The Experience of Actually Buying Physical Gold

A WOLF STREET reader shares his experience and emotional tension of buying and taking possession of physical gold.

By Andrew Kelly, a WOLF STREET reader:

It’s interesting how we Wolf Street intellectuals want to practice non-attachment, and then wind up buying gold. It cost me 3 days of fussing around, driving in city traffic, privately freaking out about legal commitments, and asking friends for advice. I took notes about everything. Here is what I learned about Buying Gold, and maybe this experience will be useful to you too.

Buy small units of gold, not big bars. A Jewish lady once told a friend (who told me) that she escaped from 1940’s war-torn Europe by slipping little gold wafers to border guards and officials to escape the country. No one wants to redeem a big pile of metal, it seems.

There is no “discovery price,” or true value, of gold. The “spot gold” price that you see posted on the internet is a theoretical value. A gold dealer has many considerations to determine a sale price.

There is no true “premium” or “commission” that a dealer charges for you to buy gold. A gold dealer has to think long term. They pay a charge to convert currencies (for Canadian buyers), and they pay money to ship, store, and secure real gold for their customers, so they have to add service costs. I calculated what the commission was after I chose to buy from a local Vancouver coin and jewelry dealer. They charged me roughly 3%. This compared very favorably with a Canadian bank, which was prepared to charge me over 6%.

Don’t trust banks. None of them. Banks obviously don’t want to deal in gold currency when they have more profitable “market funds” for their own arrangements. Banks will not give useful information about their costs or margins to their own employees, let alone Joe Public, so it’s better to find a brick-and-mortar store for purchases.

A business adviser once wrote that investors should not invest in a company with quick profits, but rather, one should invest in a business with stable, long term managers. The coin and jewellery store I used has been in business for 40 years, and the clerk has worked there over five years. They may not look flashy, these old guys, but you can trust them.

Jewelers are real people, and it helps to ask questions to get a conversation going. Jewelers also have a cool X-ray machine which measures the metal content of coins or bars. I insisted on testing three sample gold-wafers from the goods I bought. Gold has to be removed from the tight, plastic wrappers with no knife marks or scratches, because the jewelers will mark down the value if you redeem the gold and it’s damaged. My samples all read 100% au (gold) without the wrap. By the end of three visits, with the bank draft cleared, and the gold inspected, the clerk graciously accompanied me to the parking lot for safety. Now I can watch the internet spot price and practice non-attachment if the price goes down!

My gold buying experience was almost entirely trial-and-error, and cost a great deal of emotional upheaval, but I hope Wolf Street readers will be a little wiser after reading this. By Andrew Kelly, a WOLF STREET reader.

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  49 comments for “The Experience of Actually Buying Physical Gold

  1. G46R says:

    You get buy physical gold easily using reputable online dealers such as jmbullion (yes that one is legit). They’ll ship it to you in unmarked boxes with minimum fuss. However FOR THE LOVE OF GOD, open up every single piece of gold bar from its sealed wrap and TEST THE GOLD!!! You do not lose any value on the gold by cutting open the sealed wrap. Gold testing kit can be obtained for about $10/set.

    • Chris says:

      Well … yeah, but … if you trust the dealer – and JM Bullion is one of several that I do trust – then there should be no need to “test the gold” with any kind of kit, because that’s only going to tell you about the surface of the piece, anyway. The only way to test gold with absolute assurance would be to measure your absolute volume in the piece and compare that to the known density of pure gold. And even that will only be approximate, because if you’re buying “pieces” of gold, then you can’t afford the equipment to measure volume and mass to the exactitude that’s necessary for 100% positive assurance. And in any case, even the best commercially available gold has “some” impurity – nothing is exact.

      If you buy gold coins from a reputable dealer (or trusted local merchant) and have them shipped via secure transport (such as registered mail or ‘signature required’ common carrier), then you’ll be doing about as well as can be done.

      • Crysangle says:

        I find my gold so no worries about prices , so far around 100 grams, which is a good small backup if need be. Specific gravity testing is not hard or expensive, and does give a close reading. However it is not a guarantee against tungsten or even lead filled items, afaik drilling or cutting the piece is the only way to be certain for that? Most dealers will drill away the surface on thicker pieces.

      • HB Guy says:

        A small digital scale can be purchased online and is very useful for weighing coins. US Mint, Royal Canadian Mint, Perth and Royal Australian Mint coins are always very close.

        • Sinbad says:

          I use the Perth mint, they have been doing it for over 100 years, and are accredited by the LBMA, COMEX, and have an Australian Government guarantee, and the coins are legal tender.
          Buy online, delivered to your door, just so easy.

    • HB Guy says:

      Kitco is a very reliable dealer with very competitive prices. They ship product from vaults in the US (Boston, I think) to customers here and from Montreal to Canadian customers. APMEX dot COM

      APMEX is also very reliable and also has competitive prices, as well as an excellent selection of global coins.

      • Jaco says:

        Ive purchased from local coin dealers,JM and Golddealer and have been very happy with all

        I’ve bought everything from Pre-33 US coins,Mape leafs and Roos to Sovereigns , Ducats and French Francs.

        On both JM and Golddealer, depending on your level of buying, the cost over spot has been negotiable in my dealings.

    • van_down_by_river says:

      Why not purchase gold options contracts and take delivery at expiration. I’m not a gold bug so I’ve never done this but it seems like the best way to get the lowest price. You can buy contracts for gold at $1200/ounce right now, if that’s several hundred less then what dealers charge then I don’t understand why gold bugs don’t go this route.

      Wouldn’t this also minimize manipulation in the paper market that conspiracy theorist say goes on – if the entities selling the paper contracts had to make delivery that would shut down manipulation.

      The options market serves to purposes 1) hedging and 2) providing a market. Providing a market means bringing together buyers and sellers who agree on a price at a future date. Buy your ingots from options writers, take delivery and melt the bars down to whatever size you like.

      If gold options writers cannot or will not make delivery of the underlying commodity (not merely currency equivalent of quoted price) then it would seem they are committing fraud.

      If I bought wheat futures in the options market and was only given currency at settlement how could I be expected to make bread. It seems to me, if the commodity is not delivered fraud is committed.

    • Greg Pinelli says:

      I started buying gold and silver coins 45 years ago and taking physical possession. A few points..ONLY..I mean ONLY.. buy Gold Eagles/Buffalos/Maples..and Silver Eagles/Maples in one ounce increments….BU is important.
      The entire point of physical possession is portability and having the capacity to sell discrete amounts without a sizeable “discount” from a local dealer. An contrary to what a novice might believe…he/she needs a local dealer they have a relationship with… matter what is stamped on them..arouse suspicion and are completely unnecessary to achieve the aim of insurance against whatever may befall currencies and markets.

  2. kk says:

    The police here got a court order to open a whole pile of safety deposit boxes looking for something or other. The boxes, as you might imagine, were apparently full of gold and jewellery as well as the usual cash and documents. The police checked and discovered that the vast majority was owned legitimately – mostly by people who wanted the ability to make a quick getaway with portable cash equivalents in case things turned bad – and most were in their 70s or 80s. But now young people realise that there is nowhere to run and how are you to bribe a border officer when he is as monitored as you by cameras and IT systems?

  3. Robert_D says:

    My advice, based entirely as a long time coin collector who has owned every kind of “coin-like thing” over the last 50+ years.

    Gold and silver bars are the best buy regarding price to be paid. People are suspicious of them — I owned some and turned them all in in for better stuff about seven years ago ( see below ) .

    Never ever never ever buy gold rarities. They are over-priced and can be used to extract extra cash from the unwary. Please trust me on that, unless you are willing to become highly educated on the subject. As you would want to be for rare wine, rare art, rare stamps or automobiles.

    I bought some hundreds of Morgan and Peace dollars (NOT rare dates) twenty years ago when they could be had for under $10.00. I am glad I have them plus my many ounces of other junk silver (10c, 25c and 50c).

    Here is my recommendation — by these from a reputable dealer: One ounce Gold and Silver Eagles, Maple Leafs and Krugerrands. I think I received an ad for Silver Krugerrands recently, I’d give them a chance if I needed more silver, but I don’t. Gold Krugerrands went a bit out of favor a decade or more ago, which reduced the purchase premium.

    If you made the choice to have one hundred ounces in gold and silver bars, you could find yourself in dropping the price when you sell, were the buyer to demand an assay. The buyer may well choose to do that. Assays are just a pain to endure. Counterfeit gold and silver bars are out there, many from China, and available online.

  4. OutLookingIn says:

    Be careful which gold coin you purchase.

    The American gold eagle.
    Composition: 91.67% Au 3% Ag 5.33% Cu (Classed 22 carat)

    The Canadian gold maple leaf.
    Composition: 99.9%+ Au (classed 24 carat)

    • JMiller says:

      Be careful? Why? They are both one ounce of gold. Please explain your warning.

      • Matt says:

        Higher carat gold will have a higher sale price out you ever need to unload quickly. The mostly theoretical costs of refining figure into the price paid by a dealer. Kreugerrands lost popularity mainly because of their lower purity (.900) when other countries began minting 22k and .999 fine coins. The hit on lower purity silver is much more percent-wise.

        There are United States gold buffalos that are three 9s fine, around here (Indiana) they sell for a little more than Canadian gold.

        As far as the be careful warning, an unscrupulous individual may attempt to sell a one once coin in say .900 fine as one ounce of actual gold. They may present the lower purity coin as having more precious metal due to its heavier weight. Buy the coins you know and always be ready to walk away from a deal that does not feel right.

        • HB Guy says:

          Matt, Gold Maples and Gold Buffaloes are 99.99% Au, not 99.9%. The only 99.9% GMLs were issued in 1979-81, all others are 99.99%, and USM Buffaloes have only been issued as 99.99% Au. The planchets are sourced from the RCM.

          If you want add’l purity, 99.999% (5 x 9s) GMLs are also available from APMEX, Kitco, etc.

      • OutLookingIn says:

        Gold is Gold.
        And when its mixed with other metals, is considered to be worth less than other forms of pure gold, because of melt cost.
        22 carat versus 24 carat.

        • Finster says:

          Depends. US Eagles are a highly recognizable and trusted form of gold and my dealer actually offers a slightly higher price than for some other smaller purer gold coins.

        • Buckaroo Banzai says:

          Wrong. It’s a matter of opinion. 22k coins are considered by some to be superior to 24k coins because they are much more durable. Pure gold is very soft and wears easily under hard use.

          It’s so funny seeing so many of the same wrongheaded opinions that circulated back in the early 21st century, when that particular gold bull market was just getting under way. Now a new wave of uninformed and misinformed people is here, struggling to get educated. It tells me that we may be gearing up for another big gold bull.

      • HB Guy says:

        I meant to add that Silver Maple Leafs are also 99.99% Ag, whereas the Silver Eagle is 99.5% Ag. A small difference, perhaps, but also a reflection of the Royal Canadian Mint’s high quality standards.

      • Sadie says:

        The one oubce gold eagle weighs over an ounce-the additional weight is alloy to make the coin more durable. Pure gold is very soft.

    • The Dude says:

      To my knowledge, American Eagles have less purity i.e. 22 carat but they also weigh more (1.09 ounces) to compensate, and ensure that each coin has a full 24 carat ounce of gold inside.

    • HB Guy says:

      GMLs are 99.99% Au, as are Gold Buffalo and Gold Kangaroo coins. FYI, the planchets for the USM’s gold buffalo are made by the Royal Canadian Mint.

    • Sinbad says:

      I have heard that the American gold eagles are 22 carat, because they are recycling the coins Roosevelt had melted down.

      • Buckaroo Banzai says:

        Wrong. Pre-1933 US legal tender gold coins were 90% gold, 10% copper.

        Modern gold eagles are 11/12 gold, and 1/12 copper, which makes them roughly 92% gold and 8% copper.

  5. Kenny Logoffs says:

    Anything fat could be tungsten cored.

    If it’s also ‘precious’ you can’t cut it up.

    I had all 1oz silver royal mint coins (legal tender and redeemable for ‘something’ if you need to), and ~ 1/4oz gold coins (again RM as the face value in GBP is pretty good at 1/10th current spot)

    They’re nice to resell, small and easy to mix in with random change to hide etc.
    Hard to fake with tungsten due to the thinness.
    Also all RM stuff is likely to stay cap gains tax free too.

    Sadly they’re all at the bottom of the lake after a boating accident.

    For your average Au and Ag hoarder in the UK they’re hard to beat.

    Only downer is Ag VAT at 20%

  6. Bookdoc says:

    I bought some gold from online dealers recommended by trusted friends. I bought rounds in both 1 oz. and 1/2 oz. I only have 10 ounces altogether but do have several hundred ounces of silver in various sizes. These are not investments but for security. Much is locked in safe deposit boxes but some is in my bugout bag for emergencies. If I never need them they will be part of my estate as my daughter started buying her gold in Dubai while in the Navy and has a fair amount.

  7. RD Blakeslee says:

    I feel that “Junk silver” bought from a reputable dealer is the best way for this little peon to go, as a store of value independent of fiat currency pricing.

    Counterfeiting and silver content cheating are practically non-existent and the coins will be (IMO) readily valued and spendable in ordinary retail commerce, if fiat currency fails in one way or another.

    • alex in san jose AKA digital Detroit says:

      This absolutely. US silver dimes, dollars, half-dollars are well-known and trusted at least in the US and probably just about anywhere.

      I’m quite happy to have gotten two silver dimes in my change in the last month, after finding none for years and years. One was from the Coinstar at Safeway, sitting in the reject bin.

  8. Cashboy says:

    You cannot really buy gold in the UK because it is a commodity and subject to VAT (tax) at 20%.
    I live 50% of my time in Thailand now. I have been buying “baht” gold ingots (96.5% pure) that come in 1baht, 2baht, 5baht and 10 baht sizes. They are obtainable from gold dealers in every reasonable sized town and can be bought with cash and sold for cash at these shops.
    The gold price is fixed by the government throughout the day with a buy and sell spread of 100bt per Thai baht of gold. That price is based on the USA dollar price, converted to Thai currency x 96.5% (the purity) for the weight of the standard ingots.
    I see people (especially Chinese) buying and selling these all day in Bangkok shops; as in speculating and trading.
    On this link you can see the price form 99.99% USA gold price to the price of a 1 baht gold ingot.
    I have never seen the price so low in Thai baht currency in the 6 years I have been in Thailand. Yes, the USA Dollar is falling against the Thai baht currency.

    • Narcolepzzzzzz says:

      Gold is not subject to VAT in the UK, but silver is.

    • John says:

      “You cannot really buy gold in the UK because it is a commodity and subject to VAT (tax) at 20%.”

      You most certainly can buy gold in the United Kingdom.
      Gold sovereigns and gold Britannias – legal tender and not vatted- exempt of all tax and easily tradable.

  9. Paulo says:

    I used to teach silversmithing. I bought bulk silver in every (guaranteed) size, amount, shape, form, from an industrial jewelry supplier. They also sell gold. I used to buy silver wire and bulk for casting…by the gram. It was guaranteed at quoted price. Prices were based on daily quoted price.

    I think it came Fedex or Canada Post
    today: Daily Market: Gold: $1190.85 · Silver: $14.08

  10. HB Guy says:

    “… Don’t trust banks. None of them. …”

    Never, ever, trust a bankster, least of all, a Central Bankster.

  11. Ambrose Bierce says:

    When I think of a brick and mortar gold dealer I think of Pawn Stars.

  12. bungee says:

    1oz. gold maple leafs are the best form of bullion to buy. They are 99.99% Au. They are highly recognizable and accepted. Since 2013, Canadian Gold Maples have a micro-engraving of a miniature maple leaf on the “tails” side. It is done with some sort of laser (or so they say) and is a security feature; the mark is too fine to be done with the strike of a die. If you look with magnification you can see the year of mintage in the center of this feature. It is a truly beautiful coin.

    • Duke De Guise says:

      It’s half a beautiful coin: the side with the profile of that old hag ruins the aesthetics for me.

      I prefer Buffaloes, despite the premium charged for them. They’re beautiful coins, and are 24 carat gold.

      On the Pawn Stars front, I once took a good friend to buy some gold coins from a coin dealer (who wasn’t a sleaze) and when we left the shop he asked, “Why do I feel like I just engaged in a drug deal?”

      Well, sure: all cash, secretive and somewhat surreptitious by nature, something to be hidden away…

  13. Les Francis says:

    Years ago I was working in Asia.
    Credit Suisse gold bars were used as currency.
    I bought 5, 10 and 20 gram ingots.
    Paid hotel bills, commodity bills – all sorts of bills with small ingots. They traded better than the US dollar cost price.
    Father in law had gold wire. Cut it off to weight as required.
    My wedding ring is 15grams of 22 carat gold. The decoration has worn off over the years. It’s still a tradeable commodity in Asia.
    Anything less than 20 carat was not used as currency.
    Anything less than 18 carat was not considered gold.

  14. Gershon says:

    My gold buying experience was almost entirely trial-and-error, and cost a great deal of emotional upheaval, but I hope Wolf Street readers will be a little wiser after reading this.

    Hmm. I routinely buy bullion coins from my local PM dealer and have never experienced any “emotional upheaval.” Walk in door, purchase coins, walk out, always being aware of surroundings and taking a circuitous route home to detect any attempts at tailing. Good people at the shop: they knew me and there is mutual trust.

    Considering that we have Keynesian fraudsters at the central banks who intend to print away all government and corporate debts, buying and holding (in a safe place) physical precious metals is a no-brainer, especially at these prices. Don’t forget to stock up on lead and brass as well, in the form of ammunition. You may need it to protect your stash.

    • cd says:

      No Kidding…why the angst over buying gold….I would have more angst buying Intc up here……geez….

      Gainesville coins has been excellent….

    • bungee says:

      It sounds like he bought a lot for him and it was his first time. I remember my first time; I bought an american eagle and had already purchased a scale and an acid test kit. nothing made sense!!! hahaha. I didn’t know the difference about troy ounce vs. the other kind of ounce (i still dont hahaha) and the eagle is an alloy, which I didn’t know so the weights made NO sense to me. The acid test kit was stupid to begin with, plus the copper in the coin doesn’t help that situation… HAHAHA I was a mess. My dealers are Russian and so I started getting nervous that “the russians” ripped me off. Oh man, thanks for reminding me… I forgot about that! (they’re still my dealers after all these years but i switched to maples and never looked back)

  15. Art M says:

    “Jewelers also have a cool X-ray machine which measures the metal content of coins or bars.”
    XRF xray testing is a Superficial test which only analyzes the outside surface of the object, typically to only 0.01mm deep.
    A fake coin/ bar can have a thin Covering of Gold and fool the XRAY tester completely.

    Judging by your comments you May have been Played by the “Trusty old guys”.

  16. ft says:

    I bought my gold and silver from a local coin shop and, once we had established trust, the transactions all went smoothly. Unfortunately my purchases were done in 2009-2010, so my investment measured in dollars has taken quite a hit. I got my stash, though, and I’m hanging on to it. I think of it as blizzard day money.

  17. Uncle Bob says:

    Unless you buy gold in very small amounts using cash, never kid yourself that you are “keeping under the radar”. With the data-matching capabilities of Western governments these days, there is no such thing.

  18. bungee says:

    Andrew Kelly,
    Why did you buy gold?
    And why physical gold? why go through the hassle when you can just buy some GLD or some other ETF?
    thanks for sharing your experience

    • Andrew Kelly says:

      Hey Bungee,

      I’m impressed with Wolf Street readers’ responses, and an article about buying gold probably raises more questions than it answers.

      You were right in your earlier e-mail- it was a large sum of money for me, so therein was my greatest anxiety. Cheers.


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