5 tips for buying gold bars and coins

Investing in gold can be a great way to diversify your investment portfolio, hedge against inflation and preserve your wealth over time. And whether you're a seasoned investor or just getting started, buying gold bars and coins can be a smart way to add this precious metal to your portfolio.

Gold bars come in different weights, from small coins up to large bars weighing 400 ounces. With so many options available, it can be challenging to determine which gold products to buy and where to buy them. It helps to know some basic tips so you can make an informed decision and get the most from your gold investment.

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5 tips for buying gold bars and coins

When buying gold bars and coins, keep the following things in mind.

Understand the difference between bars and coins

Gold bars and gold coins each have their own advantages and disadvantages. Which type is best for you depends on factors such as cost, storage considerations and liquidity needs. Weigh these factors carefully to determine whether bars or coins better fit your investment strategy and preferences.

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Choose a reputable dealer

There are many dealers who sell gold bars and coins, but not all of them are trustworthy. So, take the time to do your research and find a dealer that is reputable and has a good track record. Check online reviews, ratings and customer testimonials, and watch out for red flags to avoid common gold scams.

Inspect the product

One of the nice things about physical gold is that you can hold it in your hand and visually inspect it. A trustworthy dealer will provide you with all the necessary information so you can evaluate the products they offer. That said, you should still look for the following things, whether you're inspecting a product in-store or after you've received a product ordered online.

Purity

The purity of gold is measured in karats. The highest purity is 24 karats, which means it is 99.9% pure. To be considered "investment quality," gold must be at least 99.5% pure, but the higher the percentage, the more it's worth at resale. You can check the purity of the gold by looking for markings on the gold, such as "999.9" or "24k."

Authenticity

If you're buying gold coins, look for ones produced by established mints  These mints are backed by a government or a central bank, and they produce high-quality coins with a good resale value. Some of the most popular mints are the U.S. Mint, Royal Canadian Mint and Perth Mint. You can check the authenticity of the coin by looking for the mint mark on the coin.

You can order a gold testing kit online to double-check gold's purity and authenticity. But there are also some simple tests you can do yourself:

• The magnet test: Unlike many metals, gold is not magnetic. If you can pick up a gold coin or small bar with a reasonably strong magnetic, it could indicate the gold is mixed with other metals.
• The ping test: Gold makes a long, high-pitched ringing sound when you strike it, whereas base metals make a shorter, duller sound. Strike the gold against a piece of clean metal (like another coin) and listen to the sound it makes.
• The water test: Gold is a very dense metal. If you place a piece of gold in a bowl or glass or water and it immediately sinks to the bottom, it's most likely real. Bars or coins that sink slowly or float at the top of the water are likely fake.

Know the spot price

The price of gold fluctuates based on market demand, so be sure to look up current prices so you can properly identify a good deal from a bad one. Bear in mind that gold bars and coins are sold at a premium, meaning that in addition to the inherent value of the gold, the price factors in the cost of production, packaging and shipping.

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Keep your investment safe

Once you've purchased your gold bars or coins, store them in a secure location. A safe deposit box at your financial institution is the best way to keep your gold protected, but you can also store it at home in a fire-resistant safe.

In addition, you should purchase insurance for your gold. Banks usually don't insure the contents of safe deposit boxes, and your homeowners insurance likely limits how much gold it protects.

The bottom line

Buying gold bars and coins can be an exciting and lucrative venture for investors. The tips above can help you make sure you find the best investment for your needs at the best price.