Buying gold can be daunting for many newcomers, but it doesn’t have to be with the right set of tips.

Today, the world is gripped by high inflation rates, a slowing economy, and financial instability due to growing conflicts like the war in Ukraine. As a result, many people have turned to gold and silver, as an inflation hedge.

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Gold has functioned as money for over 5000 years. Historians believe that the first gold coin was used in the 7th century BCE by the Lydian Empire. The official coin of the Lydians was called the Stater and was used throughout the Lydian’s mercantile culture.

Since then, gold has been viewed as the go-to currency of those who value sound money.

Here are some tips you can use when investing in gold:

1. Purchase Only Physical Gold

When purchasing gold, you will find many options like paper and physical gold. Your safest bet is to invest in physical gold.

If you’re looking at owning gold as an insurance policy for bad economic times, holding physical gold, like coins, bars, and rounds, will give you the security you’ll need.

Stay away from paper gold. Paper gold is traded on big exchanges like the COMEX and LBMA. These exchanges sell gold futures and can have hundreds of paper claims per ounce of gold.

Owning paper gold does not guarantee that you actually own the gold in COMEX or LBMA. If you owned paper gold and wanted to claim it, you will quickly find out that it isn’t available for withdrawal.

The gold paper market is very controversial amongst investors because it is believed that the exchange is over-leveraged. ETFs and GLDs aren’t required to say if they actually hold physical gold.

Remember, “if you cannot hold it, you don’t own it.”

2. Have Complete Control of Your Gold

Having the ability to access your gold should be of top priority.

If you have a little bit of money and aren’t planning to purchase large quantities at a time, it’s best to keep it as close to you as possible. This will help you gain easy access to your precious metal when an emergency arises.

If you are planning on purchasing large quantities of gold bullion, then you should consider placing your gold in various safe locations.

Have some gold placed in a safe at home, a safety deposit box at your local bank, and a gold custodian.

If you can afford it, have some gold sent abroad to a county where you would escape if things become too unstable in your home country.

3. Own the Most Liquid Bullion Products

When investing in gold, you need to always consider the premium over the spot price. This will allow you to identify which gold coin, bar, and round best fit into your budget.

Gold coins command a higher premium than bars or rounds. This is because coins are more expensive to mint and sometimes have commemorative features that give added value.

Buying gold coins is great because they are backed by governments and are issued as legal tender. This will allow you to move them more easily and use them as currency if needed in a crisis.

Popular gold bars and rounds from mints like Valcambi and PAMP are very liquid assets with lower premiums than coins. Usually, the heavier the gold, the lower the premium.

4. Buy What You Can Comfortably Afford

The current state of the economy is struggling and many top-level investors believe that things will get worse.

If you are trying to protect yourself from a financial crisis by investing in gold, one thing you should do is buy what you can afford.

Creating and sticking to a budget will allow you to get through tough times. Allocating an amount of money to gold without breaking the bank is equally important.

Purchase a comfortable and manageable amount of gold bullion but also hold enough cash for any opportunities or emergencies that arrises that require immediate cash.

If you are forced to sell your gold because you need quick cash and the spot price for gold is lower than what you originally paid for, then you will have a loss.

Conclusion

As economic instability sets in, building a recession-proof portfolio is a great way to weather the storm. We don’t know what awaits, but we can already see the cracks in the financial system opening up.

Every time you dump fiat for gold and other precious metals, you are securing the future of your financial house.

Updated on May 27, 2022, 3:31 pm