Before making your purchase, you must decide in what form you want to own gold. Do you want to own it in physical or paper form? Gold bugs and armagedon survivalists only purchase physical gold and silver in the form of coins and bullion. Investors, gold fans, and most other people buy gold in the form of jewelry, gold coins, or through paper claims on gold.
If you want to buy physical gold, the cheapest form is buying gold bars from a reputable coin dealer or a precious metals broker Kitco. Markups on gold and silver bars are the lowest, because they are the cheapest to make, weigh, assay and store.
After bars, bullion coins are the cheapest and most easilly tradeable products. The best way to buy physical gold and silver is to buy coins from a coin dealer. Markups on non-numismatic gold coins range from 3.6% to 5%. Numismatic coins may cost much more because of their rarity and limited quantity. You should buy numismatic gold coins ONLY if you are a collector and know what you are doing â not if you are a retail buyer seeking diversification. Purchase your coins from a national mint or a reputable dealer, and do not pay more than 5% over the price of the gold spot market. The best forms to own are American Eagles, American Gold Buffalos, Canadian Maple Leafs, and South African Kruggerands.
Jewelry is the worst way to buy physical gold as the markups are outrageous. One does not pay for the gold itself but for the craftsmanship and marketing costs of the jewelry. Try selling your jewelry back to a jeweler and see if you get even half your money back.
There are several options for those who want do not want to go through the hassle of buying, transporting, storing and securing physical gold, and/or want to buy it in large bulk (gold is heavy, so buying a $1 million worth of it cannot easily be carried in a suitcase). That is where you go for gold certificates and 'digital' gold.
Investors may purchase Electronic Traded Funds (ETFs) such as GLD, SLV, or IAU. These are traded on international bourses/exchanges through brokers and the only commission you pay is to the broker. The cost of the ETFs are close to spot prices and reflect fees used for storing the physical gold and other administrative fees. Because anything traded on an exchange is highly regulated, you can be sure that there is an underlying physical asset backing your investment. Stay away from futures contracts, as they are speculation and hedging vehicles with a finite life, and are not buy-and-hold instruments.
Some people prefer to own a claim on pooled gold. Pooled gold is where a gold dealer pools money from buyers and stores the gold in its vaults. Owners are given a claim to a portion of the purchased gold. The gold claim is in the form of a paper certificate, such as Perth Mint certificates. Other reputable dealers such as Kitco also offer pooled gold accounts.
Some gold dealers, such as Gold Money, sell gold and let you store it in their vaults. The gold is purchased with a pool of money, but each gram of gold is allocated to the buyer. There is a fine line between pooled gold and that offered by Gold Money, but the difference is that the former is a claim on a portion of the gold in a vault, whereas the latter specifies which part of a specific pool of gold is owned by the buyer. Gold Money and E Gold use this form of gold ownership to create a different form of payment mechanism, similar to a banking system, but instead base it on gold and not a fiat currency.
Buying pooled gold usually has a markup from 1% to 2.9% based on the amount of gold purchased (the more you buy at once the cheaper it is). Perth Mint Certiciates are sold through dealers, and have a 2.5% markup, plus service fees of the dealer. Again, the more you buy the cheaper it gets.