There are many savvy investors and individuals looking for wealth preservation options, who are interested in buying physical gold. Right off the bat, you shouldn’t consider this to be a simple retail experience.
There are a lot of factors that go into when you should buy gold, how much gold you should purchase, and who you should get it from. This is especially important if you are looking to turn a mid-to-long-term profit with the old adage “Buy Low and Sell High.”
What Are The Best Times To Buy Gold?
As strange as it may sound gold can have some seasonal influences as well as other external factors. Paying attention to these things will help you get the timing just right for when to make this major investment purchase. Not every gold dealer or gold broker can give you these insights. So, it’s best to do a little thinking and research of your own when it comes to timing your purchase.
When it comes to seasonal considerations, it’s important to note that while there are some productive operations in the Southern Hemisphere, most gold mining happens in the Northern Hemisphere. During the northern summer, prices tend to flatline a bit.
When September and October come along the weather is typically too cold for mining to continue. This is especially true for plaster miners who rely on flowing water to run their gold wash plants. It’s also the time of year when the gold volume is at its highest before it is added to the world supply.
There are also some known times of year when gold demand goes up in certain countries. India, for example, tends to run from October to December, and many of the developing middle class purchase gold jewelry and ornamentations at this time.
Oil prices can also impact gold’s price per ounce. High energy costs can drive up how much gold can be mined at a reasonable price. High oil prices in the summer can also cause smaller mining operations to “Go Bust” ceasing operations and leaving ground unmined until the next year. On a larger scale, these two factors could drive up the price of gold.
How Is Gold Priced?
While it has its moments of relative stability, gold prices tend to fluctuate. The “Present Tense” price of gold is called it’s “Spot Price.” It essentially represents the most recent average bid price which is recognized by professional traders on a global scale.
There are a variety of things that can potentially influence gold’s spot price in the short-term. This could include political unrest or outright conflict going on inside a major gold producing region, long-term inclement weather, or changes in the policy of one or more central banks.
How Do I Find The Right Gold Dealer or Broker?
There are some gold coin dealers who offer their wares through a bidding process conducted through an online sales portal. While most of these are legitimate, many use a bidding system, which can quickly turn into a bidding war, that drives up the price to reduce your overall profit potential.
When researching for a gold dealer, which is sometimes called a gold broker, there are several things that you want to research.
Pricing – Is always going to be a factor anytime you buy anything. Take your time to check out dealer websites to make sure they are offering a fair price for gold. This process should also include checking the spot price for gold on exchange sites, to give you a bellwether. In general, a broker should be offering you a price that is roughly five to eight percent premium above the spot price.
Dealer Buyback Policies
Dealer Buyback Policies – might not seem like a big when you are just looking to buy in the short-term. However, there are a few brokers who will charge another five to eight percent premium if you sell back your gold at a later date. There are some out there who do not assess these extra premium charges. Make a note of the dealer’s buyback policy, and if you choose to go with them, make sure you get it in writing and keep it in a safe place.
Reputation – is a very big deal when you consider that buying anything online poses risks. There are a few instances of fraud and counterfeit gold that have occurred through less reputable brokers who were seemingly “New” to the industry.
Are There Any Red Flags To Watch Out For?
Buying physical gold is generally a sound investment move. Yet there are a few red flags to watch out for when you are researching a gold dealer.
Free Storage Or Delayed Delivery Policies
Free Storage Or Delayed Delivery Policies – tend to be a red flag, especially if that dealer doesn’t have an established reputation. Most reputable of dealers can point you in the right direction or connect you with a reputable delivery or security company. Ideally, if you are looking at a modest amount of gold, it might be better to store it in your own safe or secure a bank deposit box.
Low Online Activity
Low Online Activity – can be a red flag that not everyone notices. Ideally, a broker who puts up updates and offers newsletters through their site shows that they are invested in the process of attracting clients and providing reputable services. It’s often a sign that they are shareholders in the brokerage, and that they have their own good name on the line. A broker site that is just a silent online portal, might just be there to make a profit off you and move on. Some might not be legitimate.
What Are Some Common Mistakes When Buying Gold For The First Time?
Don’t Buy Proof Coins
A proof coin is essentially commemorative coin that often sold in a special case. Most are finely polished to maximize their gleam and their perceived value. They aren’t really a good option if you are looking to buy gold as an investment or a wealth insulator. While proof coins do tend to have a higher value to interested collectors there is nothing guaranteed about their monetary resale value in the long-term.
Don’t Buy Fractional Coins
Technically gold retains its value on a price per ounce basis. However, you still end up paying a premium on a fractional coin just as if it was a one ounce coin. Many dealers will even charge a higher premium on a fractional coin.