What is the Cheapest Way to Buy Gold?

Investing in gold doesn't have to be expensive. While gold is traditionally viewed as a symbol of wealth and stability, there are various ways to acquire it at minimal cost. Understanding the different options—such as buying gold bullion, ETFs, digital gold, or even fractional shares—can help you optimize your investment and avoid high premiums or fees.

In this guide, we’ll explore the most cost-effective strategies to buy gold, ensuring you get the most value for your money.

Cheapest Ways to Buy Gold

The following are the easiest ways to purchase gold.

1. Physical Gold

Physical gold is available in several forms: gold bars and bullion coins.

Solid gold bars contain the highest amount of gold, and you can purchase them from reputable dealers, such as a private mint or precious metal vendor. A few trusted gold bar sellers include JM Bullion and APMEX.

You can choose between various weights and shapes if you invest in gold bars. Some are circular, while others are flat and look like bricks. Typically, purchasing gold in bulk will allow you to benefit from a discount, which makes your investment more attractive financially.

Some dealers are less costly than others. It's wise to compare commissions among retailers to ensure you get a fair price.

Gold coins are one of the cheapest ways to buy gold, especially if you purchase them through a government mint. Governments that offer minted gold coins include the United States, the United Kingdom, Australia, and China.

If you intend to invest in bullion coins, be aware that some governments assign each coin a face value that retailers can accept as currency. However, that face value may be much less than the coin's actual value due to the gold it contains.

Investors who plan to purchase physical gold should buy insurance for their holdings and make sure they have a proper place to store it.

2. Gold ETFs

Buying a gold ETF (exchange-traded fund) is similar to purchasing stock in an organization. You'll benefit from a diversified portfolio that includes precious metals, but you won't need to worry about adequately storing it or incurring the high commission fees that dealers often charge when selling gold bars and coins.

You can choose from multiple gold ETFs if you're seeking to buy gold. Each gold ETF is backed by actual gold bars and bullion held in various locations worldwide. As the price of gold increases, the value of your ETF will also increase.

Gold ETFs allow investors to diversify their portfolios at less expense than holding the physical metal. However, they aren't entirely free. You may need to pay a commission on the shares you purchase, and many ETFs include an expense ratio to cover the management of your account and administration costs.

3. Gold Mining Stocks

Some companies focus on gold mining, which can be attractive to an investor who wants to integrate gold into their portfolio in alternative ways. A gold mining stock may see higher returns over time than holding physical gold or purchasing ETFs because the company may have other factors that impact its share price.

When you're considering purchasing a mining stock, it's crucial that you understand the share's historical performance and how the company's processes work. Some gold mining companies may not have the best environmental track record, and this can deter investors who want an ESG-friendly portfolio.

If you purchase a mining stock, you won't need to worry about the expense ratio that a gold ETF may have. However, you'll probably incur a trading commission when you buy your shares and owe a fee when you decide to sell.

On the plus side, your mining stock shares will be easier to liquidate than physical gold when it comes time to cash in.

4. Gold Futures

Gold futures allow you to hedge against market swings in the value of gold. You can purchase a contract to buy gold in the future or sell it at a desired price. The contract you purchase is tradable through the stock exchange, making it a more liquid investment than physical gold.

Buying gold futures is more complex than buying gold, an ETF, or a mining stock. Experienced investors are more likely to understand the benefits of a gold future and use it appropriately for a return on their money.

Keep in mind that you can easily lose money if your contract doesn't go the way you expect it to, resulting in the loss of your initial investment.

5. Gold Mutual Funds

Gold mutual funds are another option for investors looking to gain exposure to gold without directly purchasing physical gold. These funds pool money from multiple investors to invest in a diversified portfolio of gold-related assets, including mining stocks, ETFs, and other securities tied to the performance of gold.

Investing in gold mutual funds can be less costly than buying physical gold or even individual mining stocks since they often have lower management fees and offer diversification across various gold-related assets. However, similar to ETFs, mutual funds may charge an expense ratio and potentially a sales load or other fees when you buy or sell shares.

What to Consider When Buying Cheap Gold

When looking for the cheapest way to buy gold, consider the following factors:

Market Timing

Keep in mind that the value of gold tends to rise during times of economic uncertainty. You'll pay a premium for the investment when inflation rates are high or the stock market experiences a downturn. If you want to get the best value for your gold investment, it's usually best to buy gold when the stock market is at its peak.

Investing Goals

People have different investing goals. Your goals will likely vary according to your age, your savings amount, and the current diversification of your assets.

Investors who want assurance that their money remains safe throughout market upturns and downturns may find purchasing physical gold highly attractive. ETFs can provide similar reassurance, and you won't incur the storage fees and insurance costs that physical gold requires.

Risk Tolerance

Gold bullion, gold coins, and gold ETFs are among the least risky alternative investments available today. Unlike other tangible assets, such as fine art or antique cars, you can quickly sell your gold bars or ETFs. They're also a lower risk since they're less susceptible to the market swings that stocks often have.

Liquidity

Gold ETFs and stocks are liquid. You won't need to wait weeks or months to find a buyer. You can sell gold ETFs and mining stocks through your broker or investment management company.

Selling physical gold is a little different. While you might be able to redeem it through a local dealer, it will usually offer a price below its value, which can decrease the return on your investment.

Quality of Gold

If you decide to purchase physical gold, you'll want to know how to evaluate the quality of your purchase. Most quality gold bars are at least 99.5% pure gold, and they'll contain some identification marks, like the name of the original manufacturer and the purity content.

People who purchase gold coins should evaluate their purchase, especially if they buy through an online dealer instead of a government mint.

Storage

Purchasing physical gold means you'll need a secure space to store it. You want to ensure it's properly cared for so it doesn't incur damage. You'll also want to protect it from potential theft.

Proper storage is an ongoing expense, especially for storing expensive gold bars. You should also consider insurance to protect the value of your assets if they're lost, stolen, or destroyed.

Compare Brokers for Investing in Gold Online

Several brokers can help you source gold bars and coins for investment options. Here are a few suggestions. 

Purchasing Gold is a Great Way to Diversify Your Portfolio

Since gold is considered to be a safe investment that holds its value during turbulent economic times, many consumers buy gold and store it in their homes. You can also consider buying gold ETFs, holding stocks in a gold mining company, or investing in gold futures.

Gold might be suitable for you if you're seeking an investment with less volatility than other assets, like company stocks and mutual funds.

Frequently Asked Questions