Buy an ingot
Buying Bullion Bars
You can purchase pure metal in commercial banks or directly from the mints that produce bullion bars.
- If you want to hold your savings in tangible assets, gold and silver are ideal for that.
- You only pay for the metal itself, not for its processing.
- Bullion bars come in different sizes, even as small as 1 gram. You don’t need to be a millionaire to buy some precious metals.
- Buying and selling physical bullion bars is more complicated compared to trading “virtual” metal on exchanges. Only a few organizations facilitate such transactions.
- Banks, mints independently set prices for buying and selling bullion bars, and the difference between them can be significant.
- You need to store the bullion bars somewhere. If you decide to keep them in a bank vault or a Goznak storage facility, you will have to pay additional fees.
- Goznak only repurchases its own bullion bars if the packaging is intact.
- When you decide to sell a bullion bar to a bank, they will conduct an examination and assess the metal’s condition. If scratches or other damages are found, the price will be reduced. If you lose the manufacturer’s certificate that is always provided with the bullion bar (it contains its unique number, fineness, weight, and the mint’s name), the metal may not be accepted.
- Not all bank branches that offer bullion bars are willing to buy them back. It’s better to inquire in advance about the locations where you can sell your metal.
- If necessary, you can also sell the bullion bar to a pawnshop. Sometimes, they evaluate precious metals even more favorably than banks. It’s important to carefully compare how much you will receive for your bullion bar in different financial institutions.
Buy investment or commemorative coins from precious metals
- Purchase investment or commemorative coins made of precious metals.
- The price of investment coins is tied to the value of the metal they are made of.
The price range of silver and gold coins is very wide, ranging from $10 to several tens of thousands of dollars. There is an option suitable for any budget. Coins can make a nice gift. Moreover, they are compact and can easily find a place at home. However, you’ll need to ensure the security of their storage. Drawbacks:
The Federal Reserve includes production costs in the price of coins, and commercial banks add their own commission. As a result, the price of coins can be much higher than the cost of the metal. Commercial banks buy back coins at a discount, reaching up to 30% off the original price. Coins need to be stored with great care. Any scratches, dents, or other defects significantly reduce their value. You can also invest in commemorative coins made of precious metals, which are in demand among collectors. Sometimes, their price increases faster than the value of the metal itself, but it is difficult to predict the profitability. Finding a true admirer of a rare specimen is not always easy, and banks accept rare coins only at face value.
Buy metal on the exchange
- Gold and silver are traded. However, there are fewer transactions with silver, making it difficult to sell quickly and at a favorable price. Therefore, gold is more suitable for novice investors.
- To buy metal on the exchange, you need a brokerage account. Similar to stocks, you won’t receive physical bars in your hands.
The difference between the buying and selling price of gold on the exchange is significantly smaller than in banks. Additionally, brokerage commissions for metal transactions are lower than those of banks. This makes it easier to profit from such transactions. You can invest in metals through an Individual Investment Account and benefit from tax deductions. Drawbacks:
Not all brokers deal with precious metals. If you are already investing, you may find that your intermediary does not provide such services, and you will have to search for another company. If you decide to change brokers, you cannot transfer precious metals from one intermediary to another as you can with securities. You will have to sell the metal and buy it again. Investments in precious metals on the exchange, like any other investments, are not protected by the deposit insurance system. If your broker loses its license, there is a risk of losing your assets.
Investing money in mutual funds
- Some mutual funds invest in precious metals. You won’t own physical bars, but you will receive shares of the fund whose value is tied to the price of metals.
- The composition of metals and their proportions in the mutual fund are outlined in its investment declaration. You can study this document on the website of the fund’s management company and choose a suitable mutual fund. However, the exact composition of the fund is not known in advance. The management company may make changes, such as buying or selling certain metals.
- Some management companys offer their mutual fund shares directly to investors, while others can be purchased through a broker on the exchange.
By buying shares, you can invest in a diversified portfolio of precious metals managed by professional investors. Income tax is only applicable if you hold the shares for less than three years. In other cases, you won’t have to pay personal income tax. Drawbacks:
You are entirely dependent on the actions of the management company and have no control over when to buy or sell specific metals. Investments in mutual funds are not covered by the deposit insurance system. If the management company or your broker goes bankrupt, there is no guarantee of money recovery.
Investing in securities of mining companies that extract precious metals
- On the stock exchange, you can buy shares and bonds of many companies involved in the extraction of gold, silver, platinum, and palladium. The prices of these securities are usually linked to the prices of the metals themselves. For example, when the price of gold rises, shares of gold mining companies tend to increase as well.
- However, the prices of these securities are also influenced by other factors, such as production fluctuations and the development of new deposits. This introduces some peculiarities to such investments.
Shares of a successful company can appreciate in value faster than the metals it mines. Securities often generate additional income through dividends for stocks or coupon payments for bonds. Drawbacks:
During periods of market instability, the prices of all securities, including those of gold mining companies, often decline. However, gold itself may still appreciate. If a company faces problems, such as poor management decisions, its securities can decrease in value even when metal prices are rising. Therefore, it is crucial to closely monitor corporate news. No investments are backed by government insurance. If a mining company goes bankrupt, it is unlikely that investors will be able to recover their invested funds. Some companies offer special structured bonds to investors, with their face value and coupons linked to the price of the precious metal.
For example, the face value of the bonds corresponds to 1 gram of gold. This means that the bonds are issued at the price of a gram of gold on the day of sale and redeemed at the price on the day of maturity.
Such instruments can be more advantageous than simply buying gold, as there is a chance to profit from both the price appreciation of the metal itself and the coupon income. However, by the time of bond redemption, the price of gold may have declined, making it impossible to wait for a more favorable moment when its price rises again.
Once again, it’s important to consider the possibility of bankruptcy for both the mining company and the broker through which you purchase the securities.