If you want to buy gold, you don’t have to turn your walk-in closet into a small Fort Knox. In fact, the only storage you need is an investment account.
How to buy physical gold
Gold bars — commonly called bullion — are a popular choice for people who want to buy gold. Bullion is usually sold in grams or ounces, and purity, manufacturer and weight should be stamped on the face of the bar.
Purity is important when buying gold: Investment-quality gold bars must be at least 99.5% pure gold and are considered bullion and exempt from all applicable taxes. However, if they are not, taxes still apply.
In Canada, gold can be purchased directly from any of the big five banks (Scotiabank, RBC, TD, CIBC and BMO) at a branch, online or online banking and through your real bank account. There is a limit to how much gold can be purchased from major Canadian banks in a 24-hour period, which is usually around $ 10,000. If you want to buy more than that, you should do it in person at your local branch with two pieces of ID. Some banks, such as TD, place lower limits on how much gold a non-bank customer can buy in 24 hours. At TD, this limit is $ 2,999.99.
Most major banks in Canada offer a Custodial Account Storage Service at no additional cost to their customers if they do not wish to store your gold at home. However, the gold you extract from the bank is not the same as the gold you deposited because the gold is stored in the bank. To ensure that the gold you extracted from the storage is actually yours, you can choose a form of shared storage, which stores your gold in a separate vault with your name on it. The fee is either a flat annual rate or an annual percentage value of gold.
You can buy gold online or in person through a dealer you trust. Although no taxes apply to pure gold nuggets, you are on the hook for any distribution, transportation or insurance costs.
Gold coins such as the American Gold Eagle or the Canadian Maple Leaf are popular collector items. This collector factor means that you pay a premium for the same amount of gold that you have in the form of a bar, and the applicable taxes. In addition, coins usually have a lower gold content than gold bars. One ounce American Eagle coin, for example, is only 91.67% gold. In fact, the coin weighs 1.1 ounces, about one ounce of which is pure gold; The rest of the weight is silver and copper.
You can buy gold coins through the dealers, pawn shops and personal sellers you trust. You can buy gold coins from the Royal Canadian Mint, Canada Post or Canada’s Big Five. If you are concerned about forgery, you can check the authenticity of gold coins from the Royal Canadian Mint as of 2014 or its Bullion Digital Non-Destructive Activation (DNA) technology is available at Mint or at a registered Bullion DNA dealer. The Bullion DNA device takes a high-resolution photo of your coin and, using special software, digitally checks the coin’s special security marks that are only visible through the Bullion DNA device.
For old coins or coins from the Royal Canadian Mint, their authenticity can be verified through several simple tests.
- Magnet – Gold is not magnetic, so if you can pick up your coin with a magnet, it is not a gold or gold alloy.
- TThey are the “ping” test – When you hit a gold coin, you should hear a high-pitched ringing sound. Non-gold coins sound more dull and the sound doesn’t ring as long.
- Ceramic Testing – If you pull gold on a non-glazed ceramic plate, you should see the gold mark, not the black mark.
- Nitric acid – Pure gold should not oxidize or rust when put in nitric acid. However, doing this is dangerous because it can damage your other metals or any gold items that are less than pure. You can get different capacities of acid to test different carats of gold.
Jewelry, especially antique pieces with a high gold content, may provide another way to buy gold. But keep in mind that, like gold coins, you will pay extra for the amount of gold you actually get. (This can range from 20% to 300% depending on the manufacturer.)
Plus, keep in mind that not everything flashing is gold. Manufacturers use an alloy to combine gold with other metals to make their pieces more durable or to match their color. Here’s how gold quality (measured in carats) correlates with purity.
Like coins, you want to be more careful when buying gold jewelry. Make sure the person you buy your jewelry from is reputable. You can start with a jeweler who is a member of the Canadian Jewelers Association and sign a professional code of conduct that they need to be honest and forthcoming about the nature of their pieces.
Canadian dealers of precious metals and gemstones dealing in $ 90,000 or more must comply with anti-money laundering rules set forth by the Financial Transactions and Reports Analysis Center (FINTRAC) and Criminal Income (Money Laundering). And the Terrorist Finance Act (PCMLTFA). This means dealers must establish a compliance program, keep a record of everything they sell, adhere to government-to-ministry directives, and know the rules of your customers.
You want to make sure you have as many records as possible to be able to confirm your gold quality when you resell.
Factors to consider when buying physical gold
If you decide to buy physical gold, you want to keep a few things in mind:
- Collection: Physical gold requires a secure storage space. While you can certainly keep your gold at home, many investors prefer a parent. Make sure you research the safest options to store your gold before you buy, and keep in mind that safe storage can add to the cost of your gold investment.
- Insurance: If you decide to store your gold at home, you should insure your gold to protect yourself from theft or natural disaster. This can add to the cost of your homeowner’s or renters’ insurance. And even if you do not keep your gold at home, you will want to review your storage provider’s insurance policy to determine how it will protect your investment.
- Manufacturer: Because you are investing, you want to make sure that you are buying from reputable sources that will help your purchase value grow over time. When buying gold, look for reputable manufacturers such as Credit Suisse, Perth Mint and Royal Canadian Mint.
- Purity: The gold component in a coin, bar or jewelry has a huge impact on its value and value as an investment tool. Make sure that any gold you buy as an investment has a level of purity to help you stand the test of time. This means you are probably targeting at least 91% gold items, not 99%.
Other ways to buy gold
If all this sounds too hassle, but you still want a little bling in your investment portfolio, consider investing in gold-related stocks, mutual funds and ETFs.
An inventory of gold mines
Instead of investing in physical gold, you can buy shares in companies that mining and processing gold. Top gold mining companies include Barrick Gold (GOLD) and Newmont Mining Corporation (NMC).
Although their stock prices do not fully match the physical gold price trajectory, they may be correlated. This gives exposure to gold as an investment without the risk or headache of managing physical gold.
Gold Mutual Funds and ETFs
Instead of investing in a single gold-built company, you invest in gold-backed securities through gold mutual funds or ETFs. Gold funds can track gold prices, include stocks of multiple gold mines and refineries, or be exposed to gold futures and options.
Top Gold Mutual Funds and ETFs include:
- iShares S & P / TSX Global Gold Index ETF
- BMO Equivalent Weight Global Gold Index ETF
- CIBC Precious Metals Fund
- TD Precious Metals Fund
- BMO Precious Metals Fund
Royal Canadian Mint Exchange Traded Vouchers (ETR)
Beginning in 2011, the Royal Canadian Mint launched its Canadian Gold Reserves Exchange Traded Receipts (ETR) program. This gives investors the opportunity to own gold stored in Mint’s reserves in the form of securities trading on the Toronto Stock Exchange (TSX). ETR stands for the typical gold ETF because investors own a physical gold bullion, not indirectly through shares in a gold-bearing unit.
You can redeem gold ETRs for 99.99% of pure gold coins or bars or cash on the day you cash out, or the market price of ETR (which is less than both). At the time of purchase you pay a 0.35% fee per year and current share price.
Predictions and options
For investors willing to take more risk, prospects and options may be attractive. (If you don’t already understand both of these terms, you should probably avoid them because these gold investments are highly speculative.)
With gold prospects, you are bound to buy or sell gold at a certain price in the future. Under the gold options agreement, you have a contract with the option to buy or sell gold if it reaches a certain price within a predetermined date.
Successful buying of gold prospects or options requires a brokerage account and an extreme amount of industry knowledge. You will need to closely monitor your account and gold prices to ensure that you do not miss the opportunity to enforce your options. You can increase any loss you may incur in the future and the options usually involve taking possession or using borrowed money to buy securities.
Is gold a good investment?
If you want to hit it rich with a modern-day gold rush, you’re probably in the wrong place. Over the past five years, the price of gold has increased by approximately 36% but over the same period the S&P 500 has increased by 104%. So why all the propaganda?
Because some view gold as a safe haven from inflation and severe market downturns. For example, in the 2007-2008 bear market, the overall stock market fell 33%. Meanwhile, gold fell just 2%.
Gold prices can be very volatile, which means that gold is not completely (or importantly) a safe investment. In fact, you can easily create a diversified investment portfolio without completely gold.
But if you want some gold shine in your investment account, aim to occupy only a small percentage of your investment dollars.