Financial advisors have long recommended portfolio diversification with hard assets such as precious metals for better portfolio returns over time. As one of the only forms of real, lasting wealth, gold is a classic, time-tested hedge against economic uncertainty, inflation, deflation and geo-political risk. Gold is easy to buy, sell and store, and is recognized and accepted worldwide. Gold, and in particular gold bullion, is the ultimate on-shore asset that remains off the balance sheet.
BUYING PHYSICAL GOLD BULLION BARS
Purchasing gold bullion bars can be an effective method to acquire gold assets at a relatively low cost per troy-ounce of the metal. When purchasing gold bullion bars, it is important to understand that gold bars are available for purchase in many different sizes. Gold bullion bars are available in standard 1-troy ounce, 10-troy ounce and 32.15-troy ounce (or “kilo-bar”) sizes, as well as in larger 100-ounce and 400-ounce bar sizes. Smaller gold bars, weighing less than one-troy ounce, are also available from some dealers. Gold ingots are generally pure gold, with an industry standard minimum fineness of .995 fine, ensuring the highest quality, purity and clarity.
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Gold bullion bar prices generally include a small premium over the spot gold price to cover the manufacturing costs of the bar. As a general rule, the larger the gold bar, the smaller the premium in percentage terms. So to ensure that an investor pays the lowest premium possible, gold bars should be purchased in the largest possible size.
As with any investment, knowing the background and legitimacy of the gold dealer you are investing with is of the utmost importance. Established dealers offer gold bars that are refined and produced by recognized manufacturers and refiners, offering some protection against counterfeiting. Additionally, investors should expect to pay an assay fee when buying or selling gold bullion through a dealer to ensure the purity and authenticity of the asset. These assay checks determine the legitimacy of the metal, assuring the safety of both parties.
When purchasing and selling gold bullion it is important to understand that the transactions are taxable events. You should consult a tax professional to determine how your personal tax liability could be impacted.
ADDITIONAL WAYS TO PURCHASE GOLD
As an alternative to investing in gold through the purchase of gold bullion bars, gold bullion coins offer another way to own pure gold bullion that is easy to buy, hold, divide and trade. Gold bullion coins are issued by government mints and are legal tender in the country in which they are produced, and thus, the coins’ face value, metal purity and metal content associated with your gold coin investment are guaranteed. Most modern gold bullion coin issues contain exactly 1-oz, ½-oz, ¼-oz or 1/10-oz of pure gold in each coin, while older issues contain other fractional amounts of pure gold. As a result, older issue gold bullion coins tend to be more difficult to price.
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