When you have to buy your gold ounce by ounce, the additional fees and their relationship to the current spot price can have a significant impact on your potential profits.
The stellar performance of the price of an ounce of gold in the stock market over the last few years has attracted buyers of all sorts. Unfortunately, some interested parties have been so new to investment and, in particular, commodities, that they make critical mistakes.
When you fail to understand the importance of the spot price and the fees that many vendors apply to their sales, you can suffer major losses. These losses have driven people out of the market because they think that they cannot win under the burden of these additional costs.
This is particularly possible with individual investors with limited means. They are often directed toward the gold coin market because these coins come in a variety of sizes. Smaller sizes allow these investors to buy this metal in smaller and apparently more affordable chunks.
However, buying it in small quantities is actually not efficient. Worse, coins complicate the matter with numismatic values. These additional values are helpful for experts in gold investment but aspiring aficionados can easily run into money trouble because of them.
It works like this: you see that the gold oz price today is $1,700. You have studied the issue a little and think that the price will soon go up. You are even a little proud of your analysis.
However, you are not John Paulson with virtually limitless means to support your analysis. Instead, you can only afford a single ounce of gold. Since you have been discouraged from buying bars by friends or by your own perception of their size, you seek out a coin dealer.
There are many kinds of these coins in circulation. In the United States, it is particularly easy to buy American Eagles from the US Mint. You can buy them in exquisite condition.
However, when you bring your $1,700 in to buy a one-ounce coin, you are shocked to learn that you do not have enough money. Vendors of these coins such as the US Mint charge additional costs because they have an operation to maintain.
This metal must be purchased from miners and later fashioned into a coin design. It also has to be shipped if you are buying over the Internet, which is the most common location for the purchase of these coins.
Due to these considerations, these coins will cost much more than the value of their bullion. When you add in the cost that must be attached to their sale for the design, you may have to pay much more than the current spot gold oz price.
You can reduce the impact of these fees by purchasing in bulk. However, individual investors are usually limited to much smaller purchases. This requires them to make many small purchases and pay an exorbitant amount in fees.
Further losses are incurred when these coins suffer inevitable wear and tear. American Eagles are made with a special alloy of gold and small amounts of silver. This gives them better protection against things like bag marks, which are the damages that coins can suffer as they scrape against one another when they are shipped from one location to another.
Coins from many other countries’ mints are much purer and more liable to suffer such damage because it is such a soft metal. Nevertheless, any coin can lose value over the years due to these damages. Unless the bullion value of the price of a gold ounce increases significantly, you could find yourself with coins that are worth much less than what you paid for them.
There is actually an alternative in bars that many people do not understand. You do not have to buy these products in prohibitively large sizes. Several companies make them in easy to acquire sizes as small as one gram. These companies include Credit Suisse, Johnson Matthey, and Suisse PAMP.
Furthermore, bars in one ounce sizes or bigger are also efficient purchases because you can stack and store bars very easily. You do not have to worry about damaging the face of the bars because the stamps on them do not add value.
They are simply methods of identification. You also do not have to worry about a fading value due to ruined numismatic value. The bars retain value just as bullion does on the market.
If you think that this only alternates the underlying asset on which expensive fees are placed, then you have not thought carefully about the differences between bars and coins. Many experienced buyers put their money into bars because their value is much closer to the spot price.
Manufacturers of these bars do not need to apply many extra charges to the sale price because there is little additional design involved with these bars. When you study the oz of gold price closely, you can make a better decision about how much to buy at one time in order to avoid losing money on your investment.
There is another option for people who keep a close eye on the ounce of gold price. You can invest in it indirectly rather than purchase the physical commodity.
Exchange-traded funds (ETFs) offer investors ways to invest in the physical product without actually purchasing any coins or bars. You can adhere fairly closely to the price of an ounce of gold and will not incur any extra fees associated with transport tor storage. A share in an ETF automatically gives you exposure to all the underlying assets in an index fund.
However you choose to buy gold, per oz, an ETF of another means, you should always closely the price of an ounce of gold. Better informed buyers can navigate the stormy waters of the market and stay ahead even when precious metal itself is not performing.
Though it loses value, you know that you are preserving your wealth in comparison to other investments. Even just a single ounce of gold can protect you from the eroding influence that inflation has on your investments.