Given that $52 billion worth of gold was sold last year for investment purposes, according to the World Gold Council, it’s not surprising that shady dealers have lined up for a piece of the action. Most of the total was invested in gold mutual funds or exchange-traded funds. But some of us like to possess the lustrous stuff by buying it in coins or bars -- and that’s when you can get ripped off. Regulators say the number of rip-offs is rising with the price of the precious metal.
Here’s how not to buy gold coins (some of these tips also apply to bars) if all you’re after is gold’s investment value:
Don't pay too much.
If you’re investing in gold, remember that it’s a commodity, and it’s up to you to make sure you’re not overpaying. The day you buy, check the spot price of gold (available at many Web sites, such as www.goldprice.org (opens in new tab)).Don’t pay more than a 5% to 8% markup over the spot price -- that’s the typical premium, according to Michael White, spokesman for the U.S. Mint.
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White says that American Eagle Bullion coins, one of the most popular coins for investing in gold, first make their way into the market when they are sold to the Mint’s “authorized purchasers.” (See the list below of the authorized purchasers and their prices, terms and conditions. If you’re new to buying gold, they are a great place to start.) Gold coins are also sold in commemorative editions directly to the public, but these are more expensive. The Mint marks up the price of the coins to cover the value of the gold and the actual minting, as well as shipping and other costs, White says. Dealers say that markup is about 3%. Then the authorized purchasers -- some of whom sell directly to the public and all of whom sell to other dealers -- add their own markup, as do the dealers who buy the coins.
Don't buy coins for historical value.
Some gold dealers engage in a classic bait-and-switch: They offer gold coins or bullion, then try to sell customers on coins with historical, or numismatic, value. In fact, these coins usually have little or no extra value above their “melt value” -- the value of the coin if it were melted and sold as metal.
Goldline International, a major dealer, has come under fire by U.S. Representative Anthony Weiner (D-NY) for the high markups it charges on such coins. For example, Goldline and some other dealers push a French gold coin, the 20-franc “Rooster.” Weiner says Goldline charges 69% more than the melt value of the Rooster, which has no numismatic value.
In addition to the American Gold Eagle, the best-known coins typically bought and sold for their gold value alone are the Canadian Maple Leaf, the Australian Gold Nugget and the South African Krugerrand.
Don't pay a premium for proof coins.
Proof coins are special editions struck for collectors and often mounted in a special case. The dies used to make them are often finely polished and yield particularly pretty coins with mirror finishes. Proof editions are usually valued more highly than regular coins -- by collectors. The premium you pay for proof coins may be inflated and may disappear, depending on the market. So, for investment purposes, stick with regular coins.
Don't buy fractional coins.
These coins come in fractions of an ounce, such has a half-ounce, a quarter-ounce and even one-twentieth of an ounce. You’ll pay a higher markup for such coins than for one-ounce coins. The only real reason to own them is if you believe in a future meltdown of society, at which point paper money will be worthless and you’ll need small (gold) change to buy, say, ammo, freeze-dried food or a latte.
Don't buy gold from a cold caller over the phone.
The Federal Trade Commission reports a rise in boiler rooms hawking gold coins or bars. (A boiler room is filled with salespeople who cold call prospects and use high-pressure sales tactics.) Dama Brown, staff attorney for consumer affairs in the FTC’s Atlanta office, says that these operators usually make inflated claims about the potential profit from gold, such as “tripling your money in 30 days.” Such claims are often coupled with warnings about the weak economy and how gold, as a hard asset, is less risky than stocks, she says.
Brown says your first clue that these aren’t calls from legitimate sources is if your phone number is in the National Do Not Call Registry but the gold salesmen call anyway. “It surprises me, the number of people who will go ahead with a sale when dealing with someone who has already violated the Do Not Call list,” she says.
Also, these outfits don’t give you physical possession of the gold, but claim to hold it for you in a vault. "In some cases, these are outright scams and no gold exists," Brown says.
Don't buy based on confiscation scares.
Yes, it is true that in 1933 President Roosevelt issued an order to collect gold from U.S. citizens because the bank panics of that year and other factors were draining the Federal Reserve’s gold supply, and we were on a gold-based currency standard back then. (The gold standard was a system under which the dollar was equal in value to, and exchangeable for, a specified amount of gold.) And yes, Executive Order 6102 exempted rare and unusual coins from having to be turned in.
People who did turn in their gold (many just kept their gold, and no jackbooted gold police kicked down doors at midnight to collect a single coin) received $20.67 an ounce. Soon after, the U.S. Treasury set the price at $35 an ounce. Ouch.
However, some gold dealers use these facts to scare investors into buying overpriced coins. Some history: Hello, the U.S. is no longer on the gold standard and hasn’t been since 1971. And the limit on gold ownership in the U.S. was repealed in 1974. So notwithstanding the paranoia-laden pitches of some salesmen (and right-wing radio hosts), there is no danger of gold confiscation.
Further, the confiscation sales pitch is usually based on a very broad definition of “rare and unusual coins.” “They’ll say anything minted pre-1933 has numismatic value,” says Michael Freedman, president of Euro Pacific Precious Metals. In fact, Freedman says, “there were millions and millions of gold coins minted in the 1800s and early 1900s that were simply coin of the realm. They have no numismatic value.”
Don't buy using leverage.
Borrowing money (also known as buying on margin) to make a bigger investment in gold is a risky game. Say, for example, you invest $4,000 and then leverage your investment five-to-one, so that you control $20,000 worth of gold coins or bars in an account set up by a dealer or brokerage firm. To start, the price of gold is volatile, and if the price dips far enough (below the minimum margin requirement), you’ll have to kick in more money to keep your account, or you’ll have to sell some or all of your investment. Also, the salesman’s commission is based on the total amount of the purchase. So he’ll get, say, 5% of the $20,000, or $1,000. Although 5% is a fair commission, it’s 25% of your $4,000 equity stake. On top of that, you’re paying interest on the money borrowed.
And even worse, says the FTC’s Brown, in some instances the telemarketers do not disclose that your precious-metals investment will be leveraged. “They bury the details of the leveraging and the interest charges in dense contracts,” she says.
So how do you find a reputable dealer?
Good question. There are thousands of dealers in the country, but there is no federal regulation and little state regulation. The U.S. Mint has a list of national dealers and dealers by state (opens in new tab) that it checks but doesn’t vouch for. White says that the Mint checks those dealers against the Better Business Bureau list for complaints, as well as online to see whether there is “any negative information about the firm and to get a feel for how the company conducts and promotes itself.”
However, given that the Mint’s authorized purchasers are obviously trusted by the Mint, you may want to buy directly from one of them. We checked with each of them, and here are their rates, terms and conditions.
MTB (NY): 212-981-4510. MTB sells primarily to wholesalers, but individuals can buy from the company, too. It charges 4.5% over the spot price. There’s no minimum purchase, but there is a minimum commission of $25. No discount for bulk purchases.
CNT (MA): 508-697-9600. Minimum purchase of $1,000. The company does a background check; you must provide several pieces of information, including your driver’s license number. Traders work off a current spot-price screen, which changes throughout the day. No discount for bulk purchases and no standard commission given.
Jack Hunt (NY): 800-877-7424. Minimum purchase of five ounces. Payment must be sent upfront, then the company ships. Coins offered: one-ounce Gold Eagle coins minted in 2011 or past years. The company recently charged 4% over the spot price. With the purchase of 100 coins or more, you get a discount. For example, the markup would be reduced to 3.9% for 100 coins. With an order of 20 or more coins, there’s no shipping fee; for fewer than 20, there’s a $25 flat fee.
Prudential Securities: (NY) 212-778-6667. A small investor can open up an account by buying at least 20 ounces. Most clients come from Wells Fargo (Prudential and Wells Fargo have ties), and the company normally doesn’t sell to other individual investors. “We kind of discourage that,” we were told. But you can do it. The purchase has to be made through a wire transfer -- no checks, no charge cards -- and the company does a background check. Prudential buys for 3% and sells the gold marked up for 3.15%. The person we spoke with said the average trade was 50 to 100 ounces. No discount for bulk purchases.
Dillon Gage: (TX) 800-375-4653. Minimum order of $5,000. The dealer ships everywhere in the U.S. for a flat $25 fee; the markup is 7%.
The Gold Center: (IL) 217-793-8000. You must buy in-person at the 3000 West Iles Avenue office in Springfield, Ill. The markup is 5%. If you buy 100 coins, the company will reduce the markup to 4%.
Fidelitrade: (DE) 302-762-6200. You must open an individual Fidelitrade account. The markup is 4.8%. Buying 100 ounces or more gives you a discount of $1.25 to $1.50 per ounce. The company also charges a commission. Buy up to $15,000 worth and the commission is 1%; for $15,000 to $50,000 it’s 0.75%; for $50,000 and up it’s 0.5%. The company also charges shipping and handling, which is $35 plus $2.25 per ounce of gold.
APMEX: (OK) 405-595-2100 and press 1 unless you want to be on hold forever. For purchases of one to 19 coins there is a 5% markup; for 20 to 99 coins it’s 4.8%; for 100 or more it’s 4%. You must open a free online account. You’ll pay $25 shipping for orders under $25,000; shipping is free if you buy more. Payment by check or wire transfer is preferred.
FAQs
Returns on physical gold tend to be poor. If you purchase gold jewelry, for example, you may not earn as much when you sell it as you paid when you bought it. Safely storing physical gold can be difficult, as it's vulnerable to theft.
Why is it a bad idea to buy gold? ›
Returns on physical gold tend to be poor. If you purchase gold jewelry, for example, you may not earn as much when you sell it as you paid when you bought it. Safely storing physical gold can be difficult, as it's vulnerable to theft.
What to watch out for when buying gold? ›
Buyers should research reputable dealers and check the bars' purity, form, size, and weight before purchasing. Purchasing gold bars comes with extra costs including storage and insurance and a sales markup. Online dealers may have a larger selection, but there are additional shipping and insurance costs.
How much gold can you legally own in the US? ›
Physical gold. According to the CBDT's most recent circular, men, regardless of marital status, are only allowed to possess 100 g of real gold in the form of jewelry and ornaments. Married women are allowed to possess 500 g, unmarried women 250 g, and men 500 g.
How much gold can you buy without it being reported? ›
The answer is that there is no limit on how much gold you can purchase without reporting it. However, any sale of precious metals, including gold coins, must be reported on your tax return. So, while there is no limit on how much gold you can purchase, you will still need to report any sales to the IRS.
What does Warren Buffett say about gold? ›
He once stated about gold, "It doesn't do anything but sit there and look at you." One of Buffett's basic principles of investing is that one should only invest in things that are useful and that serve some purpose and that supply some practical need that people have. Silver has a myriad of industrial and medical uses.
What does Dave Ramsey say about buying gold and silver? ›
I'd stop investing in gold and silver completely. I don't put money in precious metals at all, because they have a lousy long-term track record. — Dave Ramsey is CEO of Ramsey Solutions.
Is it better to buy gold coins or bars? ›
Gold coins are known to have more sentimental value than gold bars both historically and culturally. Simply put, gold coins can be more ideal for you than gold bars if you want to invest in something with a more historical and cultural value. Again, gold coins have more collectible value than gold bars.
Does the US government track gold purchases? ›
Do I have to report my gold coin purchases to the Government ? No, there is no branch of federal, state, or local government that is interested in how much gold you might own.
Is it really smart to buy gold? ›
Gold is considered a hedge against inflation
Gold and other precious metals have long been considered a smart way to fight inflation. That's because it tends to hold its value and preserve your purchasing power over the long haul, despite fluctuations in the dollar.
Form 1099-B for Reporting Precious Metal Transactions to the IRS. The 1099 series is a set of forms used to report any profits made by non-corporate sellers. They allow the IRS to prevent many instances of tax evasion. Keeping track of individuals who may be selling items as a source of income is one key focus.
How can I avoid paying tax on gold? ›
Hold your investments for at least one year
These are taxed with ordinary income, meaning that your profits won't qualify for the special, lower capital gains tax brackets. To avoid this, sell your investments after at least one year, if possible. Otherwise you could face higher income tax rates.
Can US government confiscate gold? ›
Under current federal law, gold bullion can be confiscated by the federal government in times of national crisis. As collectibles, rare coins do not fall within the provisions permitting confiscation. No federal law or Treasury department regulation supports these contentions.
Do you pay taxes on gold if you sell it? ›
Tax Implications of Selling Physical Gold or Silver
Holdings in these metals, regardless of their form—such as bullion coins, bullion bars, rare coinage, or ingots—are subject to capital gains tax. The capital gains tax is only owed after the sale of such holdings and if the holdings were held for more than one year.
When you buy gold is it tracked? ›
Will the Government Find Out I Am Buying Precious Metals? Bullion investors like their privacy. The off-the-grid nature of physical gold and silver is one of the metals' most attractive features. They cannot be tracked electronically, and, in this age of government surveillance, that is increasingly important.
How much gold can I keep in bank? ›
Technically, there is no limit up to which one can own gold jewellery or ornaments in India.
Why are billionaires buying gold? ›
One of the primary reasons billionaires invest in gold is because it serves as a safe haven and store-of-value asset. During times of economic instability or market volatility, gold tends to hold its value or even appreciate, providing a level of protection for investors.
How much wealth should be in gold? ›
Typically, investors should allocate no more than around 5% to 10% of their portfolios to alternative assets like gold. However, it's always important to take your individual situation and goals into account.
Has anyone gotten rich from investing in gold? ›
The answer is yes, absolutely! Gold can play a vital role in a robust, high-performing portfolio. It has helped millions of investors hedge against inflation, protect against economic downturns, and achieve superior returns. However, these results are not guaranteed.
Is it better to save silver or gold? ›
Silver can be considered a good portfolio diversifier with moderately weak positive correlation to stocks, bonds and commodities. However, gold is considered a more powerful diversifier.
Silver is less expensive than gold: Your money can buy more silver than gold, in part because silver is more abundant in supply. Silver has more uses: Silver is highly conductive and used in industry and commerce more than gold.
What is a good amount of gold and silver to own? ›
The affordability of silver makes it possible for anyone to buy small quantities regularly to build a sizeable portfolio over time. As a result, many experts recommend a precious metal portfolio that ideally consists of 75% gold and 25% silver.
What is the best form of gold to buy? ›
Gold Bars. Gold bars—more commonly known as bullion—are a popular choice for people looking to buy gold. Bullion is typically sold by gram or ounce, and the purity, manufacturer and weight should be stamped on the face of the bar.
How much is a 1 oz gold eagle today? ›
Live Prices
| Order Value | Price | Premium |
|---|
| $ 1 - $ 136,999 | $ 2,081.62 | 6.00% |
| $ 137,000 - $ 342,999 | $ 2,077.69 | 5.80% |
| $ 343,000 - $ 684,999 | $ 2,075.07 | 5.67% |
| $ 685,000 - $ 1,368,999 | $ 2,072.45 | 5.53% |
1 more rowYou can start buying gold in amounts as low as 1 gram which is much smaller than the smallest coin. There's no upper limit. You can deal thousands of ounces if you want to.
Which states do not tax gold purchases? ›
These do not include any county-specific tax rates.
- Alabama: No sales tax on bullion.
- Alaska: No sales tax at a state level.
- Arizona: No sales tax on bullion.
- Arkansas: 6.5% on all precious metal sales.
- California: 7.5% on transactions below $1,500.
- Colorado: No sales tax on most precious metals.
The country with the most gold is the United States, with 8,133 metric tons in the American gold reserve. This amounts to a value of $480.84 billion, going by the price of gold at the beginning of January 2023.
Should retirees buy gold? ›
Gold can be a highly volatile asset, with an unpredictable price that rarely correlates with stable growth. And this makes it a poor choice for the kind of dependable, long-term investing that retirement demands. Here's what you need to know. A financial advisor can help you create a financial plan for your future.
What is the smartest way to invest in gold? ›
"For most people, the best way to access gold is the easiest way — via an ETF that's backed by a physical depository," says Noah Damsky, CFA and principal of Marina Wealth Advisors. "It's easy, efficient and transacts at low costs." Examples of popular gold ETFs include: SPDR Gold Shares (GLD)
Should I own physical gold? ›
Although the price of gold can be volatile in the short term, it always has maintained its value over the long term. Through the years, gold has served as a hedge against inflation and the erosion of major currencies, and thus is an investment well worth considering.
The reasons behind this renewed gold rush have to do with the need to seek refuge in safer assets during inflationary times. According to economists, China might be preparing for the issuance of a gold-backed currency as part of the BRICS strategy to reduce dependence on the U.S. dollar.
How much gold can you buy for $10 000? ›
What is the current 10000 USD to GOLD conversion rate? 10000 US Dollar is currently worth 5.11 GOLD. This means that you can convert 10000 US Dollar into 5.11 GOLD at the current USD to GOLD exchange rate, which was last updated on Jun 6, 2023 at 05:10 UTC.
Will gold go to $10,000? ›
We are fighting a third world war against the pandemic, an unprecedented event, and monetary policy response is set to drive gold prices to levels never seen before, this according to Frank Holmes, CEO of U.S. Global Investors.
How much tax do you pay when you sell gold? ›
Gold and silver jewelry, like bullion, is also considered a collectible. So if you sell your bullion jewelry for a profit, it is subject to the same maximum 28% capital gains rate for precious metals and must be reported on your income tax return.
How much is an ounce of gold today? ›
Monex Live Gold Spot Prices
| Gold Spot Prices | Today | Change |
|---|
| Gold Prices Per Ounce | $1,971.00 | +2.00 |
| Gold Prices Per Gram | $63.37 | +0.06 |
| Gold Prices Per Kilo | $63,367.65 | +64.30 |
Expect to receive 90% to 95% of the current market value or spot price if you're selling gold coins or bars. For jewelry, expect to receive about 70% of the melt value.
Why is it illegal to own gold bars? ›
When the stock market crashed in 1929, the well-to-do rushed to convert their bank funds to more reliable gold bullion. This left the government without enough gold to back newly printed money. Therefore, President Franklin Roosevelt used his executive powers to make it illegal to own gold coins or bars.
Which president outlawed gold? ›
FDR's 1933 Gold Confiscation was a Bailout of the Federal Reserve Bank. 20,000 metric tons of gold were 'circulating naked' in 1933.” President Franklin Delano Roosevelt's 1933 executive order outlawing the private ownership of gold in the United States was arguably unconstitutional. But why did he do it ?
When were U.S. citizens allowed to own gold again? ›
These prohibitions were relaxed starting in 1964 – gold certificates were again allowed for private investors on April 24, 1964, although the obligation to pay the certificate holder on demand in gold specie would not be honored. By 1975, Americans could again freely own and trade gold.
Do pawn shops report to the IRS? ›
Thus, if the pawnor pays the pawnbroker in the course of a one-year period more than $10,000 in “cash” in connection with the related transactions, the pawnbroker must file Form 8300 reporting the transactions.
Capital Gains Tax Rate
If you owned the jewelry you sell for less than a year, you pay a short-term capital gains tax. The tax rate is exactly the same as whatever income tax rate you file at. If you owned the jewelry you sell for more than a year, you pay a long-term capital gains tax.
Can I bring gold on a plane? ›
There is no duty on gold coins, medals or bullion but these items must be declared to a Customs and Border Protection (CBP) Officer. Please note a FINCEN 105 form must be completed at the time of entry for monetary instruments over $10,000. This includes currency, ie. gold coins, valued over $10,000.
How much gold can I own without reporting it? ›
Many wonder how much gold they can buy without reporting it to the IRS. The answer is that there is no limit on how much gold you can purchase without reporting it. However, any sale of precious metals, including gold coins, must be reported on your tax return.
How much gold can a person legally own? ›
No Limits. Luckily, there's no limit on how much gold bullion an individual can acquire and own. There are no laws prohibiting anyone from buying as much gold bullion as possible. You can hold as much gold bullion as you can afford and purchase.
Can I buy gold anonymously? ›
Buying gold anonymously is possible depending on the total purchase amount and your order method.
What is considered a large gold deposit? ›
According to the World Gold Council, larger and better-quality underground mines contain around 8 to 10 g/t gold, while marginal underground mines average around 4 to 6 g/t gold. Open-pit mines usually range from 1 to 4 g/t gold, but can still be valuable.
Where is the safest place to keep gold? ›
Use Safe Deposit Boxes
It's one of the most convenient ways to store gold. A safe deposit box at your local bank offers more security compared to keeping gold at home. The method is ideal for bullion, rare and collectable coins, and expensive jewellery.
Can I deposit 100k cash in the bank? ›
Depositing a big amount of cash that is $10,000 or more means your bank or credit union will report it to the federal government. The $10,000 threshold was created as part of the Bank Secrecy Act, passed by Congress in 1970, and adjusted with the Patriot Act in 2002.
What is the disadvantage of gold? ›
Gold jewellery can become scratched, especially when worn on a daily basis. Because nickel may be present in the gold alloy, gold may not be suitable for metal allergy sufferers.
What are the disadvantages of having gold? ›
Disadvantages
- Buying physical gold brings in a problem of storage. ...
- Gold prices can be volatile in the short run.
- One may have to pay brokerage fees while purchasing gold ETFs and shares.
- It has been observed that when the stock market goes up, gold prices go down.
The disadvantages are that (1) it may not provide sufficient flexibility in the supply of money, because the supply of newly mined gold is not closely related to the growing needs of the world economy for a commensurate supply of money, (2) a country may not be able to isolate its economy from depression or inflation ...
Will gold eventually be worthless? ›
According to some estimates, most of the known gold in the world was mined during the last half of the 20th century. While there are still some new mines opening today, it's rare for this to happen. This increased scarcity of new gold supplies means its value is likely to rise for the foreseeable future.
Is it better to keep cash or gold? ›
Hedge against inflation: As inflation increases prices, purchasing power decreases. So, if you have cash, you're effectively losing money. Gold, on the other hand, is often considered a hedge against inflation. As the value of the dollar goes down, value of gold may increase.
Are 1 oz gold bars a good investment? ›
Most of investors with large budgets buy gold bars because of their low premium. This enable them to buy gold at the lowest price per gram. For this reason, gold bars are considered to to be one of the most cost-effective way to invest in gold.
Is gold considered a dead asset? ›
In times when foreign exchange reserves are large and the economy is humming along, a central bank will want to reduce the amount of gold it holds. That's because gold is a dead asset—unlike bonds or even money in a deposit account, it generates no return.
Is it wise to buy gold? ›
Gold is considered a hedge against inflation
Gold and other precious metals have long been considered a smart way to fight inflation. That's because it tends to hold its value and preserve your purchasing power over the long haul, despite fluctuations in the dollar.
Which gold is best to buy? ›
However, 24k gold will be the best option for investment because it is 99.9% pure gold. Even though 24k gold is not durable and scratches easily, it carries a bigger inherent value than 22k gold (only 91.67% gold).
Which gold coin is best to buy? ›
24 Karat gold coins are a better investment than gold jewellery as making charges for coins are cheaper. However, it is highly subjective and depends on for what purpose you are buying gold.
Can gold be considered as wealth? ›
Throughout history, gold has been seen as a special and valuable commodity. Today, owning gold can act as a hedge against inflation and deflation alike, as well as a good portfolio diversifier. As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty.
Is gold safer than currency? ›
Gold is often hailed as a hedge against inflation—increasing in value as the purchasing power of the dollar declines. However, government bonds are more secure and have shown to pay higher rates when inflation rises, and Treasury TIPS provide built-in inflation protection.
A key reason for gold's value is the finite amount of supply of the metal. It is estimated that just over 200,000 tons of gold have been mined over the course of history, the bulk of which has been in the last 70 years, according to the World Gold Council.
How long until gold runs out? ›
In fact, the global demand for gold hit a decade peak in 2022 while its supply continues its nearly 7-year plateau. So gold is in high demand, but will it run out any time soon? The Earth has a limited amount of gold in its crust and experts are estimating that it may be unsustainable to mine gold by 2050.
How much gold is left in the world? ›
About 244,000 metric tons of gold has been discovered to date (187,000 metric tons historically produced plus current underground reserves of 57,000 metric tons). Most of that gold has come from just three countries: China, Australia, and South Africa. The United States ranked fourth in gold production in 2016.
How much is an ounce of gold? ›
