It’s easy to rush into buying one or more gold coins, as a hedge against inflation, geopolitical disaster, or both.
But before you part with your money, take a close look at the real cost of the coin or coins you are buying.
Here are four things to watch for.
1. Not all gold bullion coins are pure gold.
Some gold coins, like the Canadian Gold Maple Leaf coin, or 99.99% gold. In other words, 24 karat gold. Others, like the Krugerrand, are 22 karat gold. And the Mexican 50 Pesos gold coin is 21.6 karat gold.
When gold coins are made with less than 24 karat gold, some are over 1 ounce, so they contain a full ounce of pure gold. But some are not.
Do your homework and make sure you understand how much gold you are paying for.
2. The same gold coin will sell at different prices through different dealers.
Not all gold bullion dealers charge exactly the same for identical gold coins. So shop around.
All dealers will sell at a certain amount over the spot price of gold. For example, one well-known dealer typically sells gold bullion coins for about $70 over the spot price of gold.
Also, if you are buying by credit card, some dealers will charge a premium, sometimes as much as $40.
These two factors alone would add $90 to the price of your one ounce gold coin.
3. If you are outside the US, prices will be impacted by the relative value of your local currency.
Gold is priced in US dollars. This means the exchange rate between the dollar and your local currency will impact the price you actually pay.
For example, if the value of your local currency dropped against the dollar this morning, and you are buying in your local currency, you will end up paying more for your gold.
4. There are other costs to pay, beyond the price of the gold coin.
We’re not done yet! If you are taking physical possession of your gold coins, you will also be charged a shipping fee and an insurance fee. Check these out between dealers. Or, if you can, drive down to the dealer, buy the coin and take it home yourself.
Bottom line…
The price you pay for a one ounce gold coin can be significantly higher that the spot price of the gold itself.
Do the research. Do the math. If you don’t, the value of your gold coins will have to rise significantly before you even break even.