Buying gold bars and coins: 5 things to look for

Gold has been a popular investment for centuries, especially during times of economic turmoil. However, buying gold can seem daunting, especially if you're a first-time investor. If you've chosen to purchase physical gold in the form of gold bars and coins, you have no lack of options to choose from.

Fortunately, keeping some key things in mind can help you narrow down your choices. By knowing what to look for and how to evaluate the gold you're considering, you can make the most informed decision about which gold bars and coins to purchase.

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Buying gold bars and coins: 5 things to look for

When buying gold bars or coins, it's important to know what to look for and what factors can affect their value. Look for these things as you shop around:

1. Dealer reputation

When buying gold, it's important to choose a reputable dealer. There are many scams and counterfeit gold pieces on the market, so it's essential to do your research and buy only from trusted sellers.

Look for dealers with an established track record and positive customer reviews. Additionally, check if the dealer is accredited by organizations like the Professional Numismatists Guild (PNG), Numismatic Guaranty Corporation (NGC) or Accredited Precious Metal Dealers (APMD). These dealers must follow strict ethical guidelines and meet certain standards.

2. Purity

Gold's purity is measured in karats, with 24-karat (or 24k) being the highest purity level. Investment-grade gold has a purity of 99.99%. Some gold pieces may be alloyed (or mixed) with other metals. This makes them more durable, which is useful for jewelry but reduces their value as an investment. So, be sure to check the purity of any gold you intend to buy. The purity level is usually stamped on the bar or coin.

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3. Weight

Gold bars and coins come in different sizes and weights, which affects their price. Gold bars are usually measured in troy ounces (roughly 31.1 grams). A full gold bar typically weighs 400 troy ounces, although bars come in a variety of sizes. Gold coins typically come in weights of 1 troy ounce, 1/2 troy ounce, 1/4 troy ounce and 1/10 troy ounce.

How much you buy — and whether you choose to buy bars or coins — depends on your investment budget and storage capabilities. Since gold bars are bulkier, they can be costlier to store.

4. Authenticity

To ensure you're buying authentic gold, look for hallmarks or stamps that indicate the manufacturer. Specifically, look for bars and coins produced by established mints such as the U.S. Mint, Royal Canadian Mint or Perth Mint.

You can also perform DIY tests to detect fake or impure gold:

• Magnet test: Real gold cannot be picked up by a magnet. Fake or impure gold might be.
• Ping test: When you strike real gold, it makes a long, high-pitched ringing sound. Fake or impure gold makes a short, dull sound.
• Float test: Real gold sinks to the bottom of a glass or bowl of water. Fake or impure gold floats.

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5. Premium over spot price

When buying gold bars or coins, you'll likely pay a premium above the spot price (going rate). That's because, unlike other gold investments such as stocks, physical gold must be produced, packaged and shipped.

These premiums vary based on factors including the size of the gold piece, its rarity and the demand for gold when you purchase it. It's important to know current gold prices and compare prices from multiple sellers to ensure you're getting a fair deal.

The bottom line

Buying physical gold can be a rewarding investment, but it's essential to consider the factors that affect its value before making a purchase.

Be sure to choose a reputable dealer, then take the time to check the purity, weight and authenticity of gold bars and coins before purchasing them. Also, check current gold prices and shop around for a dealer that charges a fair premium. By doing so, you can make an informed purchasing decision.