How to Invest in Gold Bars

Pure gold bars may provide a hedge against inflation.

Pure gold bars may provide a hedge against inflation.

Gold is one of the oldest forms of monetary specie in the world. It has the advantages of being rare, durable and stable. It does not rust or corrode, is easy to carry and is recognized and accepted for trade throughout the world. Some investment advisers recommend gold as a hedge against inflation, while others view it as a speculative investment and recommend that no more than 10 percent of any investor's portfolio be made up of precious metals.

Step 1

Review your current investment portfolio. A common investment strategy, called the investment pyramid, involves dividing your investment money into categories based upon their inherent level of risk. The largest category, located at the base of the pyramid should be conservative, low-risk, low-reward investments such as Treasury bills and bank certificates of deposit. Each level of investment should increase in risk, but involve a smaller percentage of your total investments, ranging from low-risk to moderate-risk to high-risk. The top tier of the pyramid, and the smallest percentage of your portfolio should be speculative investments. Investments in gold bars and other precious metals are considered to be speculative investments and should involve no more than 10 percent of your total portfolio.

Step 2

Determine whether or not you want to take possession of your gold bars. Gold bars can be purchased for delivery, or some dealers and brokerage firms will arrange to have the bars stored in a secure facility for you. This makes it easy to sell the gold if the occasion arises and eliminates the need to find a secure place to store it. The advantage of taking possession of the gold bars is that you have ready access to them, but since gold is not a commonly accepted form of legal tender, you will usually not be able to take it down to the corner market to buy a gallon of milk.

Step 3

Determine the type of firm you wish to do business with. Gold bars are not considered to be a security and as such those who deal in the buying and selling of gold bars are not required to be licensed by or registered with the U.S. Securities and Exchange Commission. Many local coin shops deal in gold bars, but investors can also purchase gold bars through precious metals exchanges or through their investments broker. Whichever route you choose, you should do your homework to make sure you are dealing with a reputable dealer.

Step 4

Determine the size and purity of the gold bars you wish to purchase. The industry standard is a 10-troy ounce bar of .995 purity, but there are many other sizes available from as small as one gram up to the kilobar, which is one kilo, or 32.15 troy ounces, of .999 purity gold. Gold bullion comes in other forms as well, including rounds and coins. Gold coins have all the advantages of gold bars, but may also have the added collectible value depending on their condition.

Step 5

Place your order. Most brokerage firms, precious metals exchanges and dealers require you to open an account to buy or sell gold bars. Local coin shops may not have such requirements. Transactions usually require good funds to be on deposit prior to delivery being made. Most dealers report any gold bar purchase transaction involving more than $10,000.

Warnings

  • Investments in gold bars is considered to be speculative. Gold prices are sensitive to a number of factors including inflation and may involve wide swings.
  • Past performance is never a guarantee of future results. Investors may lose some or all of their investments.

About the Author

After attending Hardin Simmons University, Kay Dean finished her formal education with the Institute of Children's Literature. Since 1995, Dean has written for such publications as "PB&J," Disney’s "Family Fun," "ParentLife," "Living With Teenagers" and Thomas Nelson’s NY Times bestselling "Resolve." An avid gardener for 25 years, her experience includes organic food gardening, ornamental plants, shrubs and trees, with a special love for roses.

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