Buying gold for the first time: 5 crucial tips from insiders

Buying gold

Gold has a magical appeal. For more than 5,000 years, we have been fascinated and attracted to this shiny piece of precious metal. Thus, we own gold in the form of jewellery or used gold coins as currency. Hence, gold has been known throughout history as a symbol of wealth and power.
Buying gold today is mostly done as an investment or as an alternative to saving money. Where savings accounts today get virtually no interest - or soon even face negative interest rates - gold is an interesting alternative. An investment in gold provides diversification which is very important in volatile and uncertain times. Gold has also shown to always retain purchasing power and be stable in value, where global currencies and stock markets can fluctuate enormously in value.
The price of gold has risen by over 85% in the past 10 years and investing in gold is becoming more and more normal. Thanks partly to the rise of the internet, it is now also very easy for small investors and savers to buy gold online and have it delivered to their homes, or to have the gold stored in a secure vault.
Buying gold
 
Many people have not bought gold before and have a certain image with this involving all kinds of concerns. How safe is it to buy gold and how do you know that you do receive real pure gold and not a fake gold bar? If you are also considering buying gold for the first time, then these 5 tips will be of interest to you!
 

Tip 1: Make sure you have physical access to the gold

The most important tip when buying gold is to make sure you actually get to physically hand over the gold. There are all kinds of ways to invest in gold where it exists only on paper and you never actually get a gold nugget or gold coins in your hand. These kinds of investments come with risks. A good example is buying gold delivered directly from mines in Africa at a steep discount to the gold price. Such offers often sound too good to be true and they are. A recent criminal investigation found that €50 million had been invested by investors in this type of product since 2015, with only a small part of this money actually used to invest these mines in Africa.
It is estimated that about 100x more gold is traded on paper than what is physically available worldwide. Buying gold in digital form, i.e. through futures and ETFs, is low-threshold and easy but often does not entitle you to physical gold. Such investments are more suited to speculating on a rising gold price and are not suitable to protect your assets.
Also, never buy gold through marketplaces but always through a reliable supplier who physically delivers. Reliability can be checked on the basis of the supplier's reputation. An AFM licence often indicates that you are dealing with a reliable trader. Also, large traders often have many customer reviews online with a high score and many recent reviews. Being able to deliver directly from stock also indicates that you are dealing with a reliable supplier, where, on the contrary, a high delivery time is unusual.
For a first purchase, you can also choose to pick up your order from the merchant and pay on the spot (in cash or by card). That way, you get immediate value for your money.
 

Tip 2: Choose well-known coins or bars

Once you have taken the step to invest in gold, you will notice that there are many different coins and bars available in various weights and purities. But what is a smart choice? Gold that qualifies as ‘investment gold’ is always exempt from VAT, making it significantly cheaper than purchasing collectible coins or low-purity gold.
Your choice between coins and bars depends on your budget. Investors with a larger budget often opt for large gold bars, as the costs per gram are lower. This typically involves gold bars of 1 kilogram of pure gold, with a current value of approximately EUR 37,000 per bar. The downside, however, is that when selling in the future, you must sell the entire kilogram at once—you can’t simply cut off a piece of the gold bar.
A more practical alternative is gold coins that are specifically minted as investment coins and are not in circulation as legal tender. The most well-known coin in this category is the gold Krugerrand, while the gold Maple Leaf is also highly recognized. These coins can be purchased with a very low premium and are highly liquid, making them easy to resell.
Whichever choice you make, be sure to know in advance at what price you can buy and sell. This way, you’ll already be aware of the difference between the purchase and selling price, preventing any unwanted surprises later on. At The Silver Mountain, you can easily check the buying and selling prices online using the selection guide.
 

 

Tip 3: Don’t focus too much on the gold price

The gold price fluctuates daily and can sometimes experience significant swings. It can be very tempting to sell your gold when prices rise sharply to take profits. However, buying gold is a rational decision aimed at preserving purchasing power and saving money and wealth.
The key advice is not to focus too much on short-term gold price movements. Instead, adopt a long-term perspective and keep gold in your portfolio for an extended period. This is especially important if you have purchased physical gold, as there are associated costs that do not align with a short-term strategy of selling when prices rise and buying when they drop.
The gold price can sometimes be highly volatile and is not always easy to predict. For example, the gold price surged by about 8% when it was announced that Donald Trump had won the 2016 election. However, just a few months later, it had dropped back to its pre-election level.
If you still want to time your purchase, consider buying gold in phases. By converting a portion of your budget into gold every 2 to 3 months, you can average out the purchase price over a longer period.
Buying gold should be seen as a rational long-term choice. The general advice is to allocate a maximum of 5 to 10% of your portfolio to gold. This proportion is sufficient to offset fluctuations in other assets.
 

Tip 4: Ensure a safe storage location

If you have purchased gold, the next challenge is finding a suitable place to store it. Many private investors choose to keep their gold at home. In Germany, for example, this is very common, with around 75% of physical gold buyers opting to store it somewhere in or around their homes. This is perfectly fine as long as the value isn’t too high. However, if you are dealing with more substantial amounts, you may want to consider storing it with a specialized storage provider.
Buying gold is also intended to manage your wealth outside the financial system. For this reason, it is not advisable to store your gold at a bank. After all, you withdrew your money from the bank precisely because you don’t want to be dependent on banks, the euro, etc. In the past, there have been numerous bailouts and bail-ins, and in such situations, it is not ideal for your gold to be stored at a bank.
Storing your gold in a secure and insured facility is often possible for a fee of approximately 0.65% of its value. This annual fee covers the insurance premium and the personal storage of your gold in a private vault space. The Silver Mountain has an exclusive partnership with Edelmetaal Beheer Nederland, where you can safely store your gold and silver.
Just as with gold dealers, we always recommend choosing a storage provider that allows you to easily take physical delivery of your gold and ensures that your gold is stored personally and securely. Avoid storage options where gold is held in the form of a large 12.5-kilogram bar with multiple owners, each owning only a few grams on paper. In such cases, you may not have straightforward access to your physical gold when needed.
 

Tip 5: Keep your ownership a secret

Finally, the fewer people know that you own gold, the safer it is. It may seem obvious, but it can be very tempting to mention that you’ve been holding gold for years when prices surge and everyone around you is talking about buying gold. The same happened during the Bitcoin hype in early 2018—eventually, everyone claimed to be investing in Bitcoin and other cryptocurrencies. Those who truly profited kept it wisely to themselves, while those who bought at the peak and had to sell at a significant loss were, of course, much less vocal.