Gold yields no dividend. It doesn’t earn any interest. And if the price drops tomorrow, there is no customer service phone number to call for a refund. So why do investors continue to buy it? Physical gold is different from equities or funds. You own the metal itself. But ownership entails fees, storage and risks no trade chart shows.
The Price of Gold Isn’t What You’ll Pay
You check the price of gold on the internet. The number looks fine. So, can you buy a gold bar at this exact amount? Not quite. When investors decide to buy gold in Canada, they pay a premium over the current price for gold. Dealers add the cost of manufacture, processing and delivery on top.
And that premium is going to vary depending on what you buy. Sometimes one ounce bars are cheaper per gram than a handful of smaller bars. Smaller products give you more flexibility to sell off just part of your holding later. Before placing an order, ask the dealer for the final rate, postage included. But if the difference is gobbled up in extras, then a bargain is no bargain.
Gold Bars vs. Gold Coins? It Depends
Some investors enjoy gold bars. They are plain, available from 1 gram to 1 kilogram, and often very cheap. Others go for coins, especially popular ones like the Canadian Gold Maple Leaf, struck at 99.99 per cent purity. Why? People know it, selling is easy. The dealer knows the specs of a familiar bullion coin better than an unfamiliar product.
Just be aware that bullion coins are not the same as rare collector coins. The amount a collector pays may have little to do with the actual gold content. If you are mainly buying gold as an investment, keep an eye on how much metal you get for your money. Gold at 99.5 per cent purity or better is also exempt from GST and HST in Canada.
Who Are You Buying From, Really?
Having a decent looking website does not mean a dealer is trustworthy. Before you spend thousands of dollars, check the seller’s history, payment terms and buy-back agreements. The Royal Canadian Mint suggests that you look at price, trust and accessibility when choosing a bullion dealer. It also cautions purchasers to beware of inflated claims.
Inflated claims are what you hear when someone says gold is going up. No one can make that promise. Confirm that the dealer is properly registered and has credible means to verify authenticity. And keep the receipts, too – especially if you want to sell your gold a couple of years down the road.
Gold Has to Live Somewhere
Buying a gold bar is pretty easy. Storing it is a different issue. You may have one in your home, but just how safe is your safe? And do you have precious metals coverage on your house insurance policy?
Don’t presume. Another possibility is a professional storage vault. This could provide an extra safeguard, but it entails recurring fees and questions about access. If your gold is held by a third party, ask whether you have allocated bars. If you want it delivered, ask what that involves.
