Updated on 02/07/17
Diversifying your portfolio with gold is a good idea for every type of investor.
Hard assets offer wealth protection that no other investment can, and evidence shows that gold bullion can increase overall long-term performance.
But investors new to the market can be vulnerable to scams. And if you don’t know what to look out for, it could cost you dearly.
Gold dealers are not regulated, so it’s up to you to understand the product, its pricing, and how to avoid getting ripped off.
This guide on how to buy gold online explains everything an investor needs to know about making and securing this type of investment.
You’ll learn how gold pricing works, how to find a reputable dealer, the difference between online and local dealers, and the biggest scams to avoid.
How pricing works when you buy gold online
There's what’s called the gold spot price. That’s the real-time price per ounce traded in global commodity markets. Whether you buy gold online or from a local dealer, you will buy above the spot price.
A dealer’s ask price will include a premium, which includes the costs of minting, distribution, and the dealer’s profit. The purchase price for one-ounce of gold is anywhere from 2.5%–3.5% over spot.
Coins have higher premiums because the governments that mint them charge wholesalers larger fees than the private refiners that strike gold bars. Their smaller size and design also makes them costlier to produce.
However, gold coins are a more liquid asset. They have a recognized value and can often be sold at higher prices than gold bars. So it can be worth it to pay the larger fee if you want to be able to sell part of your holdings easily.
When making a sizable investment, gold bars will give you the most bang for your buck.
You can find a complete breakdown of the pros and cons of gold bars vs. gold coins, plus why you should avoid collectible coins, in this article.
Getting the best price
To buy gold for the best price, do some comparison shopping. Remember to include shipping and other fees in your calculations. Reputable gold dealers will fully disclose all fees related to your purchase.
Before you buy, check the gold spot price to see if a dealer’s markup is in line with the standard premium.
If the premium is very high, shop around. If it is very low, buyer beware.
Dishonest dealers often advertise gold at 1% over spot to lure customers in, and then sell them on collectible coins of questionable value at huge markups (more on this later).
Finding a gold dealer you can trust
Never buy gold from a dealer without first doing your research.
- Read reviews and check consumer protection agencies and your state’s Attorney General's Office for complaints against the company.
- Whether you choose to buy gold online or from a local dealer, find out how long they’ve been in business and make sure they have a physical address.
- Be on the lookout for “bait and switch” tactics that attract you with loss-leader prices then sell you on new collectible coins, which are high-margin products you do not want to own.
Before you buy gold online, contact customer service (or visit the dealer if you’re buying locally).
Trustworthy dealers will be happy to answer your questions about the products you’re interested in. They won’t engage in high-pressure sales tactics, try to steer you into other products, or extend too-good-to-be-true offers to close the sale.
Finally, honest dealers will always offer a way to physically deliver your gold. Before you make a large investment, you may want to place a smaller order for delivery to ensure you’ll actually receive the product you paid for when you buy gold online.
A trustworthy gold dealer:
✔ has been in business for at least a few years
✔ has a physical address
✔ has positive reviews and/or no history of complaints filed against them
✔ answers your questions without high-pressure sales tactics
✔ doesn’t persuade you to buy products you’re not interested in
✔ is always able to guarantee physical delivery of your gold
Online dealers vs. local dealers
While there’s no right answer for whether you should buy gold online or from a local dealer, there are some important factors to consider for each.
Advantages of buying gold online
- low overhead costs allow online dealers to beat the prices at your local coin shop
- you can buy gold online 24 hours a day right from your home or office
- buying gold online is as easy as trading ETFs or stocks
Besides convenience and competitive pricing, there are four other unique advantages when you buy gold online:
The more gold you buy at once, the lower your fees will be. Purchase volume can make a big difference in the final price you pay for gold.
Some online dealers allow you to buy on trading platforms shared by hedge funds, pension funds, and high-net-worth brokerage clients, who are all placing institutional-sized orders.
Buy gold online from a dealer tapped into one of these networks, and the combined buying power will get you a better price on gold.
Cost averaging can be a good strategy for investors who are new to gold. Because you’re looking to diversify rather than make a quick buck, cost averaging makes daily price movements less important.
Instead of making one big buy all at once, making regular purchases of small amounts of gold over a longer period of time lets you average into your position.
This can be simple when you buy gold online—some dealers even let you automate the process.
Averaging your position means you never need to worry about the price of gold. If it dips, you’ll get more ounces for your investment dollars. If it soars, you’re already in.
Full service investing
Local gold dealers are great if you want a little bit of gold in-hand to keep in a safe-deposit box at your bank.
Investors making a large purchase, those with more sophisticated storage needs, or those who wish to add gold to their IRA have to do a lot more leg (and paper) work to make that happen.
An online dealer can streamline this process. All it takes is a few clicks of your mouse.
When you buy gold online, you can safely and securely make a large purchase and choose storage at an audited, non-bank vault provider. Storing your metal outside of the banking system ensures that your holdings are secure from bank holidays or asset seizure.
Some online dealers also offer services like a gold IRA program, where you can buy, store, and assign custodial services to your account—all in one simple transaction.
If your investment needs go beyond keeping a few gold coins in a safe, buying online is the best way to go.
An unbroken chain of custody
One of the biggest advantages when you buy and store gold online is that you don’t take possession of it. The gold goes from the vault of an approved wholesaler to the storage facility without any break in the chain of custody.
This becomes important when you need to sell your gold.
If the chain of custody has been broken, its quality can be questioned, and it may be necessary to re-assay the bars so the purchasing dealer can ensure the bullion’s origin and quality.
This can create delays and result in lower prices. It also makes it difficult for several buyers to bid on the gold, as they each need to verify the quality as the price keeps fluctuating.
With an unbroken chain of custody, your gold can be sold as-is. It is a commodity, and you will get competitive prices at all times—no questions asked.
Should I buy from a local dealer?
Buying local gives you the peace of mind of being able to see and touch the gold before handing over any money.
You also go home with the goods, so there are no shipping and handling charges to pay (however, you will have to pay a sales tax if you’re located in an area that taxes precious metals).
Because ownership is instant, you never have the worry of wondering whether the gold you purchased will actually be delivered. And because you can pay cash when buying locally, your gold purchases can remain completely anonymous if the transaction is less than $10,000.
But despite these pros, buying locally does have a few cons:
- While there are reputable local coin shops out there, even the most honest dealer can’t compete with online stores when it comes to pricing.
- Brick and mortar coin shops have smaller budgets than online dealers, which means they also have smaller inventories. If you want to buy a product outside of their limited selection they can order it for you, but you’ll wind up waiting longer than if you just buy gold online.
- While you can easily browse dozens of online dealers in minutes, finding a good local dealer takes a lot longer. Ideally, you should visit each one to chat with the owner and staff.
- While some online dealers are able to get multiple wholesalers and mints to bid for your business so you always get the lowest price, local shops have no way to do this.
- Your local coin shop may be buying some of its bullion from individuals and may not have the ability to properly assess quality. Online dealers get their supplies from large wholesalers that guarantee their products.
If you do decide to buy locally, find a dealer in your city with an established street address in a building or store it has occupied for several years.
A dishonest dealer won’t stick around for decades—those who rush into a flush market to make a quick buck will close up shop as soon as gold prices dip.
Red flags, scams, and shady practices
Now that you know what to look for when you buy gold online or from a local dealer, here’s what you should take care to avoid:
If someone offers to sell you bullion for less than the spot value of the precious metal content, it’s either counterfeit or stolen. There’s no reason anyone would sell gold for less than the spot price.
The bait and switch
Advertising gold at 1% over spot is a common tactic to lure you in then sell you something else at a higher premium—usually numismatic (collector) coins.
If you’re looking for gold bullion but are pressured to buy collectible coins instead, find a different dealer.
The only collectible coins worth buying are rare coins that are no longer manufactured. Only a handful of dealers truly understand numismatic coins, so if you go that route, make sure you work with an experienced dealer.
Many people have been bilked out of their investment dollars by dealers who offer “free storage.” Then they never see their gold or their money again.
If you buy gold online, work with a dealer who guarantees physical possession with only a nominal delivery charge. Even if you store your gold with them, you should be able to take delivery of part or all of your holdings at any time in very timely manner, days, not weeks.
Also, beware of pooled storage, what looks like a low-cost storage alternative can wind up being more expensive if you want to take delivery of gold due to conversion, fabrication, and service fees.
The time between when you buy gold online and when it is delivered should ideally be no longer than two weeks—30 days at the absolute most.
The Federal Trade Commission prohibits companies from taking orders if they cannot ship within 30 days (orders that take longer can be considered a futures contract).
If a dealer quotes an excessively long delivery time, it should raise a red flag.
Legitimate dealers will fully disclose any fees related to your purchase up-front. There should be no surprises after you read the shipping, insurance, and delivery fees listed on their website.
If a company cold calls you to get you to buy gold, you’re probably in for a high-pressure, overzealous, too-good-to-be-true sales pitch. Don’t fall for unusually low prices and limited-time offers designed to pressure you into a sale.
eBay & craigslist
There’s nothing to stop sellers from making fake accounts to drive bids higher or from misrepresenting what they are selling. With all of the trustworthy, professional online gold dealers out there, there’s no reason to assume that risk.
Gold bullion is the world’s best safe haven asset, and investors have more choices than ever before for buying it.
Local dealers offer investors the chance to see the product before buying, instant ownership, and anonymous cash transactions. But a more effective way to invest is to buy gold online.
Buying physical gold bullion online gives investors access to a wider range of products, storage options, and account types. It can be the easiest and most cost-effective way to convert a portion of your wealth into hard assets.
Research helps you learn how and where to look for the best investment opportunities and protects you against many of the gold scams out there.
Protecting your portfolio by investing in gold doesn’t have to be daunting… if you know what you want and do your homework.