WHY SHOULD I BUY GOLD?
Societal elites used gold to symbolize wealth for over thousands of years. This precious metal’s relative scarcity and inherent value offers stability for investment portfolios. Acquiring gold has, historically, proven to be a popular method of securing an inheritance for future generations. This trend may be accredited to gold’s ability to withstand the test of time and retain its value.
Gold is a trusted resource of wealth irrespective of changes in culture or the passage of time. Its long-respected history makes it a highly popular commodity. Aside from its visual appeal and intrinsic value, gold serves many functions. Gold bullion offers a great alternative that supplements stock portfolios since the two usually share an inverse relationship. Today, investors primarily invest in gold to hedge their assets against inflation. Gold can also add some much-needed diversity to independent Investment Retirement Accounts (IRAs).
Whether you prefer coins, rounds, or bars, you have a great assortment of gold bullion in various sizes and denominations at your disposal. Gold bullion weights usually range from grams to one kilogram, but it can also be a whopping 400 ounces. Bullion Exchanges provides a plethora of gold products to appeal to savvy investors, passionate collectors, and eager new buyers.
As one of the most reliable investment commodities available, gold remains a classic measure to diversify your investment portfolio and act as an excellent hedge against currency volatility. Although the price of gold can also rapidly change, it can often experience long periods of quiet trading. Some people think that gold is too volatile to invest in, but it is usually no more volatile than the stock market.
WHAT ARE THE DIFFERENT TYPES OF GOLD BULLION?
You can purchase gold in the form of bars, rounds, and legal tender coins. Gold coins differ from rounds because they are produced and backed by government mints. You can also easily differentiate between the two because a gold coin has a legal tender but rounds do not. A private mint not associated with any government can only produce rounds and bars, not coins that can be used in circulation. Bars and rounds are normally produced by private mints and have a wider variety of options to choose from.
ARE GOLD ETF SHARES THE SAME AS GOLD BULLION?
No, ETFs are paper assets backed by gold. If you own a share of a gold ETF, you do not own physical gold. Also, ETFs trade on a different combination of factors and are priced differently from physical gold. If you want to own physical gold, your best bet is to buy gold bullion.
WHAT IS THE DIFFERENCE BETWEEN AN OUNCE OF GOLD AND A TROY OUNCE?
A single standard ounce equates to approximately 28.349 grams. This is used as a measure for almost all common commodities. However, gold is not a common commodity! Therefore, we measure the price of gold and other precious metals in troy ounces. One single troy ounce weighs about 31.103 grams.
Approximately 31.1035 grams of 24 karat pure gold makes up one troy ounce. A kilogram consists of 32.15 troy ounces. France created this system of measuring precious metals during the Middle Ages, and the United States adopted this method of measurement for standard coinage in 1828.
WHY CAN'T I BUY GOLD AT SPOT PRICE?
The gold spot price is the current live cost of one troy ounce of gold. However, this does not factor in premiums and added costs of a bullion coin’s manufacturing and distribution expenses. So in actuality, the spot price of gold does not account for anything beyond the market estimation of the metal content. Unless you are buying raw gold, you usually cannot buy gold at the spot price.
Mints and refineries price gold bullion after factoring in minting, refining, and manufacturing costs to charge dealers. To cover storage and distribution costs, a dealer may further mark up the prices. This is what is known as a premium, which is applied to the price for individual buyers and investors when they buy gold.
Sometimes, you will find an additional collector’s value added to the price for rare, uncommon, and otherwise valuable items. These premiums vary, which is why it is important to shop around among trustworthy dealers. Bullion Exchanges proudly offers gold at the lowest possible markup from the gold spot price. We may also occasionally run deals selling gold at spot price at our discretion.
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HOW IS THE GOLD SPOT PRICE PER OUNCE MEASURED?
Gold is a leading bartered asset traded in numerous international markets. The most renowned and respected exchanges include the New York, Chicago, Hong Kong, Zurich, and London Mercantile Exchanges.
Four exchanges comprise COMEX (Commodity Exchange Inc): CME, CBOT, NYMEX, and COMEX. This is the essential business sector for trading common and precious metals, such as gold, silver, platinum, palladium, and rhodium. COMEX merged with NYMEX (New York Mercantile Exchange) in the early 1900s, and today it has become the primary division that is responsible for the precious metal exchange. One of its many responsibilities is to designate the price of gold today.
GOLD FUTURES CONTRACTS
When determining the spot price of gold, it is important to note that the calculation is based on the front-month futures contract. This can be traded on the COMEX.
The term front-month applies to futures trading with an expiration date in the contract month that is closest to the present date. For example, if in June you wish to purchase 100 troy ounces of gold for October, you could buy a contract. This gives you the right to a gold delivery to arrive to you in October at the price you locked in months earlier.
Basically, a futures contract is a legal agreement to buy/sell a specified commodity asset, or security, at a predetermined price. This also means you will collect on the contract at a specified time in the future. Front-month futures contract is a contract that will expire on the nearest possible date.
That being said, the options you have for buying gold through a contract are limited. You do not have as much of a selection to choose from, and this comes with additional fees and costs associated with taking delivery. We recommend researching the fees associated with your chosen purchase before making your decision.
WHAT AFFECTS THE PRICE OF GOLD?
Many outside factors can cause the gold spot price per ounce to rapidly spike or decline. While certain factors can be unpredictable, here are some major ones to keep an eye out for:
Current events: Geopolitical or economic uncertainty, especially war, positively impacts the price of gold. This is because many people consider gold as a safe-haven for investments. Therefore, they buy gold to protect their assets.
Economic/Currency Strength: Fiat currency and precious metals tend to have an inverse relationship. So as the dollar strengthens, the price of gold over time tends to fall. In contrast, the price of gold usually rises when economies stagnate or weaken. Generally speaking, many consider gold to be more stable than fiat economies or other forms of investments because of its intrinsic value. The argument is fiat currencies might become irrelevant since they are usually not backed by anything physical. However, gold is a rare commodity, and it will always retain a certain degree of value.
Buying power: When large entities sell or buy gold in bulk, the volume of the transaction alone can impact the gold market price. Thus, if entire countries buy or sell gold, this can easily affect the spot price of gold both positively and negatively.
Market speculation: Gold prices are highly volatile with constant fluctuations, and investors often bet on the prices of gold. Masses of people performing the same way in the gold market bears somewhat of an impact on the price of gold over time.
HOW DOES THE STOCK MARKET AFFECT GOLD?
Normally, gold experiences an inverse relationship with the stock market. However, this is not always the case. For example, during the health crisis of 2020, gold and stocks sometimes traded up and down in unison for an extended period of time. Usually gold does well when stocks are down because people sell stocks to hedge their assets with gold.
WHAT IS GOLD FIXING?
The London Gold Fixing Company is the source to set the price of gold twice every weekday beginning at 10:30 AM and then again at 3:00 PM GMT. They figure out the price with specified LBMA market makers. These market makers include reps from Scotiabank, Deutsche Bank, and HSBC.
IS THE GOLD SPOT PRICE THE SAME GLOBALLY?
The price of gold in India, China, Brazil, Australia, Russia, or any other country in the world, remains consistent irrespective of regional currency. Therefore, the gold spot price in Japanese yen is the same as the price of gold in the American dollar. In the absence of the same gold spot price worldwide, an arbitrage-free market could not be possible.
IS GOLD TRADED 24/7?
Gold is something you can buy anywhere in the world, but there are set parameters for the trading period. The market is open from 6 PM EST to 5:15 PM EST, Sunday through Friday, because of international trade. The gold price can, therefore, change at any point. Since gold buyers live in different time zones, markets are constantly up and running even when others are closed. When the market closes in one area of the world, some are just opening in others to be used by banks, financial institutions, and retailers like Bullion Exchanges.
DO I PAY TAX WHEN I BUY GOLD?
Every state has its own legislation relating to gold buying. Some states charge sales tax on physical precious metals. Additionally, as of late 2019, some states have mandated that online retailers must collect sales tax on their behalf for certain precious metals shipping into their state.
For NY, there is a statewide sales tax of 4%, and there may possibly be a local sales tax on top of that. However, it is possible for tax exemptions to occasionally apply. Please review our tax page for more information on each state regarding sales tax policies.
WHAT IS THE GOLD/SILVER RATIO?
The gold to silver ratio compares the number of ounces of silver required to buy one ounce of gold. Investors often check the silver and gold price chart history and the fluctuating gold/silver ratio. This spot price chart comparison allows investors to see how much the silver price is worth in comparison to gold.
The main benefit of this ratio is to help you evaluate if one or the other precious metal is overpriced. It can also help you predict price movements because if one metal is up, the other will most likely follow suit. The gold to silver ratio enables investors to determine whether or not to buy, sell, or exchange their silver for gold.
WHAT ARE BID PRICES AND ASK PRICES?
The Ask price is the lowest gold price that a dealer agrees to when selling gold to a buyer. The Bid price is the highest price that a dealer agrees to pay when buying from an investor selling gold in the market. In other words, as a buyer, when you buy gold from a dealer, you will pay the Ask price. As a seller, you will obtain the Bid price. The difference between Bid and Ask prices is referred to as bid-ask spread, or simply, ‘the spread.’ The closer the spread, the more liquid a commodity is.
WHERE CAN I BUY GOLD?
You can buy gold bullion both online or in-person with Bullion Exchanges! Unsure how to start investing in gold? Consider these helpful guiding questions: Do you want to collect coins for their beauty, rarity, and value? Or do you want to build your hedge portfolio (or IRA) quickly in the most cost-effective way? If you need more guidance about how to begin your journey, please head to our Learning Center for more information.
CAN I ADD GOLD TO MY IRA?
Depending on your IRA custodian, you might be able to buy gold for your “self-directed” IRA. Bullion Exchanges offers many fractional gold bullion products starting at fractional gram weights up to larger sizes like 1 kilo bars. Keep in mind that you might not need an entire ounce of gold to meet your IRA needs, but be sure to check the minimum requirements for your account before purchasing.