Gold is one of the most precious metals in terms of economic value and physical weight. Banks worldwide hold interest in this precious metal even though it no longer serves as a backing for the US dollar. It is because gold reserves serve as an indicator of the health of the country’s economy. It is the exact reason why gold has the value it has and why it is a prevalent investment opportunity.
It is a common suggestion from investors and investment advisors to include investment gold in your financial portfolio to protect your investment. Investing in gold is not as simple as investing in bonds and stocks, which you can do with a phone call, as gold requires other considerations like storage and insurance.
Here we’ll talk at length about investing in gold, more precisely, investing in gold bars. Read on, and you will learn all the basics about investing in gold bars and the standard terms of gold bars.
Common Gold Bars Terminology
Before we delve further into gold bars and why invest in them, here are the most common terms that investors use when referring to gold bars:
- Ingot and bullion – ingots and bullions are interchangeable terms used to refer to gold in bar form instead of coin form. Bullion or ingot gold is usually less expensive than gold coins because it takes less effort to produce.
- Cast Bar – gold bars poured into a mold to get their bar shape; these can have uneven surfaces, vary in appearance, and be handled directly.
- Mint Bar – minted gold bars are machined into specified dimensions on set specifications regarding dimensions and purity. Mint (minted) bars are sealed in protective packages.
- Troy Ounce – a measurement for precious metals, the troy ounce weighs 31.1 grams, and investors use the troy ounce when checking the prices of precious metals like gold.
- Spot Price – the price of gold at the immediate moment of sale, as the market price fluctuates over time.
Why Is Gold Valuable?
Gold is unaffected by the market rules of supply and demand, and it is an indestructible non-consumable commodity. Of course, gold is still mined on Earth, and it looks like this trend will continue for a long time, and the overall gold supply will increase.
Still, there is a constant demand for gold as central banks, and other hoarders tend to collect and store gold in their vaults, making it scarcer than it is. Here are the main factors that drive the gold markets and decide on its value:
Gold has been considered safe to store because of its properties, as it does not oxidize or lose its shine over time. Also, it is safer to keep than fiat (paper) currency as it is resistant to political, economic, or other instabilities. It is why central banks all over the world store gold and often drive up the price of gold.
The economy can experience periods of inflation for various reasons that affect real estate, bonds, and stock markets. Inflation tends to decrease the value of paper money and most other investments.
Still, gold is immune to the effect of inflation, making it a safer investment that can withstand the losses in your financial portfolio caused by the changing value of other investments.
When prices decrease, and the value of the markets loses its power, the relatively safest investment is in gold bars or gold coins. If the economy is in excessive debt, the purchasing power of gold increases, which comes in your favor.
Political Crises/War Crises
Any political or wartime crisis strongly affects the economy, usually driving the market prices up. Gold is a commodity that can be quickly sold in case of a crisis, and it can also be traded in case of utmost necessity.
That is why gold is also referred to as a crisis commodity, and many people like to keep a part of their investments in gold.
Limited Supply and Increased Demands
Gold is a naturally-occurring metal that needs to be mined from the ground. As such, its production is limited due to several factors, and the supply can’t meet the market demands, and its price and value go up.
Another point in favor of the increased price and value of gold is the increased market demand, especially by emerging economies. For example, during the wedding season in India, the global gold market experiences the highest demand, as India is the largest gold-buying nation in the world for jewelry.
Short History of Gold Prices
Here is a short overview of the historical price of gold from 1970 to today. Gold was priced at a relatively low price, but the economic crisis in the 1970s brought a significant increase in gold prices.
However, its price stabilized and slowly declined in the following years, staying at a level price of about $720/ounce until the economic crisis of 2008. During this time, the price of gold increased to about 1K/ounce, and in 2011, the price of gold soared again to about $1,895/ounce, and in 2012 it hit the $2k/ounce mark.
The price remained relatively stable until 2020 when it spiked at over $2k/ounce and leveled at $1,900/ounce. Today, 29 August 2022, the price of gold is $1,720/ounce.
Gold Bar Investment Pros and Cons
- Gold bars are less expensive than gold coins
- Gold bars are more accessible to store than gold coins
- Gold bars are more profitable, private, and liquid
- Gold bars are readily identified by their stamps and are not easily counterfeited
- Gold bars are heavy
- Gold bars are not an income-generating investment, as there are no dividends to gold investment
- The gold market prices are also subject to fluctuations
Essential Factors When Buying Gold Bars
Here are the key factors you need to know when investing in gold bars:
Gold fineness is measured in karats; fineness is ranked as thirds, starting from 8 karats up to 24 karats. 24 karat gold is 999.999 fine gold, the purest possible gold bar. To be valued as an investment gold bar, it should have a purity of 99.5% or a fineness of 995.
The purity and quality of the gold bar are outlined on the face of the bar, including the registration number, manufacturer, weight of the bar, and purity.
The world’s most popular gold bar manufacturers are the Credit Suisse Gold Bars, PAMP Suisse Gold Bars, Royal Canadian Mint Gold Bars, Johnson Matthey Gold Bars, and the Valcambi Gold CombiBars.
When looking to invest in gold, you need to consider the bar weight as it has a significant influence when selling gold bars. Gold bars come in different sizes, from a single gram, five, ten, twenty grams, and the one troy ounce or 31.1-gram bar. The heavier gold bars are 50 grams, 100 grams, 500 grams, and 1 kilogram.
The smaller sizes are more popular as these are much easier to buy and sell, and the 10-gram gold bar is one of the most popular sizes of gold bar. However, investing in larger gold bars is the better choice if you intend to save for longer or put gold in your IRA.
Gold Bar Manufacturer
The gold bars need a stamp from the manufacturer, and selecting gold bars from a reputable manufacturer is essential. The gold bars from reputable manufacturers are easier to sell, as there is a guarantee of quality, purity, and consistency across all the gold bars.
Gold Bar Seller
A factor to consider is the seller of the gold bars. There are different sellers with different profit margins and other costs like insurance, shipping, certification, and other fees.
The additional costs can raise the price of your gold bars, which is why you should find reputable gold sellers. Also, it would be best to store the gold in IRS-certified storage facilities and not store it at home, as there is no way to insure your gold with a home insurance policy.
Most Popular Gold Bars Today
Here are the top gold bars you can find in circulation now; please note that these are also very popular for IRA investments.
Perth Mint Gold Minted Bars
Produced by the Australian Perth Mint, these are fractional gold bars with 99.99% purity. They come in sizes from ½ ounce to 1,000-ounce bars. They also come in 5-gram, 10-gram, and 20-gram bars, as well as the one and 10-ounce gold bars.
Credit Suisse Gold Bars
Credit Suisse is an international conglomerate in the financial industry, and it sells some of the most popular gold products in the world. They have 999.9% pure gold bars in all sizes and are identified by unique serial numbers.
Johnson Matthey Gold Bars
Johnson Matthey is a UK company that has been producing silver coins for years and has gold products like gold bars.
They sell bars in different refinement degrees, sizes, shapes, and designs. Still, their 9999 pure gold bars are sold as cast ingots that they usually offer at reduced prices to serious investors.
Engelhard Gold Bars
Engelhard is a US-based metals company, but they don’t produce gold bars as their main products. Instead, they produce 999.9% pure gold bars with a smaller capacity, making them pricier than other manufacturers.
They have cast and mint versions and unique serial numbers on each bar, with the cast gold bars having odd shapes.
Valcambi Gold CombiBar
The Swiss company Valcambi introduced the CombiBar in 2011, which is a 999.9 fine gold bar consisting of 50 1-gram bars, making it easily purchasable and portable.
Investing in gold is wise, mainly to diversify your portfolio and ensure some of the investments are safe from direct influences and market crashes. Still, investing in gold has other implications like storage, insurance, and more, but gold bars tend to cost less than gold bullion coins.
Another plus when thinking of investing in gold is that you can add gold to your IRA and save for retirement without losing money due to inflation or other potential insecurities.