Tyler Robinson - February 6th, 2023
Gold Kit: Full overview of Gold Investing
Gold is a chemical element that is naturally found in metal form. Its atomic number is 79 and has the chemical symbol of Au. Gold is the oldest medium of exchange in recorded human history and serves in a more diverse capacity now than ever before. Prior to our time, gold was cherished as money, used by the wealthy in decorative inlays, jewelry, and statues. Today, gold is traded globally and has a market cap of 12.2 trillion dollars. In comparison, the largest market cap of any publicly traded company is below 3 trillion.
Gold, beyond its use as an investment, is more sought after in the modern day due to its unique chemical properties making it ideal for use in an array of industrial application. As a small example, approximately .03 grams of gold is used as a non-corrosive coating in the circuitry of your smart phone. While the weight in a single phone seems insignificant, well over 1 billion smartphones are manufactured each year. This use is considerably small when you consider its other uses in the aerospace, automotive, medical and jewelry industries.
This guide is a comprehensive overview of the various ways to purchase and invest in this asset.
Table of Contents
- Physical Bullion
- Gold Manufacturers
- Gold Market Prices
- Buying Physical Gold
- Non-physical Gold Investing
- Strategies for Gold Investing
Obverse (heads) side of a 1 oz South African Krugerrand gold coin listed on our Fire Sale page.
Physical gold bullion is defined as either gold coins, bars or rounds owned and physically stored by or on behalf of the investor. Bullion comes in many different weights, so gold ownership is accessible to virtually any budget. Gold is measured most commonly in grams, troy ounces (which equals 31.10 grams) and kilograms. Any time the acronym ‘oz’ is used, it is referring to a troy ounce which is different than a standard ounce. Investment gold bullion is usually refined to a purity level of .999+ pure though some modern and most vintage coins come in at .900+ pure. Less than pure coins are made from an alloy to provide a more durable coin for circulatory longevity due to pure gold being susceptible to damage due to its malleability. This is rare but one of the most popular bullion coins in the world, the Gold Krugerrand comes in at 91.6% pure and the rest of the metal content being copper.
Gold is made by various government owned, bank owned and private mints and refineries and comes in many shapes defined below.
Coins are monetarily backed with a national currency depending on origin and minted by or on behalf of an official sovereign government. For example, the United States Mint produces gold coins that are available in 1/10th oz, 1/4th oz, ½ oz and 1 troy oz sizes. A good example of this is the 1 oz American Gold Buffalo that is produced every year on behalf of our country, the United States.
Various 1 oz Gold Coins from around the world.
Bars are loaf or ingot shaped bullion that are either minted, hand poured or vacuum casted. Bars come in the largest variety of weights ranging from 1 gram all the way to 400 troy ounces. Usually, gold in bar form has an overall lower premium, the two primary reasons for this is that the process to manufacture a bullion bar is easier and less expensive for the manufacturer and they are generally moving more product by weight in a single transaction which allows for a better deal for the buyer.
Various 10 gram Gold Bars from around the world.
Rounds are circular gold pieces made by private non-governmental mints, refiners and recyclers or banks. Rounds, in most cases, borrow designs from real coins of the past such as incuse Indian coins or most popularly the famous Buffalo Nickel. While these are replicas of the real thing, they are still made from .999+ gold and they too come with a much lower premium than real vintage gold coins. Rounds can also be found in plenty of different weights (most commonly fractional and troy ounce sizes) and showcase brands such as Asahi branded rounds, Sunshine Mint branded rounds and Scotiabank branded rounds.
Coin (left) Vs. Round (right) each come in a variety of sizes but rounds do not come from Government Mints.
Other bullion items
In recent times and due to golds low melting point, backyard outfits and private citizens have taken up the hobby of smelting and pouring their own gold products. These take unique shapes such as crosses, stars, and other cool designs. While the process is long and mark ups are usually much larger than high output manufacturers, they are fun for gifts or a novelty piece to own, admire and pass on to your kin.
Note the "Hammered" custom gold round from Scottsdale Mint.
Vintage Gold Coins and Old Gold
As mentioned in the beginning of this article, gold has been revered as the one true form of wealth for all of human history. With that, many companies and even governments have come and gone, with some of their gold products still surviving in original (or altered) form to this day. In almost all cases, these pieces are extremely expensive compared to current market spot price and are traded mostly as collectible investments rather than precious metal investments. Things like recovered shipwreck gold, war gold, ancient gold and ancient decorations made of gold.
1853-1870 Napoleon III Gold Coin.
Numismatic Gold Coins
Numismatists are collectors, scholars or specialty dealers who buy and deal in numismatics, which are rare, certified and graded gold currency or bullion. Authorities such as PGCS and NGC have professional teams and historians that grade and permanently seal certain coins from modern to ancient times. While Investor Crate does not deal in a great number of these products there are huge markets for these items and are invested in for their rarity over their metal content. A single coin can sell for millions over spot value and is more closely related to investing in something like art or old cars rather than precious metals.
Gold not considered investments
While gold is gold, no matter how you swing it, some forms of gold are not largely considered investments. These include, raw ore or gold nuggets, pure gold casting grain and shot and many forms of jewelry. Raw ore is not considered an investment because it is not refined, and the true weight once purified is unknown. Gold casting grain is the final product of refined ore and is not yet considered an investment until it is made into bullion and properly assayed. Jewelry, with a gold content, is not considered a bullion investment because it is often sold well over its melt value.
Bullion manufacturers are broad in definition because some mints are government owned, privately owned but authorized by a government entity or completely private and free from government oversight. In some cases, governments contract mints to produce all or a portion of the manufacturing process. In addition to these mints, there are also refiners who refine raw ore into its pure form or recycling companies who extract PGM’s (platinum group metals), gold and silver from electronics and automotive parts.
Government Mints such as the Royal Canadian Mint or Royal Mint (UK) are wholly owned subsidiaries of their respective sovereign nations. They are responsible for production of both circulatory coins and paper currency as well as bullion products such as coins, proof sets and bars in gold, silver, platinum and in some cases palladium.
Royal Canadian Mint flag.
Private Mints such as the Golden State Mint, Highland Mint and the Germania Mint are privately owned businesses that produce massive amounts of bullion in the form of bars and rounds that trade globally. In addition to the various products they manufacture, some of these private mints have special contracts with sovereign nations around the world to produce their monetarily backed bullion coins. A few impressive examples of this; the Silvertowne Mint based out of Indiana, US has been contracted to create face value bullion coins for the sovereign island nation of Niue. The Sunshine Mint, another private mint based out of Idaho, US produces all of the blank planchet coins for the United States Mint. The list of mints and manufacturers of precious metal products is vast.
Refiners and Recyclers
A refiner or the process of refining is when raw ore taken from the ground is melted down and the extraction of impurities is conducted. In some cases, the metal is then extruded, and blanks are stamped from the pure samples. These are then sold to mints that then create the final product. This is where much of the “premium” or mark up over the market price occurs as the process of refinement is extremely expensive and difficult to achieve. Some mints have the facility and large refining machines to do this process in house which sometimes equates to a lower premium on the final product. Recyclers extract precious metals and other industrial metals from discarded electronics and automotive parts and in some cases mint their final, pure, and recycled precious metals into bullion.
Gold Market Price
A short explanation of precious metal market prices and the various costs associated with each way to invest respectively. Remember, the market spot price of gold is something you always want to aim for, but with physical, will hardly ever see. This is due to the manufacturing and refining process and costs. The follow explanation for market price is used for large quantity purchases, future contracts and raw ore purchases.
The ruling authority on the current market price for precious metals is the London Bullion Metals Association (LBMA for short) which derives the market price thousands of times a day by carefully analyzing both supply and demand for the commodities. While this is a highly complicated process, this review encompasses things such as theoretical and provisional mining contracts (supply), buy and sell orders (demand), global monetary and fiscal policies (politics) and the amount of gold in the central bank reserve (banking). This price is set and used on all major bullion markets such as the NYMEX, COMEX, JPX, SGE and others.
- Spot Price: Current price for large quantity bars or raw gold ore within a market place for immediate delivery, usually for use by central banks or by mints for use in manufacturing their bullion products.
- Bid Price: The bid price, which is almost always lower than spot or ask, is the lowest price in which a buyer is willing to pay for a specified amount of gold.
- Ask Price: The ask price, which is almost always higher than spot or bid, is the lowest price in which a seller is willing to sell for a specified amount of gold.
Buying Physical Gold
There are many ways to buy physical gold bullion, though some ways have more risks than other. It is imperative that you do your research and seek professional advice from a certified financial adviser to ensure you do not get scammed or receive counterfeit items.
Buying Gold online
Buying gold online is the most popular way to buy physical gold in the modern day. While we do not give advice on this matter, there are certain websites you should stay away from. Personal listing websites and auction websites might not be completely safe but that is for you to vet and use at your own risk. There are several well-known and well-established online bullion retailers that we have used with a great deal of success in the past.
While we are, ourselves and online bullion retailer (and the best of course 😉), our goal is to provide concise information in this regard, so you do not get scammed and so counterfeit bullion does not make its way onto the secondary market.
The veteran-owned and operated precious metals subscription company!
Buying Gold in person
There are two popular ways to buy gold bullion in person in the U.S., one is a Local Coin Shop (referred to as a LCS) and the other is a pawn shop. While there are very reputable LCS’s and pawn shops all around the United States, this is another scenario that would require you to vet and ensure these companies are legitimate. These outlets usually have a larger premium to cover costs associated with a storefront such as employees and leases, so make sure you are getting a fair deal as well. Keep in mind that purity tests are inexpensive so investing in one to ensure the product you are buying is in fact real, might be a good idea.
Buying Gold from banks
While not available in the U.S., there are gold and silver exchange programs available all around the world at various financial institutions. Even U.S. owned banks overseas offer these programs, so checking with your local bank to see if this program is offered might offer you with the best method for purchasing bullion.
Buying Gold directly from the Mints
Many government and private mints and refiners have online stores, however, in some cases this is not recommended unless you are buying novelty numismatic sets and proofs. Bullion retailers like ourselves buy huge volume from these various enterprises meaning we get a large discount on a per item basis. With extreme frequency, you will find that retailers list the very same products from the mint websites at a much lower cost and this is true on some of the proofs and proof sets that are offered. While precious metals have a very small mark up compared to other industries, volume is the name of the game when dealing in commodities.
Non-physical Gold Investments
Otherwise known as "paper gold" these investments are good for large portfolio accounts that do not have the means to properly store it and need to move it around or liquidate it at a moments notice. There are tons of paper gold options as well from ETF's, IRA's, ETR's, Mining stock and futures and derivatives.
Commodity funds or exchange-traded funds are essentially stock in gold-related assets. While you do not physically own gold inside of a Gold ETF, you do own and can trade the asset like a stock. This allows you to invest in gold backed asset and shares can be extremely low cost, however, can have significant tax implications for long term investors as well as management fees.
Like a traditional IRA or Roth IRA, but instead of paper assets, physical gold or other approved precious metals are held at a depository by a custodian within an IRA account for the benefit of the account holder. While there are many fees, buy sell spreads and storage fees, this is a popular way to hold gold without having to physically store the bullion on your own accord.
Gold Futures and Derivatives
Advanced investors have the option to trade gold futures and derivatives which facilitates an agreement between two parties for a potential quantity of gold at a certain future price point. The contract lists two prices, a preset price and a strike price and the contact has an expiration date. If the price rises to the strike price on or prior to the date of expiration, the contract is fulfilled.
ETR – Gold Receipts
Exchange-traded Receipts are essentially based on pre-1933 U.S. dollars which were basically receipts for actual gold. While a relatively new way to invest in gold, ETR gold receipts are being offered with low ‘service fees’ making this a viable option for both retail investors and large portfolio investors. These receipts are backed by physical gold bullion that is held at various banks and mints on behalf of the investor. While the physical gold itself cannot be redeemed, it can be instantly sold on the various exchanges these ETR’s are offered on.
Gold Mining Companies and Stocks
While losses and gains are reliant on many more factors than just the price of gold, many companies that mine gold or deal in gold are traded publicly on the NYSE and other stock exchanges around the world. This is a great way to take advantage of supply and demand without the other factors that move the price of gold. These are also easily traded just as any traditional stock is.
While we do not suggest any particular strategy as we are simply a bullion retailer, this is a small example of what our clients do.
Dollar Cost Average
Dollar cost average investors buy a target assets over a large period of time which helps fight against market volatility and is an effective way to garner the average price over the target time period. For example, buying gold each month for a 5 year period, will likely get you that average price of gold over that 5 year period and if any serious market volatility occurred over that time, be less impacted by if at all. This is also why Investor Crate and our monthly precious metal subscription crates is one of the fastest growing bullion retailers in the industry.
Global Economic Turmoil
There are tons of case studies from around the world in modern times where people reverted to a barter and exchange system using gold and silver bullion and jewelry during an economic collapse and civil unrest. This is because gold is instantly and easily recognizable and sought after. Some say it was not only the first currency but will be the last.
Hedging against Inflation
You’ve heard it a million times and historically speaking has always been true. Gold is one of the best hedges against inflation and this strategy is not only used by retail investors but by large hedge funds, banks and corporations around the globe.
Numismatics & Collectibles
While this might seem silly to some people, rare coins and other collectibles like paintings or old antiques have the ability to fetch huge sums of cash at auction. While coin collecting and collecting vintage bullion is very difficult and requires an immense amount of research and knowledge, there is a huge market in this regard.
Our absolute favorite strategy we hear time and time again from our clients are heirloom investors. These are folks who stockpile precious metals to pass down to children and grandchildren. Gold does not tarnish and old gold coins if handled properly can look brand new even if they are 100 years old, so passing down this true form of wealth to newer generations of your namesake is something special.
Gold is traded on an impressive level and uniquely hoarded by not only private individuals but large trust funds, hedge funds and even by banks, governments, and corporations. While it may seem like everyone buys gold it’s always important to consult with your financial adviser and see if gold ownership is right for your situation.
As we mentioned above, we provide a fun and unique service that facilitates physical gold ownership so if you made it this far, check out our various products we have to offer. Thanks for taking the time to read this article and if you found it helpful or interesting, please consider sharing it with your friends on Facebook. Thank you for supporting our small, veteran-owned & operated business.
This is in no way to be considered investment advice. Past performance is no guarantee of future results. Asset allocation and diversification do not ensure a profit or guarantee against a loss. Keep in mind that any form of investing involves risk and you should always consult with your financial advisor before making any financial decisions. Investor Crate, LLC., it's subsidiaries and staff will never advise you on any asset as our aim is to provide a fun and affordable service should you decide to purchase Precious Metals.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.