I want to preface this article with two things.
First, gold is not an investment. It is a store of value and a commodity. So you don’t “invest” in it, you just buy it.
Second, in this article I am not going to cover why to buy gold. I’ve already done that before and if you want to read that article click here.
In this article I am going to teach you how to buy gold.
I’m 29 years old.
I personally own hundreds of ounces of gold.
I also own a gold dealer, a precious metals distribution company and have been buying both gold and silver since 2016.
So my experience in buying gold is much greater than that of most.
There are a few ways to buy gold.
You can buy paper or digital assets in a share or fund, where the fund or share buys gold.
You can buy paper certificates that say you can redeem them for gold.
You can buy collector’s items that have gold in them.
Or you can buy actual physical, pure gold.
I do that last and I’ll explain why and how.
First, I do not invest in things that buy gold. I don’t want to own a piece of paper or an invisible digit that says I have ownership in a collective fund or pool of money, where the fund or pool of money buys gold. That isn’t me owning gold. That is me owning a fabricated paper or digital representation.
Second, I do not buy paper certificates that are redeemable in gold. Again, “I” don’t “own” gold in that circumstance. Somebody else does and I have the right to swap my paper certificate for it. In that event, why not just own the gold outright myself?
Third, I do not buy collector’s that contain gold. This is really the purchasing of art or rare collectibles and a feature of the art or collectible is that gold was used to create it. I’m not a collector of trinkets nor art and I certainly wouldn’t do it just because I can get some gold. If I want gold, I’ll just buy gold. If I want art, which I don’t, I’ll just go buy art.
I only buy real, physical, pure gold.
So let’s talk about the different ways I can do this.
I can do this with coins. Like Canadian Maple Leaf coins or American Gold Eagle coins. I don’t personally buy coins because while they are gold, they usually don’t contain 99.99% gold (some do, but many don’t) and I want only 99.99% pure. Second, when I do this, I am to a degree paying extra money for the brand name. I am overpaying for gold because of where it came from. If this was the 1800s and there was no way for me to test the purity of what I was buying, then yes, I’d pay extra to get it from a name brand source. But that’s not the case. It is so easy to ensure I’m buying genuine 99.99% pure gold now a days that I don’t want to overpay for a brand.
Next would be bars and rounds. This is what I buy. They are generic bars or rounds of gold. They come from reputable mints (a Mint takes refined gold and produces bars, rounds and coins that can be bought and sold) and I know they’re genuine and pure. But they’re also the cheapest. You see, gold is a commodity. When you buy a commodity, you want to buy it cheap because at the end of the day, all commodities of the same type are all the same. Wheat is wheat just like gold is gold.
I can also buy gold in jewelry. I do this sometimes, but minimally. The benefit here is that jewelry is wearable. This makes it easily transportable and very difficult to have confiscated. The key is, you want to buy 24 karat gold jewelry. You’ve probably seen 12 karat, 14 karat and even 18 karat. What this refers to is that other metals have been alloyed into the jewelry so that there is less actual gold. Again, I’m buying it for the gold value alone so I want 24 karat because that refers to the highest purity of gold I can get. The idea is, if I ever needed to, I could wear my gold jewelry to the airport with no trouble at all, go to a different country and the be able to sell or borrow against it to pay for things. I can’t do that with a gold brick.
Lastly is what’s known as gold pool. This is where a company buys a very large brick of gold. Often 1 Kilogram, 100 oz, or even 400 oz. I can buy fractional ownership of that brick. So I actually do hold title to the gold, but I don’t physically have it. They keep it in a secure vault. If I want to, I can sell my share of the gold for a profit, or I can ask them to convert it to bars and rounds for me. The benefit here is if I’m going to store my gold in a vault anyways, this often will get me the lowest cost. It costs less money to mint a Kilo or 100 oz brick than it does a 1 oz round. So because of that it sells for cheaper. Because they don’t have to ship it to me or insure it, I save money there as well.
These are all of the types of gold I can buy. For me, I mostly stick to bars and rounds, and then some jewelry here and there.
Now, what is the best way to buy gold to get the best pricing?
First, we need to understand how gold is produced and sold.
A rule I want you to keep in mind is every time someone is involved in the process of you buying gold, it costs more money. Think of it like an assembly line with you at the end getting gold and then everyone who is working on the assembly line is charging a fee.
It starts with the miners. Miners locate gold and get it out of the ground. They front their own cost for doing so because they are going to sell it to a refiner at a profit.
Refiners buy gold from miners. What do they do? They refine it. They purify it, get out any other metals or additives and often will sell it off in bricks to a mint for a higher price than they bought for from the miners.
An Mint is going to divvy the larger bricks up into smaller rounds, bars and coins. They take the raw product of refined gold and turn it into a specific product that the end user wants or needs. They also assay the gold, which is the process of ensuring the gold meets the weight and purity standards required. A Mint will often package the gold, put their own branding or markings on it, and will often assign it a serial number as sell. A Mint will sell gold to a Wholesale Distributor for more than they paid the refiner.
The Wholesale Distributor buys gold in bulk and gets contracts from Mints and Assays that give them the right to buy gold at a discount for resell to brokers and dealers. A wholesaler usually must meet minimum order volume quotas and might even have exclusivity clauses with various Mints. The wholesaler sells the gold to a broker or dealer for more than they paid for it at the Mint.
The Broker or Dealer sells gold to you and I. We might buy it from them online or we might buy it from them at a retail store. But, when they sell it to us, they charge us a fee so they can make a profit too.
So in the cycle of buying gold, the Broker takes a cut, the Wholesaler takes a cut, the Mint takes a cut, the Refiner takes a cut, and the Miners take a cut. All before we buy it. Which means an ounce of gold costs not only what an ounce of gold costs, but also the fees each of those parties charged.
Now, you can shop around trying to find the cheapest fees but the truth is, they’re all very close and even if you manage to save 1% on a gold purchase, if it took you several hours to find the perfect deal, you could have made more money flipping hamburgers at McDonalds for a few hours.
How do we get the cheapest fees?
By cutting out the Broker and becoming the Wholesaler.
This is what I did. Do you think I bought several hundred ounces of gold and paid retail? No. It took me many years and lots of order volume, but I finally got approved to buy at Wholesale pricing so that I know I am always buying the cheapest gold out there for myself.
In fact, we made this a membership for our clients. For $40-$80/mo. my clients became members of my wholesale club and they get to buy gold at wholesale pricing without paying a brokers fee. This means on every order they are buying it 2–3% cheaper than anyone else. Brokers can’t compete because they’d have to make $0 in profit to match the pricing.
Now, does this mean a broker is unnecessary?
No, there is still a time and a place for brokers.
The wholesale membership I mentioned is self service. This means I log in, I shop my own order, I place my own order and without anyone else’s help.
If I don’t have the time or confidence to do that, then I would pay a broker a fee to do it for me. But then the fee is for the service, not for the gold. Do you see what I mean? A broker might also know how to use bulk pricing to get me even better deals. I’d be willing to pay for their expertise for that help. Lastly, the broker may have connections in the gold industry that benefit me and they may be willing to share those connections with me as their client. I’d be willing to pay for that too.
Next is holding costs. Gold does not provide an income and it requires storage. Storage is a cost. This means I am going to pay an out of pocket cost to own gold and I won’t cover those costs until I sell for a profit. Logic stands to reason, I want to have those storage costs be as low as possible.
When I store gold I can either store at home and buy a safe or a vault, in which case my cost is going to be the cost of buying the safe or vault, plus the cost of insuring the gold against loss or damage.
I can also send my gold to a depository vault where a reputable vault stores it on my behalf. If I do this, at a minimum I want to ensure my gold is secure, guarded, allocated (meaning they actually hold my gold and don’t loan it out or lease it out while they have it), insured and audited by a 3rd party. Storage that does not offer these things contain risk that my gold can be lost, stolen, etc.
Industry standard is that I will pay an annual percentage based fee to store my gold with a depository vault. So again, I want to pay the lowest storage fees possible because that too, is a commodity. As long as it meets all of the points above, it’s kind of all the same thing. Lowest costs becomes my main focus.
Again, my wholesale member clients get access to wholesale storage costs too.
One service we offer to our Wholesale Member clients is Gold Leasing.
This is the ability to lease gold that you own to a retailer or a jeweler. Those who sell gold as a business often need to finance inventory (much like a car dealership does) and so they will lease gold from those who already own it in order to do so.
This means that I own the gold, I lease it to a gold jeweler, broker or retailer, with me still owning the gold and them paying me interest to use it for 6–24 months (whatever we’ve agreed upon).
I pay no storage costs because it’s not in storage. The lessee is using it.
I earn interest from the lessee.
I earn appreciation as the gold climbs in price over time and at the end of the lease, they send my gold back.
This is a great option for someone who wants minimal cost to buy, no holding costs and to earn income from their gold.
The last thing to consider is the cost to sell.
When you sell gold to a dealer, just like at a car dealership, they are not going to pay you full price. They will charge you a buy-back fee, which will be usually 1–3% of the price of the gold. So you are only going to get 97–99% of the price of gold when you sell.
Now here lies the problem. We only sell gold when it has gone up in price and we are cashing out at a profit right? So 1–3% is being charged on a larger number, which means selling gold is often more expensive than buying it.
Why do dealers do this? Because when they buy your gold, they are going to resell it to another customer. If they bought it for only 97% of its actual market rate and then when they sell it they charge 2–3% to whoever the buyer is, they’ve doubled their usual profit.
My Wholesale Clients pay no sellback fees. Ever.
This is how I’ve done it ever since I got access to wholesale pricing a few years ago.
I buy with no Broker Fees.
I have the cheapest storage costs (if I pay storage at all).
I can lease my gold out or even borrow against it while I have it.
And when I’m done with it I pay no fees to sell.
For example, I buy gold and hold onto it for 5 years, I save roughly 10% total in buy fees, sell fees and storage costs cumulatively over that 5 years.
Not only that, but if I lease it out or borrow against it, I might earn an additional 10–20% in cumulative income on top of the natural appreciation gold has.
And all of this for only $40-$80/mo. for a Wholesale Membership.
If you’re reading this, this article isn’t just a pitch for a Wholesale Gold membership. The purpose of this article is to inform you of a way to buy, storage, use and sell gold the way the Wealthy actually do it.
They aren’t paying a bunch of extra fees and costs, I’ll tell you that much.
If you’d like to learn more, I will be teaching a free class this Friday at 10:00 pm EST on How To Buy Gold Like The Top 1% and I want to invite you to it.
Every Friday night at 10:00 pm EST, for over 4 years now, I’ve taught a free course on finances.
Here is the replay for the one I did last week:
If you’d like to register for this week’s upcoming course at 10:00 pm EST on Friday, click here to register!
To Purpose, Wealth & Freedom,
Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on over 45 podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.
Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.
Learn more at www.WealthDynamX.com
(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)