Q: How do I buy an actual gold bar?
A: Investors can gain exposure to gold in a number of ways – buy shares in gold mining companies, invest in managed funds, acquire gold options and derivatives and, finally, purchase the shiny stuff itself!
Gold can be purchased from the Perth Mint and f a number of bullion companies in the market, and investment-grade gold bullion can be purchased GST free. However, coins usually attract the tax.
Gold bullion can usually be purchased in weights from 2.5g and up to 1kg in ingots or bars. Unlike gold jewellery, investment-grade gold should be 99.99 pure and stamped accordingly on the ingot.
Personal identification must be provided for trades of gold bullion worth $5000 or more. All cash trades greater than $10,000 must be reported to Austrac.
Things to look out for and questions to ask when buying from a bullion company:
Ensure the gold is sourced from a reputable supplier whose ingots are accepted in the market.
Hallmark stamped fees charged to buy or sell gold will vary, so shop around.
Will the bullion company store your gold for you, and at what cost?
Will the bullion company repurchase gold from you, and at what cost for the trade?
Other issues you should consider before buying gold bullion:
Where will you store the gold? If it’s lost, or stolen, it’s gone!
Insure your gold for replacement value, not purchase price.
It is important to diversify your investment portfolio. The World Gold Council commissioned a study that recommended investors hold, in some form, 2.5 per cent of their portfolio in gold for a low-risk portfolio, but no more than 10 per cent for a high-risk portfolio.
Determine how long you plan to own the gold. Unlike conventional investments, the asset itself will not grow in size. It is a static lump of shiny metal, whose value will rise and fall on the basis of demand.
This article was published in The Australian on 9 September 2011. A direct link to the article can be found here.
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