Posted on March 09, 2022
Investing in gold bullion can be an exciting journey and one that brings together a lot of moving parts. For newer investors or anyone interested in learning more about buying gold bullion, it can be helpful to have a resource available to support you as you learn more about gold bullion and its many nuances.
To help you make an informed decision about your purchase, we’ve assembled the top questions we hear about buying gold bullion.
Gold bullion is physical gold – such as bars and coins – refined and produced with a standardized weight and purity of gold. Gold bullion is distinguished from other forms of gold (jewelry, collectible coins) in that its value is primarily derived from its intrinsic value – in other words, its gold content. Gold bullion is generally treated as fungible, like other commodities.
Gold bullion is a physical precious metal. Since there are different ways to invest in gold, it’s important to distinguish between buying gold bullion and other avenues for investing in gold’s price, (gold exchange-traded funds (ETFs), gold mining stocks, futures contacts, and other “paper gold” investments).
There are many ways to buy gold, and even within the subset of gold bullion, you have several options to choose from. The simplest and most popular form of gold bullion is gold bars.
Bullion rounds, which look like coins but are essentially just round bars, are another choice.
Finally, you have gold coins, for example, the gold American eagle and gold maple leaf coins. These coins are not only pieces of gold bullion, they also possess a face value as legal government currency.
Choosing which gold bullion to buy depends on your personal investment goals. Maybe you’re a collector interested in unique coins and their significance, or you just want your gold bullion to be beautiful as well as valuable.
If getting the best possible deal on gold bullion is important to you, your best choice will likely be gold bars or rounds.
Finally, you might want to diversify your portfolio and buy a little of everything. Ultimately, the choice is entirely up to you.
Buying gold bullion has become easy thanks to the advent of the internet. You can buy physical gold online at precious metals dealers like BullionMax, or from other individuals on sites like eBay (which have risks). For those who value a face-to-face experience and prefer buying gold in person, there are still bullion dealers and coin shops with brick-and-mortar storefronts, as well as pawnshops and coin shows.
Check out our guide on where to buy gold bullion for more details.
The price of gold bullion depends on two factors: the current spot price of gold, and the specific product in question.
The spot price of gold represents the current market price for an ounce of pure gold and is constantly changing based on worldwide supply and demand. The spot price moves every hour of every day because gold is traded around the world.
Gold bullion products can vary significantly in price based on supply, demand, and the production costs associated with the specific bullion item. One thing you can count on when it comes to the cost of bullion is that the lowest prices will still be a bit higher than the spot price. This is because refining, packaging, storing, and shipping gold costs money.
You’ll also find that gold coins are usually more expensive than rounds or bars. Coins are always in demand and minting a beautiful coin is a complex task.
In general, you will also find that the larger the volume of bullion, the lower the premium over spot. This is simply economies of scale at work.
Refiners have certain minimum expenses associated with producing a gold bar, whether 1g or 1 oz. Hence, the markup on smaller bullion pieces increases the price per unit of gold.
Gold bullion is packaged in plastic sleeves or tubes before it’s shipped, which helps protect it from damage and prevents it from moving around excessively. Purchases of gold bullion in larger volumes can include monster boxes, which are unique boxes specifically designed for bullion transport and storage.
Monster boxes house up to 500 coins and, when new, come with a special security seal. Most gold bullion is shipped with USPS registered mail and is insured when it’s in transit. Some bullion dealers like BullionMax offer free shipping on orders over $199.
The costs associated with gold bullion don’t end after your initial purchase. Ongoing gold bullion costs include storage and insurance, both of which you should consider before your gold arrives.
Some people like the idea of keeping their gold bullion at home or close by in a safe deposit box. If you keep your bullion at home, you’ll want to get a good home safe to house and protect your investment. Alternatively, you may want to opt for storing your gold at a precious metals depository. (If you intend on investing in a gold IRA, for example, you’ll legally have to find an approved depository or custodian, per IRS regulations.)
Purchasing some type of insurance coverage for your gold bullion is imperative since, without it, you could be exposed to the threat of a complete loss if your gold is destroyed, lost, or stolen. If you have a small amount of gold that you keep at home, you may have the option of purchasing additional coverage through your homeowner’s insurance policy. Alternatively, you can look for an insurer that offers a bullion-specific policy to cover your gold.
For investors who have – or are planning on buying – more substantial quantities of gold bullion, your best option will likely be a precious metals depository, which offers state-of-the-art security and includes insurance coverage against losses.
The best way to protect yourself from falling victim to fraud or counterfeit bullion is to buy only from trusted, reputable sellers. If a deal seems too good to be true, it probably is. Thanks to the internet, you have access to thousands of reviews and consumer ratings, which can help you ascertain whether or not a bullion dealer is legitimate.
Gold bullion taxes vary based on a few different factors. Most (though not all) states will charge some sales tax when purchasing gold bullion. Since every state has its own taxation laws, be sure to read up on the tax rates of the specific state before buying. When it comes time to sell your gold bullion, be prepared to pay short or long-term capital gains tax. If you hold bullion for less than a year before selling, your profits will be taxed as ordinary income. Suppose you sell gold bullion after holding it for more than one year. In that case, the bullion will be taxed as collectibles, and you’ll be responsible for paying the appropriate long-term capital gains rate, which is currently capped at 28%.
When buying gold bullion products, the sheer extent of the different bullion options can make the decision a difficult one. Add to that the challenge of figuring out whether you’re getting a good deal and ensuring you’re buying from a reputable seller, and the choice can become nearly impossible. BullionMax can help you avoid the headache of trying to get it just right, giving you the comfort of a safe, simple experience.