How to buy gold bullion online - its also the cheapest way to buy gold.
Before you buy small gold bars or gold coins, read this.
There are many reasons to want to buy gold, but how you do it is critical to the total costs of owning physical bullion.
To determine the total costs of ownership you must consider not only what it costs to buy the small bar or coin, but also what you will receive for it when you come to sell. Plus, you should include in your calculation the cost to have it shipped to you, and the cost of insuring it at home.
Many coin and small bar dealers offer ‘free’ shipping. Most people know that when something is ‘free’ the cost has usually been shifted elsewhere. With gold it is often hidden in the price you pay for the coin or bar, along with the costs of the bar’s manufacture and the dealer’s mark-up over the wholesale gold spot price.
That wholesale price – also known as the spot gold price – is the price for buying or selling gold in the form of large, wholesale bars. Any small bar or coin will have started as part of one of these large 400oz (12.5kg) bars – the size and format that the professional market deals in.
Small bars and coins are made by melting down those large bars and casting smaller units. The cost of this manufacturing process is effectively loaded into the final price the consumer pays for the "retail" unit. So over and above the spot price for gold, you must also pay for the costs to manufacture the small bar or coin, plus the dealer's overheads and some amount the dealer wants to make as a profit. In total, it is not unusual for all of these costs to result in you paying 5-8% over the actual wholesale cost of the gold.
As with most things, the most efficient way to buy gold is to buy from the wholesale market. If you could buy a car directly from the factory or fruit directly from the farmer you would pay much less than you do at the dealership or supermarket. Wholesalers, like car manufacturers, won’t sell directly to consumers because they can't typically buy in large enough quantity to make it worthwhile. This is why they sell to distributors who have access to the retail market place. They like this arrangement as it keeps everyone’s margin – the profit they make – intact. That profit is paid by you, as a retail client.
The final kicker is that when you come to sell a small gold bar or coin, you may not realise the full value for it either. A dealer will not pay you the spot price, as they have to factor in their overheads, and they also have to consider the chance that the bar or coin is not what they think it is. Some rarer coins might be quoted at prices above spot, but in gold bullion products this usually results in you receiving 5-8% less than the spot price when you come to sell.
All told, the typical roundtrip cost of buying and selling a small gold bar or coin can cost you at least 10% of the value of the gold. This seems like a poor way of going about buying something that has the primary purpose as a store of value.
There is a better way. Using BullionVault you can buy AND sell at wholesale prices. Its low commissions start at 0.5% and fall quickly on larger quantities, meaning you’ll pay a maximum 1% roundtrip compared to about 10% if you bought and then sold a small bar or coin from a retail dealer.
Each person that opens a BullionVault account receives four grams of silver plus a small amount of US Dollars, Pound Sterling and Euros free. This enables new users to try buying and selling bullion completely risk free.
Commission & storage fees
|Gold Purchased Troy Ounces||Cost at $1,300 per Troy Ounce||Buy Commission||Custody for a year||Sell Commission||Total Costs||Total Costs as a % of total bullion cost|
|Gold Purchased||Cost at £830 per Troy Ounce||Buy Commission||Custody for a year||Sell Commission||Total Costs||Total Costs as a % of total bullion cost|
|Gold Purchased||Cost at €1,050 per Troy Ounce||Buy Commission||Custody for a year||Sell Commission||Total Costs||Total Costs as a % of total bullion cost|
The table above shows the total costs to buy gold on BullionVault, store it for a year, and then sell. Each illustration assumes that the price of gold remains unchanged from $1,300 per Troy Ounce at the prevailing exchange rates.
UPDATE: 100g gold bars now available using BullionVault
This page explains why the smart way to own gold is by avoiding the inefficiencies of the small bar and coin market. And yes, we think your gold is better kept fully insured within in a professional vault.
But if you really want gold in your hand, we now offer 100g bars for delivery. We’ve solved many of the complexities that lead to the high costs associated with gold bar and coin retailers and we can now make these 100g bars available to you at very low prices. Find out how we do it.