Thinking About Investing in Gold? Check this Gold Buyers Checklist First.

If you are thinking about investing in gold, then there are a few things that you need to consider before making your purchase.  I’ve made a gold buyers checklist to cross out before you buy.  Please note that whether or not gold is a good investment, or whether or not you should invest in gold, will not be debated in this article.  Also, this article will focus on purchasing and holding physical gold.  Gold related stocks and ETF’s won’t be discussed.

Authenticity and Reputation

Do your due diligence when selecting a bullion provider and when authenticating and verifying your gold.  Here are a few key things to consider.

  • Does your gold provider buy direct or are they buying in secondary markets? Always select a provider who is sourcing directly.
  • Do they have proper procedures and checks in place to make sure that they are buying a genuine product?
  • A bullion provider should ensure that the bullion that they receive is refined by an accredited bullion mint or provider and that they are stamped with a serial number and have a purity of 99.5% or higher.
  • Once acquired the gold should remain in professional vaults recognized by international financial institutions. As long as the gold remains in the so-called “chain of integrity” it can be easily traded and verified.  Gold kept in the system is said to be in “good delivery” status.  Providers can assure their clients that the gold that they own is authentic as long as it remains in the system.
  • Your provider should have systems in place to protect clients from money laundering and counterfeiting.
  • Seek a dealer who commits to repurchasing the gold that they have sold to clients.
  • Avoid buying gold that is converted to certificates. Own physical gold only.  Don’t allow a dealer to convert your gold into anything.
  • Avoid closed-loop buying and selling systems. Be sure that your gold can be traded on international markets.
  • Be sure that your provider is well-established, financially sound, regularly audited, and that you can access all audit filings. Request written statements from the auditors of their filings and reporting.
  • A quality gold provider will have well-established partnerships and be a member of one or more of the following: London Gold Market Association (LGMA), International Precious Metals Institute (IPMI), Industry Council for Tangible Assets (ICTA), Professional Coin Grading Service (PCGS), or the Numismatic Guaranty Corporation (NGC).
  • Ensure that your provider has adequate size and partnerships so that you can easily sell your gold.

Storage

  • Short of a few coins or a small amount of bullion do not store your gold on your own. Your gold provider should offer a specialized storage facility for your gold.  The facility should have independent verification and auditing procedures in place and should be insured.  Keeping your gold in such a facility keeps it in the chain of integrity.
  • Your provider should never store your gold in anything but this type of facility, and the gold should never remain on the bank’s balance sheets.

Quality

  • Buy only quality gold. That is with a purity of 99.5% or higher and traded at 100% “fine.”
  • “Good Delivery” gold is the most tradable and desirable. Since it is the spot market standard, it is the most liquid form of gold, much higher than coins or lower grade bullion.
  • Avoid companies that deal in hard-sell tactics. Most are selling gold coins of low quality with a markup of 25% to 100% over actual bullion value.
  • Do not buy from companies selling illiquid gold coins and bars.
  • Do not deal with companies who do not give you the right to sell your gold immediately or who force you to pay for multiple years of storage upfront.
  • Finally, avoid brokers engaging in leverage buying of gold. Quality can not be verified since you do not own the underlying asset.

Conclusion

This gold buyers checklist is extensive, but if you are going to invest a portion of your net worth into an asset class, then you have to be thorough and do your due diligence.  Investing in gold is no different.  The main takeaways are as follows:

  • Before selecting a provider do a complete audit on them. Check for all the criteria listed above.
  • Be sure that your gold will be kept in a secure location. Again, check all the listed criteria.
  • Finally, be certain that the gold that you purchase is of the highest quality, in the chain of integrity, and in good delivery status. Only purchase physical gold.  Avoid paper certificates and high-pressure sales tactics.

Read More:

Understanding How Gold Price is Determined 

Important Points to Consider When Buying Gold

Precious Metals For Your Investment Portfolio

Understanding Platinum and Why You Should Buy It

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