How to Buy Gold Online

If you’ve never purchased gold before, your first purchase can be nerve racking. How do you know which dealers you can trust, and when is the best time to buy? This post provides advice about how to buy gold online from my experience as a gold enthusiast.

  • What to Buy: Gold Coins or Gold Bars
  • Where to Buy Gold
  • When to Buy Gold

What to Buy: Gold Coins or Gold Bars

Gold Bars and Coins
Gold Bars and Coins

The format of gold you decide to buy can depend on your reasons for buying gold. If you’re more of a collector, you might prefer to buy gold coins. I advise avoiding numismatic coins, however, because the price of a numismatic coin is highly prohibitive, and you really need to be an expert collector to know what you’re doing when it comes to numismatic coins. If you’re new to precious metals, you can identify a numismatic coin by comparing it to the prices on my Gold Coin Prices table. If the price is far greater than similar coins you find there, it’s probably numismatic or a scam.

If you want to maximize wealth preservation, you probably want gold bars because they have lower premiums. In fact, the bigger the gold bar, the lower the premium.

Where to Buy Gold

Deciding where to buy physical gold coins and gold bars (gold bullion) is an important decision. After deciding what you want to buy, go to my Gold Coin Prices table or Gold Bullion Prices table, find the item you want to buy, and click the arrow at the top of the column to sort by price. Then, check the gold dealer ratings–indicated by the stars under each dealer’s name–to determine which dealer has the best combination of low prices and a good reputation. You should consider other criteria such as:

  • The gold dealer’s location.
  • How long the gold dealer has been in business.
  • The gold dealer’s payment methods, return policy, and buy-back policy.
  • Volume discounts.
  • Reduced pricing for different payment methods. Note that you can find some of this information on my dealer review pages.
  • Shipping costs.

Gold Price Prediction: August 2013

Up til now, the polls have only appeared on the sidebar and in the poll archive, but from now on, I’ll associate a page with each poll, so you can leave comments to justify your gold-price prediction.

July spot gold ended: $1,333.80.
Will it go up or down by the end of August?.

  • Up (67%, 22 Votes)
  • Down (33%, 11 Votes)

Total Voters: 33

Protips for Gold and Silver Dealers

This post is for dealers and sellers of precious metals.  Precious-metal consumers are also welcome to post their suggestions in the comments.

Because I truly believe in sound money (gold and silver), I want all precious metal dealers to have a successful business with many satisfied customers. So here are a few important tips to improve your image and increase you customer base.

  • Be honest about your stock quantities. “In stock” means you have the product on location, in your possession. It does not mean the product has been allocated by a supplier and is on its way.  Don’t be afraid to list an item as out of stock.  If possible, provide even more transparency by specifying when the item will be restocked. Not only will this make you more reputable, it also provides a signal to consumers that there are shortages in the market.  Gold and Silver Online, for example, clearly displays the date when they expect delivery of out-of-stock items.
  • Be direct and transparent with pricing.  When listing prices on landing pages that contain a product assortment, display the price for a single item– not the lowest-price volume discount for that item.  A sure-fire way to instill mistrust in new customers is to list the volume-discount price for what appears to be a list of single items. When a potential customer clicks an item and discovers that the price is actually a volume discount for a quantity he can’t afford, the result is suspicion, and it detracts from your credibility.Make tables that display payment options and volume discounts on product-detail pages.  JM Bullion, for example, clearly lists all of the of the volume-discount prices and also includes the prices for different payment methods.
  • No hidden fees.  When people make purchases online, they expect to pay the cost of the product plus shipping, and sometimes tax.  That’s it.
  • Display live prices on your web site.  Dealers that do not have live prices risk losing customers online.  Nobody wants to call just to find out how much something costs, when there are plenty of other dealers who display live prices.  Dealers that do not have live prices probably get most of their customers by direct referrals and are losing a great share of potential customers that find the dealer via online searching.
  • Use consistent and clear names for your products. Each product name should stand on its own, without relying on page headings, for example, to provide clarity or other information. A product name should always include the metal, weight and if it’s a bar, the format (bar). For example, 1 oz Silver American Eagle, 1 oz Gold American Eagle,10 oz silver bar, etc.

Gold and Silver Brokers

Problem

I don’t have a lot of money, so my PM strategy thus far has been to save for long periods of time, then buy silver or gold in bulk in one shot to save on premiums and shipping. The downside of this strategy has been that I don’t buy as often as I would like, and it’s not always a good time to buy when I’m finally ready to trade some cash for precious metals. Another problem is that while I’m saving, it’s easier for me to dip into my cash savings, whereas I never touch my savings that are already converted to gold and silver. If I were better off financially, I would prefer to make a small purchases monthly, so buying precious metals would be more habitual.

Solution: Precious Metal Broker

To solve this problem, I’m thinking about trying a precious-metal broker. A precious-metal broker lets you purchase gold, by funding an account online, and stores the gold on your behalf. One benefit is that you don’t have to buy an entire once of gold at once, if you can’t afford it. You simply deposit as much as you can afford, and the corresponding fraction of gold is allocated to your account. In theory, you could deposit one dollar and own a dollar’s worth of gold. This doesn’t mean that they shave off a speck of gold and put it in a vault for you, but they do allocate a speck to you from a gold bar.

Physical Delivery

Some brokers also deliver physical gold, silver and other precious metals. So after you have allocated an entire bar’s worth of gold in your account, you can take delivery of the physical bar. My strategy will be to fund an account regularly and take physical delivery whenever I’ve allocated an entire bar of gold or silver.

The table below contains my findings so far. I will only add brokers that offer physical delivery. The fees are copied directly from respective sites at the time of this post

Broker Commissions Delivery Fees Metals Offered
GoldMoney Your metal purchase is based upon the prevailing gold gram, silver ounce, platinum gram or palladium gram buy rate, which is the metal’s current spot price plus a buy fee.The buy fee for a gold gram purchase ranges from 0.98% to 2.74% above the prevailing spot gold price, depending upon the size of the transaction. The buy fee for a silver purchase ranges from 1.99% to 4.24% above the prevailing spot silver price. For platinum the buy fee ranges from 2.19% to 4.67% and for palladium from 2.63% to 5.52%. Fees will depend on location and bar type. Gold, Silver, Platinum, Palladium
BullionVault
Transactions Sum of all purchases (or sum of all sales) in the year so far Commission Rates
On the first $75,000 or equivalent 0.50%
On the next $750,000 or equivalent 0.10%
Then 0.05%
In normal use you will receive your money paid directly to your bank account after you sell.You can withdraw bars at any time. The fees vary according to the circumstances:

  1. Where you cannot reasonably be paid safely by bank transfer you can withdraw physical gold for the reduced fee of 1%, plus transport and insurance costs.
  2. Where the normal exit route to your bank remains viable, but you elect a physical withdrawal, then the cost is 2.5% for withdrawing whole gold bars, with a further 5% surcharge for withdrawals below 400 oz – to cover the cost of sourcing the necessary small bars or coins.

 

The fee for silver (whole bars only) is 10%.

BullionVault gold and silver are both VAT (sales tax) free – for as long as they are held in our vaults. Upon physical withdrawal gold remains exempt, but 20% VAT then applies on silver.

Gold, Silver
GoldBroker

GOLD

Minimum investment = 20 000 euros

Amount Invested Commission
20 000 – 100 000 euros 2%
100 000 – 200 000 euros 1,5%
More than 200 000 euros via Matterhorn Asset Management

Note: 1 oz bars are sold with 2.5% commission on top of the spot price.

SILVER

Minimum investment = 25 000 euros

Amount Invested Commission
25 000 – 100 000 euros 3,5%
100 000 – 200 000 euros 3%
More than 200 000 euros via Matterhorn Asset Management
Not Specified Gold, Silver

Gold fair value: $10,000 to $38,0000 or More

The fair value of a good or service is the rational and unbiased estimate of the potential market price.  Unfortunately, the current gold prices are irrational and biased.  The paper market for gold trades 100 to 200 times the amount of gold there is to back the trades, which is completely irrational, so there is no gold fair value.  It also came out recently that spot prices are determined by a handful of banks. The London spot price is set twice daily by five banks: Barclays, Deutsche Bank, HSBC, Bank of Nova Scotia and Société Générale (silver is set by the latter three). These prices are then used to determine prices worldwide.  When the world-wide price of something is set by a small elite group, motivated by their own self interests, it is not only biased, it’s criminal.

According to Dylan Grice, the price of gold (per ounce) at which the US dollar would be fully backed is $10,000. Dylan Grice doesn’t present his calculations in his publication, but it seems like he is using the monetary base in his calculations, which is simply “sum of currency (including coin) in circulation outside Federal Reserve Banks and the U.S. Treasury, plus deposits held by depository institutions at Federal Reserve Banks.” So, it seems like Dylan Grice’s calculation is low.  If you have a good argument for using BASE or M1 instead of M2, please let me know in the comments.  Also, if you consider Michael Kosares’ calculation at goldseek.com that the true inflation-adjusted price of gold (back in 2010) was $7,500, that makes $10,000 seem even lower. Note: Michael Kosares’ figures are the gold price adjusted for inflation; his numbers have nothing to do with backing the dollar with gold.

Monetary Base, M1, M2 April 2013

If we try to back the dollar with gold using M2–which includes M1 plus savings deposits, money market deposits, etc.–to get a more complete picture of the money supply, we get a much larger fair price for gold. After all, why would you not take savings deposits into consideration when calculating the money supply?  Couldn’t savings be converted to gold under a theoretical gold standard?

Let’s do the math.  According to the Federal Reserve, the M2 money supply is about $10.5 trillion. Let’s round it down to $10 trillion for the sake of simplicity.  The US Treasury holds (in theory) 261,498,926.247 ounces of gold. Using this formula:

gold price per troy ounce * total gold reserves = value

or

gold price per troy ounce = value / total gold reserves

…we get

1,472.00 * 261,498,926.247 oz  = $0.385 trillion.

38,241.07 * 261,498,926.247 oz  = $10 trillion.

Gold Price Gold Reserves Value
Current  $1,472.00  261,498,926.247 oz  $0.385 trillion
Theoretical  $38,241.07  261,498,926.247  $10 trillion

So, to back the US money supply with gold, it would would probably take a gold price of around $38K per ounce.  I say “around” because I rounded M” down and I’m not sure if we should use M2 or M3, which is no longer published, to make these estimates. If we threw in Michael Kosares’ inflation adjustment into the mix, we would get an even higher price.

Delivery Delays and Stock Shortages

The recent drop in gold and silver prices has caused a spike in demand, which has emptied the shelves and caused delays for many precious metal dealers. Below is a table of current (April 2, 2013) messages regarding delays shortages.  I commend the dealers who state which items are out of stock or delayed, so we have a clearer picture of what is happening in the markets.

Dealer Message
Bullion Direct “Due to a increase in market activity, please anticipate product and operational delays.”
Gainesville Coins “This item will begin shipping on 05/10/2013” on several popular silver coins.
Gold and Silver Online “SOLD OUT” on many silver items.
Golden Eagle Coins “Out Of Stock” and “Delayed Shipping Date: 05/18/2013″ on some silver items.“Delayed Shipping Date: 04/25/2013″ on some gold items.
GoldSilver.com “Estimated Shipment Date May 19, 2013″ on many silver items.”Estimated Shipment Date May 05, 2013” on many gold items.
JCSGold “Out Of Stock” on popular silver coins.
Kitco “Shipping only outside US. Due to high demand, this product is only available outside of the US.” on many silver and gold items.
Lear Capital “Because of the recent market swings, we are limiting online orders to $5000 after hours.””Delivery may take up to an additional 14 days due to supply postponements.”
Provident Metals “STOCK DELAYED” and “OUT OF STOCK” on many silver items.”STOCK DELAYED” on many gold items.
Texas Precious Metals “Out Of Stock” on many silver items.”Out Of Stock” on some gold items.

Comex Gold Inventories Drop to Lowest On Record

Over the last 90 days, stocks of gold held at Comex warehouses plunged by the largest figure ever on record during a single quarter since eligible record keeping began in 2001.

Total drainage of physical inventories reached nearly 2 million oz.’s of gold, which  represents roughly 3 billion dollars at today’s prices.

The largest inventory drainage is being reported from JP Morgan Chase & Scotia Mocatta warehouses.

For more info and charts, see the full scoop at bullmarketthinking.com.

What Is Paper Gold?

Paper GoldIf you’re new to precious metals, you might have read about paper gold and wondered what it is. Paper gold is not physical gold. Paper gold is a piece of paper, or digits on a computer, acting as a substitute for physical gold. Paper gold is usually traded in exchange-traded funds (ETFs) or futures markets. In a futures market, speculators bet on the direction of the gold price. They do not produce gold or use it. They cannot deliver gold to a buyer, nor do they take delivery of the gold. They merely try to profit from a change in the gold price. This mechanism can provide price stability for producers and buyers, but the problem is that there is more paper gold than physical gold in existence. In fact, it is believed for every ounce of physical gold, there are 200 ounces of paper gold. What happens if consumers try to take delivery on more gold than there is in paper existence? Pop goes the weasel!

Gold & Silver Legal Tender Legislation Status by State

According to Article 1 Section 10 of the Constitution

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.


However, when was the last time you paid for anything in gold or silver?  This table shows the current status of states that have passed or proposed laws to make gold and silver legal tender.

Arizona Passed in Senate April 2013 and the House on April 8, 2013. SB 1439, the Constitutional Tender Act, which allows businesses and the state government to accept payments in gold or silver was eventually vetoed by Governor Jan Brewer.

On February 14, 2014 a new bill (SB1096) passed the Senate by a vote of 18-12 and is awaiting a vote by the House.

Colorado Senate Bill 12-137 killed by Senate democrats in March 2012.
Georgia Introduced February 17, 2009.
Idaho Passed April 2012.
Indiana Introduced January 2013.
Iowa Cited in the news but cannot confirm.
Minnesota Introduced May 2011.
Missouri Passed April 2012.
Montana Rejected by 20 Republicans and  32 Democrats in March 2011.
New Hampshire Introduced January 2011.
North Carolina Introduced March 2011.
Oklahoma Passed in the state Senate on March 11, 2014 by a vote of 37 to 4. Senate Bill 862 (SB862) is now waiting to be voted on by the House.
South Carolina Passed April 2012.
Tennessee Introduced February 2011.
Utah Passed March 2011.
Vermont Introduced January 2013.
Virgina Introduced January 2011.
Washington Introduced January 2012.

Updated April 9, 2013.