What’s the Cheapest Way to Buy Gold (Without Getting Scammed)?

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Last Updated on: 8th November 2023, 08:16 pm

Gold has been a symbol of wealth and a store of value for thousands of years. For modern investors, it serves as a diversification tool and a hedge against inflation and economic uncertainty. Here’s a look at the cheapest ways to buy gold—particularly physical gold bullion—safely and cost-effectively.

Types of Gold Investments

Investors can choose from several types of gold investments, each with its own set of considerations regarding cost, security, and potential for scams:

• Gold Bullion: Includes gold bars and coins with a price derived from the current market value of gold.
• Gold ETFs: Exchange-traded funds that track the price of gold or the performance of gold-related companies.
• Gold Mining Stocks: Shares in companies that explore for, mine, and produce gold.
• Gold Mutual Funds: Funds that invest in a diversified portfolio of gold-related assets.
• Gold Futures and Options: Derivative products that offer investments in gold at an agreed-upon price in the future.
• Gold Jewelry: Often holds artisan value over its raw material value and is not the best option for pure investment purposes due to high markups.

Gold ETFs offer a uniquely cost-effective method for buying gold. By purchasing securitized shares in an ETF, these funds offer liquidity and flexibility; shares can be bought and sold like any other stock on an exchange, making it easier to manage the investment according to market conditions. 

Additionally, gold ETFs allow for fractional investment, enabling investors to purchase gold in smaller, more affordable quantities, which can be particularly appealing for those with limited capital to invest. These factors, combined with the fact that gold ETFs track the market price of gold closely, make them an attractive option for diversifying into precious metals. 

Figure 1: A chart demonstrating the price volatility of a gold ETF (NYSEA:GLD) between 2019 and 2023 (Source: CNBC)

In Figure 1, depicted above, there are clear peaks and troughs visible in the share price of the gold ETF (SPDR Gold Shares). Gold ETF investing allows for the instantaneous purchase of shares as soon as their price drops. These movements can be tracked (with alerts) using popular online stock trading and charting platforms. 

Given during pricing data at the time of writing, as of Q4 2023, a share price in a popular gold ETF is approximately $181—a significantly lower entry point than the $1,992 gold spot price.

Nonetheless, physical gold bullion products is still considered by many to be the best choice for both budget-conscious investors. This is because gold bullion and coinage present a risk-managed approach to gold investing that mitigates many of the pitfalls associated with purchasing gold.

Why Focus on Physical Gold Bullion?

Physical gold bullion offers benefits like mitigating counterparty risk since you're not reliant on another party's ability to fulfill a contract or promise. You can store gold securely, ensuring you have direct control over your investment. 

Gold bullion is also highly liquid, allowing you to buy and sell with relative ease. The volatility of gold can be less compared to other assets, making it a stabilizing addition to a portfolio.

For those who are especially wary of market risks—including systemic and counterparty risks—there are myriad unique benefits associated with physical gold investing over “paper gold” investing (i.e., investing in gold mining stocks or ETFs). 

Cheapest Ways to Buy Physical Gold

Here are some tips to buy gold at lower costs:

1. Compare Prices: Shop around to compare prices from various dealers, including premiums above the spot price of gold. Look for premiums of 3 percent or lower over spot price. 

2. Buy in Bulk: Dealers often offer lower premiums per ounce for larger purchases, so buying a more substantial amount can save money in the long run.

3. Opt for Bars Over Coins: Gold bars generally have lower premiums than coins due to the collectible and design value of coins.

4. Avoid Rare Coins: Unless you're a numismatic expert, stick to bullion products to prevent paying for the rarity or collectible value. Standard gold bullion bars are generally easier to identify and have standardized hallmarks and engravings. 

5. Check the Dealer’s Reputation: Buy from reputable, accredited dealers to avoid scams. Look for dealers authorized by mints or those with positive reviews from the Better Business Bureau or other regulatory bodies.

6. Understand Buy-Back Policies: Some dealers offer a buy-back policy at or near spot prices, which can add value and assurance.

Mitigating Risks of Buying Cheap Gold

To ensure you're not scammed when purchasing physical gold:

• Verify Authenticity: Purchase gold bars and coins that come with a certificate of authenticity and a hallmark from a reputable mint.
• Secure Storage: Consider vault storage options offered by some dealers, or invest in a quality safe for home storage.
• Insurance: Make sure your gold is insured, especially if stored at home, to protect against theft or loss. Note that gold stored at home cannot be included in a tax-advantaged retirement account. 

The bottom line is that some options are significantly more affordable than others when it comes to buying gold. The cheapest way to buy gold is often not the most reliable nor the safest method. 

Buying from unscrupulous vendors or purchasing tainted or damaged bullion or numismatic products can help reduce the purchase price, but it comes at the cost of potentially buying fraudulent or misleading products or products that cannot be resold. 

Investing in Cheap Gold through Self-Directed IRAs

For retirement savers, investing in gold via a self-directed Individual Retirement Account (SDIRA) offers tax advantages. A specialized gold IRA provider can help you navigate the rules for purchasing, storing, and selling gold within your IRA. They ensure compliance with IRS rules, which is crucial for maintaining the tax-advantaged status of your investment.

1. Choose a Reliable Custodian: Look for self-directed IRA custodians with expertise in gold investments and a solid track record.
2. Understand Fees: Be aware of potential setup fees, annual fees, storage fees, and selling fees. Competitive pricing can add value to your investment over time.
3. IRS-Approved Gold: The IRS requires gold to be 99.5% pure for IRA purposes, so ensure you purchase eligible gold products. Gold IRA companies ensure that all purchases are fully compliant with IRS regulations. 

Fortunately, there are dedicated companies that streamline gold IRA investing. These companies work with IRS-approved storage facilities to vault low-cost gold assets in compliant depositories. Home storage options are not permitted for gold IRA investors per IRS regulations. 

(Note, however, that you can store gold coins in bullion at home, as long as these assets are held outside of an IRA. If you choose this option, and don’t mind paying taxes on your gold assets, make sure you store your gold in a trustworthy and durable gold safe.)

Choosing a Gold IRA Provider

Several reputable gold IRA providers make it easy to invest in gold within an SDIRA. In a hurry? We’ve provided a quick overview of some of our top-ranked gold IRA companies below: 

Noble Gold

Noble Gold has some of the most competitive fees in the bullion industry, along with some of the best ratings of any gold IRA company we assessed in 2023. 

Co-founders Charles Thorngren and Collin Plume opted not to allocate millions of dollars to hire celebrity ambassadors or produce extravagant television and radio commercials. Instead, they chose to operate a streamlined business, prioritizing exceptional client service. 

This strategy appears to yield positive results, with the company consistently receiving outstanding ratings. We read only a single 2020 complaint posted on the Better Business Bureau (BBB), which has since been resolved. Plus, Noble Gold has a simple buyback policy in case you want to liquidate your gold position at no cost.

(Want to learn more about Noble Gold? Read our full Noble Gold review here.)

Quick Notes:

• Lowest fees in the industry
• Low account minimums ($2,000)
• No-hassle buyback policy for all gold and silver
• IRS-approved storage facilities in Texas
• Relatively new company (founded 2017)

Augusta Precious Metals

Among the more than 60 companies we’ve reviewed, Augusta Precious Metals stands out with its exceptional ratings and reviews on platforms such as the Better Business Bureau (BBB), Business Consumer Alliance (BCA), Google, and more. Money magazine even honored this company with the title of “Best Overall” Gold IRA Company. 

Augusta Precious Metals has gone the extra mile by adding a Harvard-trained economic analyst, Devlyn Steele, to their team. Devlyn offers valuable education to potential customers considering precious metals investments. Plus, this company has the coveted endorsement of Hall of Fame quarterback Joe Montana, who entrusted Augusta Precious Metals to be his gold company of choice. He's not only a customer, but also a passionate long-time advocate. 

If you decide to partner with Augusta Precious Metals, you won't be disappointed.

(Interested in Augusta Precious Metals? Read our full Augusta Precious Metals review here.)

Quick Notes:

• Best ratings across the board
• Zero fees for up to 10 years for all customers
• Money Magazine’s “Best Overall” Gold IRA company
• Relatively high account minimum ($50,000)
• Endorsed by Hall of Fame quarterback Joe Montana

Silver Gold Bull

Silver Gold Bull is a precious metals investment firm with offices in Las Vegas, Nevada, and Calgary, Alberta. This Canadian-American company has an extensive inventory of precious metals products, characterized by remarkably low markups, averaging just 3%. In fact, they guarantee the best price possible on all gold bars in their catalog.

Their diverse range of bullion options caters to the preferences of retirement savers, investors, and collectors alike. For American customers, Silver Gold Bull collaborates with a range of IRA providers, simplifying the process of rolling over IRAs or 401(k)s into precious metals. 

Similarly, for Canadian clients, the company offers a seamless avenue for diversifying Registered Retirement Savings Plans (RRSPs) and other Canadian registered savings plans into physical precious metals bullion. In addition to their highly competitive markups, Silver Gold Bull ensures complete product insurance and refrains from charging any startup fees.

(Thinking of opening an account with Silver Gold Bull? Check out our full Silver Gold Bull review first.)

Quick Notes:

• U.S. and Canadian storefront shopping experience available
• “Best Price Guarantee” on gold bars
• Terrific selection of RRSP, TFSA, and IRA-eligible products
• Limited selection of platinum and palladium products
• Low markups of only about 3% on average

Note that this is not an exhaustive list of companies. For a full list of the best gold IRA providers in America, check out our full review list here.

How to Avoid Getting Scammed When Investing in Gold Products

Buying gold can be a safe and secure investment when done correctly. When looking for the cheapest way to buy gold, however, many novice investors get led astray and end up investing in fraudulent products or with unscrupulous vendors. 

If you care about protecting your wealth, you need to invest in gold with reputable vendors. Even if they carry a higher premium, you will save money in the long run by avoiding IRS penalties, hidden fees, and the tax liabilities that non-IRA gold is exposed to.

By focusing on reputable sources, understanding pricing and premiums, and tapping into the resources of a specialized gold IRA provider, you can add gold to your portfolio without falling victim to common scams or paying unnecessary premiums. Remember, thorough research and due diligence are paramount when venturing into precious metals to safeguard and potentially enhance your investment portfolio.