Buying Gold – Tips on Costs

Most small Investors will have no doubt been aware of the recent rise in the price of gold and subsequent correction. Like many precious metals, the higher the price, the more attractive and alluring it becomes especially when the public feels that its on an upward trend – even though one can buy less for the same money. Ironically in the West, as the price falls people tend to purchase less – although this is not always the case. This yellow metal, has throughout the Centuries, been the one form of investment that has maintained its purchasing power. For this reason, the purchase of:  gold bullion, gold futures, gold coins, ETFs, and more recently Gold IRAS, have become increasingly popular. So much so, that many people considering their retirement have undertaken Gold IRA Rollovers so as to preserve wealth against a declining dollar and currency devaluation. Many investors have purchased physical gold and stored it themselves in order to avoid ‘third party’ and ‘counter party’ risk.

When purchasing gold, like all investments, there are associated costs, and anyone considering an investment of this kind, should take the following into account:

Gold Spread:

This is the difference between the buying and selling price set by the bullion dealer. The price advertised on-line or in the National Newspapers is the “Spot Price” and the dealer will purchase from you a few percentage points below ‘spot’ and sell to you a few percentage points above ‘spot’ price. Depending on the size of the purchase/sale and the size of the dealer, this may represent anything from 5% – 10%. (Many householders have been tempted to sell their gold to high street or ‘post only’ dealers who may have a spread of as much as 50% – and these really should be avoided).

Gold Storage Costs:

When purchasing physical gold or bullion, it needs to be stored in a safe place to protect against theft. Generally this will involve a Bank’s Vault or Security Box or a specified Storage Unit designed for that purpose. To provide such a facility naturally incurs a charge which may be monthly or annually. In the case of a Gold IRA or precious metal IRA, the custodian will take care of this, again at a fee. These costs vary considerably, and should be compared and taken into account.

Shipping and Insurance Costs:

Once the precious metal has been purchased, it has to be transported to the Secure Storage facility, which may or may not be in the same country. Naturally, the transport costs and inevitable insurances associated with the transport have to be assessed and borne into the overall cost equation.

Taxation:

This will vary from Country to Country; in the USA for example, Sales Tax is charged, and in the UK VAT (much of gold is exempt but not all, whereas silver is subject to VAT). Capital Gains Tax may also apply to any profit or gain, however, one of the key benefits of a Gold IRA is to either defer or eliminate such a charge – the reason why they have increased considerably in popularity.

A layman, looking at this may ask, ‘with so many costs, is an investment into precious metals like gold, silver or platinum, really worthwhile?’ When one considers the gains – especially the medium to long term gains – in their price and value, the answer is an almost inevitable Yes. Tax benefits exist for retirement accounts, and gold is purchased as a hedge against inflation or for portfolio diversification reasons.

In conclusion, whether one is investing directly into gold, or a gold IRA or an IRA Rollover, costs of acquisition have to be borne in mind. So too should security, tax incentives and of course performance in value. With this in mind, any investor should consider dealing with a highly positive rated company, with a good track record, and reasonable charges.