Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
This is a common starting point for those looking to get the most out of their investments. This is especially true for budget-conscious or novice precious metals investors looking to gain exposure to the market without overextending their financial resources. You might not be able to control gold’s price action, but there are ways to lower your cost basis to optimize your returns. It’s all about timing trades correctly, choosing the right assets, and sticking with an effective strategy.
How Gold is Priced
The price variation among gold assets is a common source of confusion for investors. Understanding how these assets are evaluated can make it easier to find the cheapest way to buy gold. Here are some crucial variables in determining the value of physical gold investments.
Spot Price
The spot price of gold is the value of one troy oz of unprocessed gold. This base evaluation serves as a foundation for pricing in the broader market for refined gold assets such as bullion coins and bars. The spot price is based on gold futures which are affected by a slew of factors including supply and demand, mining production, economic indicators, geopolitical rates, and market sentiment.
Dealer Premiums
Precious metals suppliers and coin dealers add a minimal fee on top of the spot price to cover the cost of sourcing, managing, and transporting assets. This additional fee, known as a dealer premium, fluctuates based on the popularity of certain assets, supply and demand dynamics, broader market conditions, and individual dealer rates. Generally, the more work required to produce and acquire a gold asset, the higher the premium.
Numismatic Value
Some gold assets have numismatic value, meaning they’ve accrued worth beyond their weight in gold. This additional value can result from scarcity, historical appeal, or other unique features making an asset more sought-after among investors or collectors. Numismatic gold assets are evaluated based on a combination of their precious metals contents and numismatic features.
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Buy in Bulk
Buying in bulk is a tried and true method for securing gold at cheaper prices. Dealer premiums tend to be lower for large orders because dealers incur fewer costs on a per-unit basis. On the other hand, purchasing gold assets in a piecemeal fashion results in disproportionally higher premiums. Gold bars are ideal for buying in bulk due to their comparatively larger sizes which can reach up to 1 kilogram and higher.
Open a Gold IRA
One of the cheapest ways to buy gold is through a gold IRA. This specialized form of self-directed retirement plan allows investors to buy physical gold with tax-advantaged dollars. You’ll get more gold for your buck before Uncle Sam takes his slice, achieve a more diversified portfolio, and have plenty of time to allow the gold assets to appreciate until retirement. It’s important to note that the IRS places strict requirements on IRA-eligible assets.
Invest in Paper Gold
Paper gold in the form of gold ETFs, mutual funds, and mining stocks is another effective strategy for those searching for the cheapest way to buy gold. These alternative gold assets don’t come with the dealer premiums or storage costs associated with physical gold. Bear in mind that these assets don’t offer a direct investment in gold. Instead, these paper alternatives provide indirect exposure to gold by tracking the spot price (in the case of ETFs or mutual funds) or providing shares in gold-linked companies (in the case of mining stocks).
Find the Best Deals
Sometimes, finding the cheapest way to buy gold is as simple as looking for the best deals. It’s not uncommon for precious metals experts or coin dealers to offer special promotions or discounts. Usually, this happens at the end of the year when suppliers want to offload their holdings to lower their tax burdens. In the search for deals, resist the temptation to fall for misleading sales tactics or outright scams. In these instances, the general rule of avoiding everything that sounds too good to be true is applicable.
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Wait for Pullbacks
Gold prices boast a confident upward trajectory when viewed from a broad time frame. However, there are brief slumps within this rising trend. For the savvy investor, these momentary dips represent prime buying opportunities to catch gold assets at relatively lower prices. If you already have gold holdings, these temporary pullbacks are perfect for dollar-cost averaging to achieve a lower-cost basis. New investors can take advantage of these troughs for a more affordable entry point.
Consider Fractional Gold
If you’re looking for the cheapest way to buy gold in terms of overall cost (as opposed to lower cost-per-unit), fractional gold assets are an affordable option. This is a common choice for investors who want to invest an amount below the current spot price of gold. Generally, fractional gold refers to any coin, bar, or round weighing less than one troy ounce. Although there are smaller gold bars, the smallest products can be found among fractional gold coins which come in 1/10, 1/20, and even 1/40 oz variations. Buying smaller gold products won’t change what you’re paying in terms of price/oz, but it will provide a lower barrier of entry.
Want To Learn More About Investing in Precious Metals?
The cheapest way to buy gold varies based on each investor’s specific goals and preferences. If you’re looking to get the most out of your precious metals investments, grab a FREE copy of our Precious Metals Investment Guide. This comprehensive guide explains everything you need to know about investing in gold and silver assets for a more diversified and secure portfolio.