Three Things You Should Know Before Buying Physical Gold
So, you’ve made up your mind and have decided to start your investment efforts by purchasing some physical gold. Great! I’m sure you’ve already thought about why you want a real piece of shiny precious metal to call your own and not some paper that says you own one in a pile somewhere in an underground vault. But let’s go through some of the risks and pitfalls that you may face while you’re a proud owner of a few ingots or coins.
#1: Keeping a private cache of gold is a legitimate logistical concern.
Most of the issues you’ll face will deal with logistics. How will you store them? Do you keep it at home, or place it in a bank vault? How will it be kept? You can easily hide some gold coins inside a pair of socks, but it may prove more difficult to shove a whole ingot inside a pair of shoes.
I exaggerate, but the basis of it is still true: like all valuables, gold is best kept out of sight, and physical gold can prove to be an irresistible target for thieves, unwitting or otherwise looking to sell gold for cash.
#2: Gold ingots must stay ‘visible’ to retain full value.
Gold ingots are highly regulated. Because they are easy to fake (more on that later) and governments depend on their gold reserves to maintain economies, the whereabouts of every gold ingot is tracked as closely as possible.
This doesn’t mean that you can’t bring one home with you – it’s definitely possible, but the problem is that it effectively disappears in the radar, so to speak, and they have no idea what’s happening to it. But one major concern is the duplicating and faking of more gold ingots, which would lower the stability of gold if it went unchecked.
So what happens then? Any ingot that goes into private hands immediately loses a significant chunk of the original value, while the ones in the vaults – those that are under watchful eyes – are automatically cleared as authentic. It’s a harsh measure, but it helps stave off rampant forgeries.
On the other hand, bullion coins suffer no such penalty, and their value still reflects current gold prices.
#3: Fakes are not uncommon for both ingots and coins.
Gold is actually relatively easy to fake. Most people can be fooled by a simple gold foil encasing a cheaper metal, and the more experienced ones can miss out on cleverer forgeries.
In the case of ingots, the size itself allows a fake core to be inserted into a gold shell. This makes the ingot approximately the same weight as an authentic one, while containing less gold than usual. Ingots and bars are also easier to fake than coins, because there aren’t usually any defining characteristics for a block of gold, apart from some inscriptions that are reproducible.
Coins are somewhat harder to forge, due to the more complicated and varied designs from several mints around the world, but fakes still do exist. To make matters worse, individual coins are usually marketed as being more valuable than they really are (again, due to ‘exclusive’ designs), tricking innocent buyers to shell out more money than they are worth.
So, you’ve made up your mind and have decided to start your investment efforts by purchasing some physical gold. Great! I’m sure you’ve already thought about why you want a real piece of shiny precious metal to call your own and not some paper that says you own one in a pile somewhere in an underground vault. But let’s go through some of the risks and pitfalls that you may face while you’re a proud owner of a few ingots or coins.
#1: Keeping a private cache of gold is a legitimate logistical concern.
Most of the issues you’ll face will deal with logistics. How will you store them? Do you keep it at home, or place it in a bank vault? How will it be kept? You can easily hide some gold coins inside a pair of socks, but it may prove more difficult to shove a whole ingot inside a pair of shoes.
I exaggerate, but the basis of it is still true: like all valuables, gold is best kept out of sight, and physical gold can prove to be an irresistible target for thieves, unwitting or otherwise looking to sell gold for cash.
#2: Gold ingots must stay ‘visible’ to retain full value.
Gold ingots are highly regulated. Because they are easy to fake (more on that later) and governments depend on their gold reserves to maintain economies, the whereabouts of every gold ingot is tracked as closely as possible.
This doesn’t mean that you can’t bring one home with you – it’s definitely possible, but the problem is that it effectively disappears in the radar, so to speak, and they have no idea what’s happening to it. But one major concern is the duplicating and faking of more gold ingots, which would lower the stability of gold if it went unchecked.
So what happens then? Any ingot that goes into private hands immediately loses a significant chunk of the original value, while the ones in the vaults – those that are under watchful eyes – are automatically cleared as authentic. It’s a harsh measure, but it helps stave off rampant forgeries.
On the other hand, bullion coins suffer no such penalty, and their value still reflects current gold prices.
#3: Fakes are not uncommon for both ingots and coins.
Gold is actually relatively easy to fake. Most people can be fooled by a simple gold foil encasing a cheaper metal, and the more experienced ones can miss out on cleverer forgeries.
In the case of ingots, the size itself allows a fake core to be inserted into a gold shell. This makes the ingot approximately the same weight as an authentic one, while containing less gold than usual. Ingots and bars are also easier to fake than coins, because there aren’t usually any defining characteristics for a block of gold, apart from some inscriptions that are reproducible.
Coins are somewhat harder to forge, due to the more complicated and varied designs from several mints around the world, but fakes still do exist. To make matters worse, individual coins are usually marketed as being more valuable than they really are (again, due to ‘exclusive’ designs), tricking innocent buyers to shell out more money than they are worth.