreover, it requires highly advanced refineries, where they will be individually made, signed, registered and sealed.
Gold bars that go through minting process are shinier and possess a high-quality finish. Gold bars with the same size have similar dimensions too.
Moreover, minted gold bars are securely packaged in which they cannot be touched by bare hands.
Although minted gold bars have a higher premium compared to gold-cast bars, they usually have a better resale value.
The video below shows the manufacturing process of gold bars.
Gold Bar Formats
Like mentioned above, gold bars have various sizes, weights and purities. Their values greatly depend on them. Moreover, their dimensions depend on whether they are minted or casted.
Below are the various sizes of gold bars that are currently available in the market.
1-oz gold bars
1-oz gold bars is the most common and most popular gold bar size today. It precisely weights 1-troy ounce or 31.107 grams. They appear to be thin, with a rectangular shape with tapered edges. Their average sizes is comparable to a credit card.
The size and shape of a 1-oz gold bar vary depending on the mint. However, all of them weight 1-troy ounce have possess a fineness between 99.95% and 99.99%.
10-oz gold bars
This is another popular gold bar format today. 10-troy ounce or 311.07 grams gold bars have a purity of 99.99% or 24 carats.
Moreover, their dimensions are approximately 60mm by 35 mm and 8mm deep.
1-kg gold bars
1-kg gold bars or 32.1507ounces have a purity of 99.99%. Moreover, these gold bars have a dimension of 80mm X 40mm X 18mm, which is similar to an iPhone.
Lately, 1-kg gold bars are increasing in popularity among investors.
400-oz gold bars
400-oz gold bars are also known as London Good Delivery Bars. Large investors and banks also go for these gold bars. They weigh between 350 and 430 ounces so that they can save on costs of producing them.
Moreover, their minimum purity is 99.95% and they are about the same size as a brick.
400-oz gold bars are usually created by casting. Furthermore, due to their size, they ensure that they get lower premiums compared to the other gold formats.
Smaller gold bars
Other than the gold bar formats we discussed above, there are also smaller gold bars such as the 1-gram and 5-gram gold bars. These are mostly popular in China, Middle East and India.
Just a reminder, the smaller the gold bar is, the higher the premium it has. This is because the costs of minting and casting each bar are the same.
With that, the machining cost per unit of each small bar as a percentage of their worth are way higher compared to larger gold bars.
How Are Gold Bars Priced?
The prices of gold bars depend on their size, weight and purity. Moreover, the current spot price of gold is also a factor in determining the prices of gold bars.
Gold Bars vs. Gold Ingots
You may have heard the term ingots and confused with the gold bars.
An ingot is an Eastern and European term to describe metals, non-metals and precious metals that have been casted into specific shapes.
Moreover, ingots are usually not the final products. They are just shaped in a way that it makes them suitable to be processed and be made into jewelry or other products.
Gold Ingots typically do not have any stamps on them which certify their purity. They simply have the name of their manufacturer engraved, same as their weight.
With this, gold ingots are not considered investment-grade gold bars.
Gold Bars vs. Gold Coins
Gold coins are made by sovereign mints, whereas gold bars are minted by both private mins and sovereign mints. Choosing between them for your investments is entirely up to you and your investment profile.
However, let us compare both of them to learn more about investing in gold products.
GOLD COINS | GOLD BARS | |
|---|---|---|
Size | They vary in size. Smaller coins are good for discreet investment. | Available in various sizes ranging from 1 gram to 1 kilogram. |
Storage | They can be easily stored such as gift boxes and presentation boxes. | Gold bars can be used in storage large amounts of wealth in a small space. 1kg of gold bar can store £40,000 worth of wealth. |
Investment reliability | All gold is a reliable investment. But it can be challenging to find out the value of gold coins since their collector's value is less measured by their live spot price. | Gold bars are reliable investments. Moreover, their value is easily calculated based on the live spot price. |
Cost | Gold coins have a higher premium than gold bars since they cost way more in minting, as well as their commemorative value in nature. | Gold bars are priced very closely to the live spot price. Moreover, they only get a small margin from, their merchant and mint. |
Historic and Traditional Value | Gold coins hold a very high traditional value. | Gold bars have little traditional and historical value. They are only purchased due to their gold content. |
Tax Advantages | Gold coins are VAT free as long as they are considered investment-grade under the HRMC regulations. | Gold bars are VAT free as long as they are considered investment-grade under the HRMC regulations. |
Gold Bars vs. Gold Stocks
When you buy gold bars, you are owning a physical product of gold. Gold stocks on the other hand is a bit different. Buying gold stocks basically mean you are investing in gold mining companies.
In simpler terms, you are kind of betting that these companies will have high yield profits. If they don't, then you will lose investments.
This is just basically the same as the other stocks that are available in the market. If we compare gold stocks to gold bars, the latter offer more stability in the long term.
Gold Bars vs. Gold ETFs
Similar to gold stocks, buying gold ETFs (Exchange Trade Funds) does not grant you physical gold. The actual gold that you will be investing in through ETFs is held by the organization, SPDR Gold Trust.
It is one of the world's largest holders of gold with an approximate 24 million of ounces of gold stored in its vaults.
When you buy gold ETFs, you are investing in the performance of gold. You will not be able to own any physical gold. Instead, you will only receive cash which is based on the gold's performance.
Pros of Buying Gold Bars
Hedge Against Inflation
When a large portion of your investments lie on your cash and other assets, they will be heavily affected during times of inflation and economic crisis.
Over time, they will lose their value. However, gold bars and other gold products are proven to be effective protection against inflation.
Global Commodity
Ever since its discovery and throughout history, gold has always retained its value and is considered as a global currency.
In fact, the U.S. government has backed up their currency using gold, which is known as the Gold Standard.
Currently, there are more currencies around the world that are not tied to gold. Moreover, these currencies are very vulnerable to economic crises, subjecting their values to a massive decline.
Gold on the other hand, offers stability and is a physical asset.
Offers Long-Term Stability
Gold bars are very stable due to its low long-term volatility. That is why it is used as a hedge fund against economic crises since it has lower chances of declining its value during these times.
Unlike the current investments such as stocks and cryptocurrencies in which they can experience massive losses and very high profits, gold bars are safer and more stable.
Good for any Investor
Investing in gold bars is for anyone at any income level. Whether you are starting out or already a big time investor, gold bars offers you a lot of options to choose from depending on your budget.
Straightforward and Intangible
Investing in precious metals is straightforward. There are no complex processes and strategies you need to learn. You simply buy gold bars and then you own them. Moreover, they are tangible assets. So whatever happens, they are still yours.
You simply hold onto your gold bars and wait for their value to rise. When you need to sell, the process of liquidating your gold bars is also straightforward.
Diversifies your Investments
Of course, if you did not know this, it has always been a wise idea to always diversify your investments. Do not just stay on one investment because if things go wrong, then you will lose everything.
Investing in gold bars is a great way to diversify your investments, while you invest in stocks and bonds. So that whenever the other investments suffer from a fall, you are still safe because gold bars are stable.
Cons of Buying Gold Bars
Storage is Challenging
Owning gold bars requires you to store them for security and safety. Whether you own storage at your house, or pay a third-party to store your gold bars for you, it will still cost you.
Furthermore, the more you buy gold bars, the more you have to spend on storage. Additionally, transporting them will also cost you a fortune.
Does Not Offer Rarity or Collection Value
Like we discussed earlier, gold bars does not hold any collector's value, historical or traditional value. They are simply made and only has a stamp of their manufacturer and weight.
So basically, gold bars' value only depend on the amount of pure gold they have.
Has Confiscation Risks
There was once a time wherein the federal government in the U.S. confiscated gold bar bullion from its citizens. This is due to the Emergency Banking Act of 1933, which ordered Americans to surrender their gold bars in exchange for some cash.
The reason for this was to recover the government's declining gold supply.
Risks of Fake Gold Bars
Although there are a lot of factors that will indicate the authenticity of your gold bars, there are still other counterfeit gold bars out there that closely resemble the authentic ones.
That is why you should always be careful and be meticulous when buying gold bars. Always check whether they are authentic or not. Moreover, you need to make sure that you buy your gold bars from reliable and trustworthy dealers.
Are Gold Bars a Good Investments?
Now, let us answer the question you have been asking, "Are gold bars a good investment?".
Well, we have already discussed the various pros and cons, as well as the benefits of owning gold bars above. To summarize it up, yes, gold bars are a good investment.
They offer a long-term stability and helps in diversifying your investment portfolio, since it is an effective protection against inflation and other economic crises.
Moreover, if you wish to liquidate your gold bars and get cash, the process is very straightforward. There are a lot of buyers out there, which are reliable and will give you the best services.
How To Buy Gold Bars?
Now that we have established that gold bars are a good investment, let us talk about how you can buy gold bars.
Gold-Buying Process
Buying gold bars is just very straightforward. You can opt for licensed retailers online. There are several good websites out there such as Goldco, JM Bullion and Augusta Precious Metals where you can choose your gold bars.
You can choose which bar based on their weight, size and price. Once you receive them, you can either store them at your house, or pay a third-party depository to store them for you.
Buying Online or In-person?
Some buyers prefer to buy gold bars in-person so that they can immediately check out the products physically and pay in cash. But the concern is that local dealers tend to have higher prices than online retailers. They also have a smaller selection of products.
Online gold stores on the other hand offer lower prices because of higher volumes. However, chances of being scammed is high. That is why you need to make a thorough research on which dealers are legit.
Moreover, online gold sellers may also offer discounts and you can pay in other mode of payments such as credit cards, checks and wire transfers.
Factors to Consider When Buying Gold Bars
Storage
When you buy gold bars, you need to consider the storage. You can either store them at your house or pay a third-party depository to store them for you.
Usually, investors opt for the depositories since they have state-of-the-art facilities to ensure the safety of your gold products. However, this will be additional costs for you.
Storage fees scale up based on your gold bars. The more gold bars you have, the higher the fees you have to pay.
Size
The size of the gold bars is also a factor that you need to consider, especially if you are selling them. The difficulty of liquidating them lies on the size of your gold bars.
For example, if gold is priced at $1500 per ounce, and an investor has $15,000 to use for buying gold, the seller will have an easier time to sell 10 bars with a weight of 1 ounce than selling 10-oz bars.
Basically, they can easily find buyers and sell 1-oz. bars one by one. While, if they sell 10-oz. bars, it will be challenging to find buyers who will buy this bar, since it can be expensive.
Purity
Keep in mind that investment-grade gold bars should contain at least 99.5% pure gold. The remaining percentage is alloy, usually copper or silver.
Moreover, when you buy gold bars, always check if they have stamped the name of their manufacturer, weight and purity.
Insurance
When you choose to own gold bars, it is wise that you consider getting an insurance policy.
So that when a bad thing happens, such as theft or loss of your gold bars, you will be compensated.
Comparing sellers
If you are buying gold bars online, you will have various sellers to choose from. When you do that, always be updated with the live spot price of gold products. You can use this as a basis for comparing sellers.
Online retailers tend to add a profit margin for their products, as well as other costs which cover shipping, handling, authentication certificates and payment processing costs.
So it is important to compare the prices of the various fees that sellers have.
How to Choose a Seller
One of the best ways to check whether a seller is legit or not is to read reviews about them. There are a lot of website where you can find them.
I personally, review a lot of them and you can check them out in my website. Moreover, there are several review websites that you can trust such as the Better Business Bureau, Ripoff Report, Business Consumer Alliance and Trustpilot.
Here, you can see a seller's ratings and reviews. Moreover, you can read what past customers can say about them. In that way, you can gather an idea of what kind of services a seller provide.
Conclusion
To conclude my article, "Are Gold Bars A Good Investment?", yes they are. Gold bars are excellent hedge funds against inflation. They are very easy to liquidate and it offers a lot of options that yo can choose from.
Moreover, they are straightforward to purchase and are tangible assets, which can offer diversification for your investment profile.
Just always keep in mind that you need to be careful when purchasing them. Nowadays, there are several scam sellers, especially online, who will provide you with fake or counterfeit products.
If you wish to research about these sellers, be sure to check out my reviews on them.
And if you want to know my top-recommended precious metals firm, click the orange button below!
Thank you so much for reading my "Are Gold Bars A Good Investment?" article! If you have any comments or questions, feel free to leave them in the comments section below.
