If you’re looking to purchase gold as an investment, there are five primary types of gold assets to choose from:
- Physical Gold: This is what most people mean when they say they’re buying gold. Physical gold, or gold bullion, is gold that you can hold in the palm of your hand.
- Gold IRA: A gold IRA is a self-directed retirement investment account that, instead of investing in stocks or bonds, invests in verified precious metals.
- Mining stocks: One way to directly invest in gold is to purchase stock shares of a gold mine or refinery. This works the same way as any other stock: if the mining company performs well, its stock price may rise, resulting in profits if you sell.
- Gold futures: Another type of investment, a gold future is a contract to buy or sell gold when it hits a specified market price.
- Gold ETFs: Gold Exchange Traded Funds (ETFs) are investments in various fragments of the precious metals market. For example, one gold ETF may track the price of gold itself, a specific mining company, an additional refinery company, and even track gold futures or options.
For this article, we’ll focus on buying physical gold. That said, if a gold IRA seems more your style, check out our list of top-rated gold IRA companies. It covers the basics of the gold IRA market and how to start your investment journey with gold.
Gold Purity
No matter what kind of gold you’re buying, the biggest factor in how valuable it is as an investment is its gold purity. As gold is both soft and rare, other metals are often combined with it to create an alloy that is more resilient to being handled. Since these other metals are cheaper than pure gold, jewelers and manufacturers can make more “gold” products and sell them for less money than if they were made of pure gold.
To make sure you know what you’re paying for, always ask for the gold purity rating of what you’re buying. This will allow you to know exactly how much gold is actually present in a gold bar or coin.
Gold purity is represented as a percentage, usually from 41.70%–99.90%. Anything less than 41.70% purity wouldn’t be worth calling gold while anything over 99.90% purity is virtually impossible to find; gold is naturally-occurring and will always contain some trace amounts of other metals.
The higher the purity, the easier it will be to sell your gold. Gold with a 99.5% purity is the trading standard for most gold bullion. Additionally, for gold to meet IRS requirements in funding a gold IRA, the gold must have a 99.5% purity minimum (with few exceptions).
Types of Gold
Physical gold comes in a variety of formats or shapes, each with a unique price point. It’s important to remember that every piece will be different—even two identical-looking pieces of gold can differ wildly in value due to innate differences such as metal purity, premium pricing, and collectability status.
Gold Coins
A gold coin’s value is affected by both its gold content and its collectibility status. Collectible coins have similar caveats to jewelry pieces; their value can rise or fall depending on the popularity of the stamp itself. You’ll notice that they’ll cost more than just the value of their gold’s weight and purity; this upcharge is the result of the coin’s collectible status.
Setting gold value aside, precious metal coins can be fun to own and build a collection with. They might be stamped with the face of a president, an animal, a building–just about anything you or other collectors find interesting.
Regardless of its collectability status, every gold coin’s value will be affected by its purity and weight. They’re measured in ounces or grams and are always assigned a purity rating, so you can quickly identify which coins you want to invest in.
For a stronger investment choice, we recommend you set aside the collectible status and focus on purity alone. Coins with a purity rating of 99.5% are common because they’re also used to fund gold IRAs. You don’t have to open a gold IRA to buy them, but the higher purity rating means they’re intrinsically more valuable than a lower-grade collectible coin.
Gold Bars
Gold may be less visually interesting to collect in bar format, but this is by design. Reputable gold bars are only stamped with the bar’s purity, manufacturer, and weight in grams or ounces.
This practicality comes with a strong benefit: because it isn’t seen as a collectible, a gold bar’s price will closely follow the going market value of gold itself. Investors won’t have to pay above market value to meet collectible or labor costs.
When buying a gold bar, keep in mind that it’s an investment; you want to choose bars that will be easy to sell in the future. The same factors that make a gold bar more valuable to you today will make that bar easier to sell later:
- Recognizability: look for bars produced by a well-known brand or mint.
- Size: select bars that are more easily traded. Finding a buyer for a kilogram-sized bar can be more difficult than finding buyers for ten 100-gram bars. On the other hand, selling one hundred 1-gram bars quickly becomes a logistical headache.
- Condition: gold bars that are sealed in tamper-proof casing (with an included assay card) are more easily sold than loose bars.
This isn’t to say that you can’t buy a gold bar from a smaller mint or one that is out of its original packaging, just that you might be asked to provide a proof of assay—a test for the gold’s purity level—when you sell it.
You can buy officially-minted gold bars from any reputable dealer. To shop from some of our favorite gold dealers, click here.
IRA-approved Gold Bullion
If you’re not sure where to start with buying gold, the easiest way to buy gold coins or bars without worrying about purity or resalability is to look for IRA-approved gold. The IRS has strict requirements on what kind of gold can be used to fund an IRA to guarantee its value. Any gold labeled as IRA-approved meets the following requirements:
Gold Coins
- Purity: 99.5%
- Most collectible coins are excluded
- Proof coins must be encapsulated, in mint condition, and include a certificate of authenticity
- Non-proof coins must be in brilliant, uncirculated condition
Gold Bars
- Purity: 99.5%
- Must be produced by an accredited/certified source or a national government mint and meet fineness requirements
- Small bullion bars must be manufactured to exact weight specifications
The only exception to these rules is the American Gold Eagle coin. It's still accepted by the IRS as IRA-approved bullion, but it only has a purity rating of 91.67%.
While you don’t have to open a gold IRA to purchase IRA-approved gold, a gold IRA can be a great asset for long-term investors. You can’t withdraw funds until you’re 59 ½ years of age, but you also don’t have to worry about storing or protecting your gold at home; it’ll be kept at a secured depository.
Gold Jewelry
Gold jewelry is the most common form of physical gold, but it comes with some caveats as an investment opportunity. This is because its value depends not just on its gold purity rating and the market value of gold, but also the amount of work required to make it and its value as an art piece.
These factors are part of a jewelry piece’s premium, which can raise the purchasing price of a ring, necklace, or earring set anywhere from 5%–300% above the value of the gold itself. It includes the labor costs invested by a jeweler to create the piece, the new value of the piece as a work of art, and the additional value of the piece as a rare or collector’s item.
If you’re buying gold jewelry as an investment, you’ll want to consider whether its value as an art piece will appreciate or depreciate in addition to its gold purity rating.
To understand a jewelry piece’s gold purity rating, you’ll need to know its karat number. Jewelers use a karat system to rate gold purity in jewelry, which directly correlates to the percentage system described earlier. Here’s how the two systems compare:
How to Store Gold
When buying physical gold, take a moment to consider where you’ll store it. Depending on how often you want to personally access your gold and what your security needs are, there are generally three options for where to store your gold: the freedom to store your gold anywhere you like, here are your best options:
- Fireproof vault: If you want to store your gold at home, invest in a fireproof, high-security personal vault. These vaults are typically too cumbersome for thieves to steal without being noticed and too thick to melt in the event of a house fire.
- Safety deposit box: Renting a safety deposit box from a trusted bank balances access, security, and storage fees. Safety deposit boxes vary in cost ($30-$100+ per month) but include constant surveillance.
- Gold custodian, depository, or vault: For maximum security, you can entrust your precious metals to a professional gold custodian. Gold custodianship is a service offered by financial institutions, in which your gold is safeguarded and (typically) insured for a fee.
Although there are multiple options to securely store your bullion, the choice may not be yours to make—an insurance contract may even require you to store your gold with a specific bank or custodian. Similarly, a gold IRA requires that the gold investments backing your account are stored with an IRS-approved bullion custodian.
Is Gold a Sound Investment?
Yes, when paired with traditional investment strategies.
As an investment, gold may be best used as one facet of a diverse investment portfolio. In a “play-it-safe” style investment portfolio—in which high-risk assets (e.g. stocks) are disproportionately balanced with low-risk assets (e.g. bonds)—gold acts as a kind of medium-risk investment.
As opposed to sticking all of their (golden) eggs into one basket, these are a few reasons investors include gold in their portfolios:
- Diversification: Gold tends to resist the market. When the S&P 500 excels, gold slows. Investors will use gold to protect their portfolios against an unfavorable market.
- Hedge against Inflation: The purchasing power of a single US dollar will stretch shorter and shorter with time. Thanks to its rarity and historical inherent value, gold will better retain its purchasing power as the years go by.
- Store of Value: If the overall economy looks bearish, gold will better retain its value. Gold’s rarity, historical value, and liquidity make it a steady asset when traditional stores of wealth begin to crumble.
- Liquidity: Physical gold can be turned into cash with relative ease, making it more liquid than traditional investments.
Ready to Buy Gold? Start Here
Get a head start on your next gold investment with our list of the best precious metals dealers in the US.
If you’re more interested in starting a gold IRA, you’re also in the right place. Check out our Gold IRA comparison page to get free quotes from the top-rated gold IRA custodians.
