The Golden Route: Investing in Gold Bars

Gold holds a hefty sway in precious metals – not necessarily in weight, but in economic impact.

While it's no longer the bedrock of the US dollar or any other paper money, the globe's central banks still safeguard this inert metal as a vital reserve for economic stability.

The prevailing notion that gold carries substantial value as an alternative to fiat currency fuels today's gold market. Some standard advice among investors is that 5% to 15% of your financial portfolio should include secure assets like physical goods and precious metals.

In contrast to digital investments such as stocks, bonds, and ETFs, gold requires extra considerations like insuring and storing it. The acquisition of gold usually involves the assistance of a broker-dealer, bank, or similar institutions.

Nevertheless, gold continues to enter investment portfolios, a trend emphasized during the pandemic. If you're worried about the stability of your paper money or your nation's economy, it might be the right moment to contemplate gold bars.

Gold Bars: A Guide to Their Specific Terminology

Before you leap into the gold bar investing arena, you must familiarize yourself with a few crucial terminologies every investor ought to understand.

• Ingots and billions - these two terms frequently refer to bar-formed gold instead of coins. Nuggets and bullion are sound investment alternatives since they bypass the premium associated with bullion and collector coins.

• Cast bar pertains to gold directly poured into molds to attain its bar configuration. Although these bars might have inconsistent shapes and differ in looks from one bar to another, they don't carry the premium of minted bars and can be touched directly.

• Mint or minted gold bars originate from a bank or refinery, slicing the gold into predetermined dimensions. These bars follow specific standards in terms of dimensions and purity. The handling of these bars is unique, usually sealed within protective packaging.

• Troy ounce is a unit employed explicitly to gauge the weights of precious metals. The troy ounce weighs around 10% more than a typical ounce, with a regular ounce at 28.25 grams and a troy ounce at 31.1. For choosing investments, most investors monitor the price-per-troy-ounce.

• Spot price refers to the ever-changing market price of gold for immediate purchase or sale.

Deciphering Gold's True Value

Unlike most other resources, gold doesn't strictly follow the laws of supply and demand. The trade of gold is more about sentiment as it's a non-perishable and indestructible asset.

So long as Earth has gold to mine (excluding any potential extraterrestrial mining prospects), the supply will continue to increase.

On the other hand, demand is influenced by central banks and "collectors" who absorb a significant portion of the fresh mine yield.

Several common factors influence market sentiment for gold, such as:

Concerns Over the Economy or Systems

Gold is viewed as a reliable store of value, irrespective of whether there's apprehension concerning fiat or paper money. Banks tend to augment their reserves when they sense political, economic, or other forms of uncertainty.

Central banks globally have a considerable impact on the spot price of gold due to their buying power.

Market Inflation

Inflation affects real estate, bond, and equity markets for various reasons. When these markets are deemed unfavorable, "collectors" or individual buyers of precious metals turn to gold for its consistent value.

Plus, when the value of paper money drops, the relative worth of gold typically rises, making it a secure investment to offset potential losses in a financial portfolio should the fiat currency impact other assets.

Deflationary Phases

During deflation, when prices are falling, but the economy is struggling with excessive debt, gold's relative buying power skyrockets. Investing in gold bullion and coins becomes the safest option.

Wartime or Political Instability

Political turmoil and the prospect of war raise the price and market demand for gold. People can quickly liquidate their life's earnings and savings into an asset that retains its value.

The concept here is that the value of this metal can be safely kept until it's required to be exchanged for essentials such as food, shelter, or transport. That's why gold is often called the "crisis commodity."

Supply Constraints

Further impacting market sentiment, central banks worldwide can place excessive demand during times of crisis. Given that launching a new mine into operation can take 5 to 10 years, this heightened demand, coupled with reduced supply, can cause gold prices to soar.

Rising Demand

Recently, emerging market economies have amplified the demand for gold. For instance, in India, during the wedding season in October, the global demand for gold peaks as they are the world's second-largest gold consumer, primarily for jewelry.

Gold Prices 

Have you pondered over the historical performance of gold?

Between 2008 and 2010, amidst the US financial downturn, gold prices escalated significantly from around $720 per ounce to nearly $1k per ounce.

In 2011, with the economy persistently declining, gold prices responded by skyrocketing to around $1,895 per ounce, driven by a surge in investor sentiment and demand. By 2012, it breached just above the $2,000 per ounce threshold.

In 2020, gold held onto most of these gains and started climbing again. By July 2020, gold prices had broken their previous record, surpassing $2,000 per ounce for the first time since September 2011. As of June 7, 2021, the spot price of gold hovered close to $1,900 per ounce.

A similar trend can be traced back to the 1970s. After a surge in the 70s, gold values dipped for nearly two decades before rebounding amidst the economic volatility of the 2000s.

In uncertain times, when investors struggle to predict if gold prices will rise or fall, market dynamics are predominantly steered by sentiment. As the pandemic crisis unfolds, gold demand and its cost are increasing steadily.

Advantages and Disadvantages of Investing in Gold Bars

Advantages:

• Investing in bars is often less costly than coins since coins carry separate charges for minting, packing, and imprinting.

• Storing bars is more straightforward than coins, which might sound odd, but remember, 500 ounces of bars occupy far less space than 500 ounces.

• Bars offer the convenience of portability, privacy, and liquidity.

• Through stamp authentication, you can quickly ascertain the quality of your gold, eliminating the requirement for assay testing.

Disadvantages:

• When compared to coins, bars can become noticeably heavy in no time.

• Stamp verification, although applicable, is less secure against counterfeiting than coins equipped with bullion DNA technology.

• Gold does not produce income like other investments such as stocks, bonds, or ETFs that offer dividends.

• Unexpected shifts in the global economy can catch investors off guard, especially during times of crisis.

The Art of Acquiring Gold Bars

When buying gold bars, opting for the ones with the highest gold purity, with minimal amounts of alloys like copper or silver used in the smelting process, is crucial.

Gold Bar Purity

The purity of gold is expressed in karats. The scale goes from 333, equivalent to 8 karats, to 999.999 fine gold or 24 karats, the purest gold bar available.

Investment-grade bars should contain at least 99.5% pure gold or have a fineness of 995.

High-quality bars usually clearly feature their registration number, manufacturer, weight, and purity on their surface.

Some renowned mint manufacturers are the Royal Canadian Mint, Perth Mint, and Valcambi.

Bars recognized as "Good Delivery" by the London Bullion Market Association (LBMA) consistently have at least 995 fineness, a recommended specification when adding bars to your portfolio.

Bar Weight

Intelligent investors consider the ease of liquidating the gold bars they purchase. This consideration determines their preferred bar size. Ask yourself, "What size will sell the quickest and easiest when I decide to liquidate?"

Gold bars come in a variety of sizes, whether they're cast or mint.

The "petty cash" of the gold world is bars of a mere one gram, often the smallest bar you can buy, roughly the size of a thumbtack. These highly liquid bars make them akin to fiat currency in the gold world.

Other popular sizes include the 5-, 10-, and 20-gram bars. The 10g bar is a favorite as it's still soft and malleable but has a reasonable weight. The 20g bars are also sought after, as they're similar to the 1-troy ounce bar at approximately 30g.

For those interested, it's possible to purchase heavier bars, 50 grams or more, offering the price advantage of buying gold in larger quantities.

Remember, smaller bars tend to be more liquid. However, these larger bars may be a worthwhile investment if you're planning for long-term savings, like a gold IRA.

Gold Bar Manufacturers

The manufacturer's name should be printed on your gold bars. Opting for a trustworthy manufacturer is crucial as it is a good indicator of the bars' quality, purity, and consistency.

Some globally recognized producers of gold bars include Perth Mint, the Royal Canadian Mint, Credit Suisse/PAMP, Johnson Matthey, and Engelhard, among others like Metalor, Umicore, and various government mints.

Bar Sellers

Once you've determined the ideal gold bar size for your needs, comparing various sellers before deciding is advisable. While buying gold is relatively straightforward, each seller will have different profit margins, insurance costs, shipping costs, authentication certificates, and processing fees.

Factor in these additional costs as they can significantly increase the selling price of the bars above the spot price of gold.

Finally, consider keeping your new investment in an IRS-approved storage facility, as home insurance policies typically don't cover precious metal investments such as gold bars.

Prominent Gold Bars Actively Circulating

Listed in no particular, the following gold bars are some of the most popular IRA-approved potential investments.

Gold Minted Bars from Perth Mint

The illustrious Australian goldsmith, Perth Mint, fabricates gold bars in fractions starting from 1/2-ounce and escalating to the gargantuan 1,000-ounce bars. Naturally, this encompasses the more budget-friendly 5-, 10-, and 20-gram bars, along with the sought-after 1- and 10-ounce variants.

Perth Mint has a global reputation for excellence, having crafted top-notch gold bars for many years.

Gold Bars from Credit Suisse

Credit Suisse, a global finance powerhouse, manufactures some of the most sought-after gold bars on the planet. They are recognized for their minimalist design and unique serial number.

The distinct identification feature often reduces their premium, making them an excellent choice for those looking to diversify their investment portfolio.

Gold Bars from Engelhard

Engelhard, a US-based metals corporation, boasts a century-long history. Unlike other manufacturers, Engelhard's production capacity is relatively limited, contributing to their increasing scarcity (and an occasional unique form).

Both cast and mint versions of Engelhard bars are available, each stamped with a distinctive serial number.

Gold Bars from Johnson Matthey

Johnson Matthey, a British corporation, has seen immense growth since becoming the authorized silver coin producer for the UK in 1946. They provide a variety of gold bars with varying degrees of purity, sizes, patterns, and forms.

Most JM bars are cast ingots, enabling them to deliver them at a substantial discount to investors.

The Swiss-originated Valcambi Gold CombiBar

Launched by the Swiss in 2011, the CombiBar boasts a unique design and 999.9 fineness. This 50-gram gold bar can be conveniently split into individual 1-gram pieces, enhancing its portability.

Harnessing the Potential of Gold Bars

Despite the method you select for diversifying with gold, this is a financial move that demands careful consideration.

The tangible acquisition of gold introduces additional factors, such as the need for storage and insurance. Nevertheless, gold bars typically incur lower premiums than bullion coins.

As a protective instrument against volatility in your portfolio, particularly during economic or political turmoil, or a recession, gold acts as a reliable safety net in uncertain times.

Regarding long-term financial planning, like retirement, IRS IRA-certified gold bars present an excellent option to preserve wealth during economic instability.