How to Buy Gold

Inflation Ahead? How to Buy Gold Safely, Simply and at Low-Cost Today

WHY ARE MORE and more private investors choosing to buy gold today?

“People rightly buy gold when they see inflation ahead,” said William Rees-Mogg, a former advisor to Margaret Thatcher and editor of the London Times, at a recent meeting of private investors in the City.

In fact, with the world’s major central banks now struggling to maintain their inflation targets, the current lull in gold prices could prove a “table banging opportunity” to buy gold in “decent amounts” as John Reade at UBS has said.

But what’s the best way to go about buying gold? Type “Buy Gold” into Google, and you’ll be met with a huge range of choices. Most carry their own advantages and drawbacks, depending on your aims and concerns.

Here are the four options now open to private investors wanting to buy gold today:

Buy Gold for Physical Possession

Buying gold to hold in your hand remains the ultimate in tangible wealth. But the big problem with storing gold coins at home or keeping gold bars at your local bank is the gap between prices to buy and prices to sell.

Gold stored and traded by professional bullion dealers in the wholesale market is what creates the “spot” price you see quoted in your newspaper and on the internet. It comes in large, 400-ounce bars — until now, inaccessible to the private investor.

This gold also comes with an absolute guarantee of its history, weight and purity. If you buy gold outside that professional system, your gold will lack this guarantee — and loss of integrity is the single greatest cost in private gold ownership.

In Europe and the US, expect to pay spreads of 4% and above, both on purchase and sale, when trading with a gold-coin dealer. For modern-day bullion coins, such as the Chinese Panda or Australian Nugget, don’t be surprised to get only “melt” value when you come to sell, even though you will pay up to 16% above the spot price of gold when you buy.

Buy Gold through a Storage Programme

If you’re willing to cede outright ownership when you buy gold, then an “unallocated pool programme” will let you buy gold as an entitlement only, stored at low cost, with a view to taking physical delivery sometime in the future.

The leading providers quote around a 1% dealing spread. One firm also offers an “allocated” programme, where buying gold bullion outright in your name costs an extra 1.5% per year in storage fees, plus a $50 flat fee with a minimum gold investment of $10,000.

Buy Gold via a Trust-Based Fund

The exchange-traded gold funds (ETFs) launched over the last half-decade let you track the price of gold — if not actually buy gold to own it outright — by trading a security on the stock market. The leading ETFs buy gold and hold it in trust at HSBC in London; ask your stock broker about LxyOr GBS in the United Kingdom and Europe, or StreetTracks GLD in the US.

These shares can only be traded during your local stock market hours. They will also require a transfer of cash into dollars if you’re not buying gold from the US.

Another drawback of buying gold through the gold ETFs is their daily shrinkage. These funds all charge 0.4% per year to cover storage, insurance and administration fees, deducting this fee from the physical gold backing each share. But while the amount of gold backing each share shrinks a little each day, the title on each share remains the same — typically one-tenth of an ounce.

Over time, this gap only grows wider; the shares in Australia’s Gold ETF now represent less than 9.876% of an ounce after just four years. By 2010, they will come to represent less than 9.75%. The sponsors of the leading gold ETF programs are likely to consolidate the shares soon, repricing them to account for this shrinkage.

Buy Gold Like a Professional Dealer

Thanks to the cost-savings enabled by the internet, there is now a way you can buy investment-grade gold bullion, outright in your name alone, at low cost. Stored in secure professional vaults in London, New York or Zurich (you choose which location you prefer), gold held at BullionVault costs just 0.12% per year, with insurance included, starting from a minimum of only $4 per month.

Buying gold at BullionVault couldn’t be simpler, nor more secure. The site lets you set your own prices using a 24/7 online order board, and it gives you instant settlement with zero credit risk. One investor who chose to buy gold at BullionVault recently wrote to say that:

“Having ownership of physical gold in BullionVault‘s London vault is better than having AAA-rated bonds. Yes, we could have saved a miserly 0.12% per year by buying unallocated gold with a bullion dealer, but we now call that ‘sub prime’ gold!”

To find out more about buying gold at low cost today, be sure to visit BullionVault and claim a complimentary gram of free gold — stored in Zurich, Switzerland — now…

PLEASE NOTE: We will receive a small referral commission for any accounts opened through this article. But the tiny dealing fees and storage charge you will pay would be no smaller without it.

And this ground-breaking service really does give you unique access to live gold market prices, cutting out the middleman and slashing the costs of investing in gold “dramatically” as the Financial Times recently noted.

To find out for yourself, go to BULLION VAULT now.

Gold price chart by BullionVault.com – Click for live prices