Buying gold can add stability and diversification to an investment portfolio, particularly in today’s economic climate of high inflation and stock market volatility.
Here’s what you need to know about buying gold in Australia.
Remember that investing in a commodity like gold, or investing in a stock market fund, is inherently risky, and doing so puts your capital at risk. You may not get back some or even all of your money.
How is gold valued?
Gold is valued by reference to its purity and weight. This is then multiplied by the spot price of gold to calculate the value.
ABC Bullion updates its live gold price feed in real time, refreshing every five minutes. The feed works 24 hours a day, allowing buyers and sellers the ability to monitor the market.
1. How is the purity of gold measured?
All that glitters is not necessarily gold, as manufacturers add other metals and alloys to the mix.
Carats measure the proportion of gold in relation to other metals. The karat number is often stamped on gold, ranging from zero to 24.
The higher the karat, the higher the proportion of gold compared to other metals, such as copper, silver or palladium. Pure, or effectively 100% gold, is 24 karat.
This is how purity varies by carat:
two. How is the weight of gold measured?
Even though Australia uses the metric system, the weight of gold bars is still measured in ounces. But to add an extra layer of complexity, that ounce measure is not an imperial ounce. Instead, it’s a ‘Troy’ ounce.
An imperial ounce weighs 28.35 grams, while a troy ounce weighs 31.1 grams, making a troy ounce weigh almost 10%.
ABC Bullion Group Communications Manager Shae Russell says most bullion dealers assume people know the difference between troy and imperial ounces and therefore often only display prices “per ounce.” “.
Therefore, it is important to know the correct weight measurements if you are interested in buying gold.
How to buy physical gold in Australia
You can buy physical gold in the form of bars, coins or jewelry from mints, precious metals dealers and banks.
1. bullion bars
Gold bars, often depicted stacked in bank vaults, can range in weight from one gram to more than 10 kilograms. Bars are stamped with purity level and weight.
Since 1978, the ABC Refinery in Victoria has been involved in the refining and processing of precious metals, and is the exclusive producer of the ABC Bullion product, sold through ABC Bullion.
ABC Bullion sells bullion bars and minted bullion tablets in sizes ranging from 1 gram to 400 troy ounces, the equivalent of just over 11kg.
two. Gold coins
The Royal Australian Mint is the only producer of coins in circulation in Australia and, since opening in 1965, has produced more than 15 billion coins.
The three types of coins produced at the Royal Australian Mint are common circulation coins (used for everyday cash transactions), collector coins (which are legal tender but produced for use as gifts or collections), and collector coins. investment coins.
Investment coins, which are produced in large quantities, are an easy and inexpensive way to enter the gold markets, explains the Royal Australian Mint on its website.
Gold coins typically have a lower gold content than bullion bars, making them a cheaper investment option. At the time of writing, the lowest cost gold coin available at the Royal Australian Mint store is trading at $360, while the most expensive is $3750.
Other Australian mints also produce and sell non-circulating coins made from various metals, with pure gold coins available to buy from ABC Bullion, The Perth Mint, The Melbourne Mint and more.
Since there is a strong international market for historical and rare coins as collector’s items, these coins typically command a premium compared to their gold content.
The 1933 “Double Eagle”, one of the last gold coins minted in the US, sold at auction last year for $18.9 million, which is equivalent to more than $29 million Australian dollars. Contains 0.9675 troy ounces of gold.
3. gold jewelry
Jewelry, especially vintage pieces, is another avenue to buy gold. However, just like gold coins, you will normally pay a premium in relation to the content of the gold.
This markup is typically over 20% and can often be much higher depending on the manufacturer, which exists to cover the labor cost of design, manufacturing, and retail margin.
You should be able to calculate this margin if you know the weight and karat, along with the current spot price of gold. That said, some retailers are reluctant to advertise jewelry weights for this reason.
For example, an 18-karat gold wedding ring from a luxury designer brand retails for $2,600. If the current value of the gold content is $398, that means you’re paying a markup of more than 6 times for craft and retailer profit.
By comparison, you could buy an 18-karat gold wedding ring at a high-street retailer for $580, a markup of about two-thirds on the underlying gold value of $398.
Jewelry also decreases in value at the time of purchase, making it a less stable investment. If you’re thinking of investing in jewelry, keep all sales documentation and proof of value, as it will make resale easier in the future.
Factors to consider when buying physical gold
If you decide to buy physical gold, you’ll want to keep a few things in mind:
- StorageNote: Physical gold requires secure storage, preferably not in your home. It should be stored away from moisture, corrosives, and metals like silver, which can tarnish it. Several Australian mints offer storage, as do specialist vault companies; however, third party storage will incur additional fees.
- Sure: If you decide to store your gold at home, you need to make sure your home insurance policy covers this. Similarly, if you are using a third-party storage facility, you should check that it has adequate insurance.
- Reliability: Regardless of the type of gold you are looking to buy, it is important to use a reputable dealer such as the Royal Australian Mint or ABC Refinery. If you’re looking to buy from an alternative source, be sure to research whether the seller is legitimate.
- Purity: The gold content in the bar, coin or jewelry determines its value. High karat (21 karat or more) is preferred as it contains a higher proportion of gold and is less likely to tarnish. That said, higher karat gold is less durable and requires more care so it doesn’t get scratched or damaged.
How to buy gold stocks
Buying gold in physical form can be difficult in terms of ensuring its authenticity, storing it safely, and selling it. Investing indirectly can provide investors with a potential advantage if gold prices rise, without the hassle of owning gold directly.
So what are the options for investing in gold? Here’s a quick overview:
- Purchase of gold funds and raw materials: specialized commodities, mining and exchange-traded funds (ETFs) can give you exposure to gold. These range from funds that invest in gold mining companies to ETFs that directly track the price of gold and other precious metals.
- Purchase of shares in gold mining companies: Companies that mine gold have enjoyed huge profits over the past year due to rising commodity prices. Mining companies include BHP Group, Rio Tinto and Newcrest Mining. They also provide potential income for shareholders through their traditionally high dividend payouts.
As with other assets, any gains or capital gains made from investing in gold, whether directly or indirectly, will potentially be subject to capital gains tax (CGT). You may have to pay capital gains tax if your investment-grade bullion has a higher value at the time of sale compared to the value at the time of purchase, ABC Bullion explains.
Is gold a good investment?
If you’re looking to strike it rich in the modern gold rush, you’re probably in the wrong place.
Why? The answer lies in having gold in times of economic volatility. Some investors see gold as a safe haven during stock market crashes, along with a way to preserve wealth when inflation is high.
However, gold prices can also be very volatile, which means that gold is not a safe investment. If you want some of that golden glow in your investment portfolio, try to keep it to just a small percentage of your total investments.
As with other investments, your gold investment may go down as well as up, and you may not get your money back. If you are unsure about the best option for your individual circumstances, you should seek financial advice.
Should you invest in gold?
Gold can offer investors a safe haven and a way to preserve wealth in an environment of high inflation. As with stocks, the price of gold is volatile, however it has generated an increase in value over the last 30 years.
Depending on your preference and risk appetite, you can choose to invest in physical gold, mining stocks, or gold-based funds and ETFs. However, it is important that any investment in gold is part of a diversified portfolio. And, as always, make sure it’s the right choice for you.