The geopolitical situation and fear of inflation are driving up the price of gold. Many savers rely on coins and bars – which is something to consider when buying.
The price of gold reaches one peak after another. On Friday, the price of one troy ounce of the precious metal temporarily exceeded the $2,400 mark for the first time. This means it has increased by 15 percent this year.
Precious metal is considered a “safe haven” for savers
Gold has a millennia-old tradition as a means of payment and store of value and is considered a “safe haven” for savers and investors in times of crisis and inflation. The precious metal is less suitable for building wealth: the long-term returns are manageable, there are no interest or dividends and the price of gold can fluctuate considerably. However, gold has repeatedly proven its suitability as protection against losses in times of crisis.
Many financial advisors recommend that private investors invest a smaller portion of their assets – around 3 to a maximum of 10 percent – in gold. You can choose between all sorts of financial products such as funds, structured products or exchange-traded funds (ETF) physically backed with gold. However, many savers prefer to hold their gold in their own hands and decide to buy coins and bars.
The advantage is that you then own the precious metal directly and there are no investment products in between. However, savers should not be naive when purchasing. There are a few points to consider.
More gold for your money with larger units
Price ranges include: There are no “real bargains” when buying precious metals, says Benjamin Summa, spokesman for precious metals dealer Pro Aurum. Anyone who wants to purchase fine bars or coins always has to pay more than the current “pure” material price. The following applies: With a higher bullion value, you get more gold for your money.
At the precious metal dealer Degussa Goldhandel on Friday, a gold bar weighing 1 gram cost 82.50 francs, a bar weighing 100 grams cost 7,248.50 francs and a 1-kilo bar cost 71,682 francs. For both bars and coins, dealers have ranges between buying and selling prices. So you should be aware that you will initially be in the red after purchasing it. When it comes to coins, you should also choose coins that are widely used and can be easily sold again – such as Maple Leaf, Krugerrand or Vienna Philharmonic.
At Degussa, private customers are asking a lot for smaller units such as 50-gram or 100-gram gold bars, says CEO Andreas Hablützel. Christian Brenner, managing director of the precious metals dealer Philoro Switzerland, says that customers often buy gold in ounce denominations such as the Vienna Philharmonic and Krugerrand. “The Gold Vreneli is a long-running favorite anyway.” When it comes to gold bars, the versions from 100 grams to 1 kilogram are in very high demand.
But there are also many customers who now want to benefit from the gold price rally and sell, says Brenner. “The inflation of the last few months has led to many people looking for ways to get liquid assets.”
Only buy from reputable sellers: When buying gold, it is very important to pay attention to the seriousness and reliability of the provider in question. “You shouldn’t allow yourself to be persuaded to buy gold by ‘hawkers’ at holiday resorts, at motorway service stations or in shady train station areas, and you should also avoid Internet-based, dubious fake shops,” says Summa.
Anonymity limits when buying gold: For some gold buyers, it is important to purchase the precious metal with cash and remain anonymous. Banks always require authentication when purchasing precious metals. “If you buy through a precious metal dealer, precious metal goods up to 15,000 francs per person per year are available anonymously, i.e. without providing any personal data,” says Brenner. If the amount exceeds 15,000 francs, extended documentation requirements apply, including a copy of your identity card. In Germany this limit is only 2,000 euros, in Austria it is 10,000 euros.
Gold coins and bars exempt from VAT: In contrast to silver, platinum and palladium, gold coins and bars are exempt from VAT in Switzerland.
Pay attention to the LBMA label: Buyers of gold bars should make sure that they have the London Bullion Market Association (LBMA) label. Otherwise they cannot be traded in Switzerland and other European countries. The label means that the precious metal was not mined under questionable circumstances and that certain social and environmental standards were adhered to. “In addition, the bar should be bought directly with the name that is on the bar,” says Hablützel. This makes it possible to ensure that the bar meets all security features and is not a re-emboss.
However, demand for sustainable gold is limited among the precious metal traders surveyed. “Our customers rarely discuss the question of recycled or so-called green gold – it is estimated that one customer in 2,000 addresses this topic,” says Summa. Buyers are generally concerned with getting as much gold as possible for the money offered, i.e. paying as few premiums as possible on the value of the material.
Investors should factor in storage costs: Gold buyers should consider how they want to store the precious metal. Brenner believes that precious metals worth up to 20,000 francs can be stored in a safe at home. However, there is then a risk that they could be stolen in the event of a break-in. So you should think about insurance. Otherwise, safe deposit boxes at banks or a private precious metal dealer are an option. Another option is duty-free warehouses.