Should You Invest in Gold Bullion?

Gold has been an asset for centuries and probably even several millennia. Throughout recorded and unrecorded history, metal has been seen as a symbol of wealth and power. As a matter of fact, it has been found in gravesites dating as far back as 4,500 B.C.E. Thousands of years later, the metal remains valuable as an investment or as a piece of jewelry. 

The fact that it’s been able to maintain its value over time shows how stable an asset the shiny metal is and it’s no wonder that it has caught the attention of many investors. In fact, presently, gold investments, especially bullion, are considered one of the safest forms of investment today for several reasons which we will look into shortly. The metal has played a significant role throughout financial history with the most notable being between 1913 and 1971 when the gold standard was adopted by many countries. 

At the time, gold backed early paper money, with every printed bill corresponding to a fixed amount of gold held in a vault. Although technically, during this time, paper money could be exchanged for its gold equivalent, it rarely happened. In 1971, due to several factors including the impact of World War I and the Great Depression, the United States abandoned this standard and so did many other countries. Presently, no monetary system is backed by the metal; however, it’s been able to still maintain its value. 

Why is Gold Investment Considered the Safest?

There are several reasons why investors see investment in this asset as one of the safest. One is its ability to remain unphased by financial and economic crises. Historically, the value of this asset rises at times when other forms of investments struggle, take the stock market crash of 2008, for example. 

In early 2008, gold traded for about $720 per ounce but shot up later in the year to trade at about $1000 after the stock market crashed. By 2011, three years into the recession, the asset was trading at an all-time high of around $1,895. This rise in price value in times of financial crisis is due to investor sentiment and an increase in demand for the commodity. Click here to learn more about the stock market crash. 

When money is pulled out of the market during times of economic uncertainty, it is used to purchase gold to preserve it. Since the supply of this asset is limited, an increase in demand unavoidably leads to an increase in its price value.

Another notable reason is that it can be used as a hedge against inflation seeing as its price tends to increase when the cost-of-living increases. Unlike fiat currencies that lose value during inflation, gold maintains its value and purchasing power. 

To better explain this, $1000 worth of gold purchased today would have the same purchasing power or more in the next 50 years. Whereas, $1000 left in a bank account would have lost some of its purchasing power due to inflation. Therefore, many investors buy bullion as a way to preserve their wealth for future generations. 

Investing in Gold Bullion

Bullion is the general term used to describe physical gold whether it be in coins or bars. There are many types of gold coins that exist today and are minted by different mints around the world. Bars also come in various sizes and weights ranging from one gram to an ounce. Popular coins include the American Eagle, American Buffalo, Canadian Maple Leaf, South African Krugerrand, and the Australian Philharmonic. The top ten most popular bars in order of sales volume include Credit-Suisse, Johnson Matthey, Engelhard, PAMP Suisse, UBS, Sunshine Minting, Perth Mint, Scotia-Mocatta, Heraeus, and Holy Land Mint. Visit https://www.mgsrefining.com/blog/2019/12/17/the-history-of-the-gold-american-buffalo-coin/ to learn more about the American Buffalo coin. 

When it comes to bullion investment, one thing investors worry about is storage. Storing large amounts of this shiny metal is often a challenge to many investors, especially when it is in bars. Transporting the asset from the dealer to the place of storage can be quite expensive if the purchased quantity is large. That said, once it’s been transported safely to the storage location, investors have nothing else to worry about other than keeping the asset safe. 

Investors can choose to store the asset at their residence, but this may pose a threat to their safety and that of their family. This is why most investors entrust the storage of the asset to professionals. But the best way to invest in bullion is probably through a gold or self-directed individual retirement account (IRA). Conventional IRAs typically have several tax advantages, and those advantages also apply to gold IRAs. 

If you chose to go with this option, it is important for you to know that there are certain IRS requirements that coins and bars must meet to be eligible. For example, the asset must meet the minimum purity requirement of 99.5% before it can be stored in a self-directed IRA. 

IRS-approved coins include the American Buffalo, Canadian Maple Leaf, and the Australian Koala bullion coins. The American Eagle coin is also accepted by the IRS although it doesn’t meet the purity requirement. Approved gold bars include the Pamp Suisse, Credit Suisse, Royal Canadian Mint, Sunshine Mint, Royal Mint, Valcambi, and Scottsdale Mint. 

Today, most gold coins and bars can be purchased online, and they’ll be shipped right to the customer’s home. You can get more information about SD Bullion here and about buying gold online. 

Gold IRA Fees

A self-directed IRA comes with more fees than a conventional IRA. There are three main fees that investors may have to pay to get their account set up and running. They include: 

• • Account set-up fee: A custodian will most likely charge a fee to set up the account for you. How much you pay depends on the company. That said, this fee can be from anywhere between $50 and a few hundred dollars. 

• Storage fee: You’ll also be charged for storage and this amount varies depending on how much of the asset is being stored. Typically, you’ll pay more for larger volumes. 

• Management fee: You’ll also be charged a management fee that covers administration expenses and other necessary paperwork. 

Final Thoughts

There are several other ways to invest in this asset including gold-backed stocks and ETFs, however, many investors choose to buy bullion. This is because other options can be affected by factors like economic stability, the quality of management in the issuing companies, and so on. But physical gold is unaffected by any of these, making it the safest.