Invest in Gold (I) — Where to Buy Gold, Kitco or Bullion Direct?

My first gold investment was made five years ago on February 8th, 2002, when I opened an account with Tocqueville Fund to buy $1,000 of their Tocqueville Gold Fund (TGLDX). At that time, the share price of TGLDX was $18.05. Since then, I bought TGLDX almost every month and have accumulated about 200 shares at the end of last year (I sold 50 shares in 2004). During the same period of time, prices of spot gold has risen from $287.40 an ounce on February 4, 2002 to $645.70 on February 2nd, 2007. And how did the fund do? At the close of last Friday, the fund is priced at $50.64. In fact, TGLDX was one of my top three performers in my mutual fund holdings.

Though so far I am very happy with the performance of TGLDX, which gives me an exposure to the precious metal sector and makes my portfolio more diversified, the fund mainly invests in mining stocks, instead of the physical bullion. Despite the outstanding performance of gold/precious metal mutual funds in recent years, I think when people are talking about gold, the interest is not really about the paper value of some mining stocks, but the stability and security of physical gold. If I want to use gold to hedge against inflation, the only way to go is owning the metal.

Investing in gold is a lot easier nowadays. In addition to gold/precious metal mutual funds and physical gold (coins and bars), there are several gold-backed ETFs launched in the past couple of years to help investors catch the gold fever. In addition to TGLDX, I am also looking for other alternatives to invest in gold, particularly in physical gold.

I have been interested in buy gold for some time, but never got into action. One reason was it is difficult to make a sizable commitment. When investing in mutual funds, I can contribute $50 or $100 at any time without additional costs and a $100 investment today could mean a lot 20 years later. However, with gold, it doesn’t make too much sense to buy only $100 and pay $30 fees. Besides, the gold bear market can be very long. As a matter of fact, gold prices hovered around $400 (the prices are not inflation adjusted) nearly twenty years before taking off in 2002. There’s a chance that the 700 some dollars I spend on a piece of gold today may worth less that 10 years later. Yet, I still want to own some pieces. Not a big amount, but a couple of ounces every year is what I can afford.

General information

It’s very easy to get real-time gold price. Unlike stock prices, which are always delayed for 20 minutes if you don’t use your own brokerage, prices of gold listed on various website are up-to-the-minute. The websites I use most often are Goldprice.org and Kitco.com. Goldprice.org also has an on-going series on how to buy gold as well as basic knowledge about gold, very educational. Also, APMEX is offer a free gold investment kit, which is quite informative.

Buy gold

There are many places to buy physical gold (coins and bar) and prices vary. While prices (price of the gold and commission, shipping charges, and insurances) are always important in selecting from which dealer to make a purchase, I also look at the dealer’s reputation, reliability, and customer service (the accuracy of the quotes, execution time, price lock, insurance, and return policy, etc). Since I don’t have personal experience with any dealer just yet, all I did was collecting information from people who have used them on various websites and compare these sites myself.

For price comparison, I used the close price of spot gold on February 2, 2007, $645.70, as a reference. The following are sites that I am interested in.

Kitco

Kitco provides comprehensive information on precious metals such as gold, silver, and platinum, in addition to being a bullion dealer. The bullion products from Kitco include American and Canadian gold coins and gold bar. Real-time prices are available online and purchases can be made online as well.

Price

  • American gold Buffalo 1 oz: $685.86
  • Canadian gold Maple 1 oz: $682.71

Payment

  • Certified check, postal money order, cashier’s check, teller’s check or bank wire
  • For personal check, a 3-week waiting period from when payment is received before the order is shipped
  • For orders less than $20,000, a credit card authorization is required for price confirmation

Fees & insurance

  • $30 flat shipping fees
  • $4 per $1000 insurance charges

Bullion Direct

Bullion Direct offers three different ways to purchase gold: Catalog, Nucleo Exchange, and Auction. For non-active trading, their Catalog service is a better choice and it is the one that I am interested in. Purchases can be made online by registering a free account. Real-time price is also available online.

Price

  • American gold Buffalo 1 oz: $686.50
  • Canadian gold Maple 1 oz: $686.50

Payment

  • In addition to bank wire, money orders, and checks, credit card payments are also acceptable for Catalog product purchase
  • 7-day holding period for personal checks

Fees & insurance

  • $9.95 and up shipping fees (depends on destination) and $5.95 + 4% handling fees
  • Gold is insured by Lloyd’s of London and insurance charges are included

APMEX

American Precious Metals Exchange (APMEX) is a leading online dealer of precious metals, such as silver, gold, and platinum. When this post was originally written in 2007, I didn’t know about APMEX, so I couldn’t make the price comparison. However, it appears that APMEX does have a competitive pricing, especially when you buy a large quantity. For example, it shows on its website that for 2011 1 oz American Eagle Gold Coin, it will add as low as $74.99 markup over the price of spot. For order with 20 coins or more, the price for the Gold Eagle is $5 per coin less than for an order of 19 coins or less. Bullion Direct, on the other hand, doesn’t offer discount for large quantity.

In addition to regular account, APMEX also offers IRA account so that investors can hole precious metals in their retirement accounts as well. Opening an account with APMEX is free and easy and you don’t need to put down any money in the account. If you interested, you can try APMEX and get a chance to win a Gold Eagle for free.

Tulving

For large amount purchase of gold coins, Tulving offers very competitive price. Most of their gold coin products, however, require a minimum of 20 coins and I guess that’s why they can keep their prices relatively low. However, they don’t have real-time price information online. Call (800) 995-1708 to obtain up-to-the-minute quotes and place order.

Price

  • American gold Buffalo 1 oz: $675.00
  • Canadian gold Maple 1 oz: $675.99
  • Prices are locked in when placing order over the phone and that’s the price you will pay

Payment

  • Bank wire or overnight check only

Fees & insurance

  • Free overnight shipping and insurance for all gold orders

USA Gold

In addition to contemporary gold bullion coins and bars, USA Gold also sells historical coins. Real-time price quotes are only available by calling their (800) 869-5115 number. The information on their website are not as complete as others and I wasn’t able to find payment information, shipping and handling fees, and insurance policy, though it’s a reputable company.

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6 Responses to “Invest in Gold (I) — Where to Buy Gold, Kitco or Bullion Direct?”

  1. moneymonk |  Feb 06, 2007 at 3:39 pm

    I did not want to park all my money in Gold, so I brought a Commodity ETF which has Gold, Sweet crude oil, heating oil, aluminum, corn and wheat to be safe.

    I guess Im being too safe.

  2. Super Saver |  Feb 06, 2007 at 9:22 pm

    Sun,

    Nice post about how to own gold. Another way to “own” gold is to buy shares in a company that mines gold. It’s more liquid than owning the metal and provides a little bit of leverage since share prices sometimes rise faster than the price of gold. A caution is there is more risk, because owning one or two companies is less diversified. (For example, my returns for owning gold companies has lagged behind my other stock returns :-(

    At this time, I consider gold a hedge versus an investment. I have some shares in a gold company just in case there is a market “disruption.” For now, I think the economy and the stock market will be fairly strong for the next 6-9 months.

    Good luck on your gold investment.

  3. The Sun |  Feb 06, 2007 at 11:40 pm

    The benefit of having a small portion of the assets in precious metal is obvious as it has a weak correlation with the general market (“my returns for owning gold companies has lagged behind my other stock returns”). The question is in what form. Owning gold mining stocks, mutual funds, or ETFs are flexible in terms of buy and sell, but I think they are not really gold. That being said, I don’t think I will become a full scale investor in gold or anything close to that. Maybe just get a couple of coins :D.

  4. Tab |  Feb 08, 2007 at 8:09 pm

    Back in the 80′s I got hooked into the silver swing and all the hype that silver was going to go ballistic as it cost more to mine it than you could buy it for. Anyway I invested and over a period of about 6 mounts acquired about 450 ounces of bullion. At the time silver was probably in the $6. Long story short I held on to that silver for a LONG time and finally sold it and only broke even. Like you said there is no adjustment for inflation. I have also toyed with buying gold and gave it some pretty good thought first of the year and didn’t, then saw it jump up $50, $75 then $100. I am unsure at this point. I do also own a couple of thousand in Tgldx. One thing for sure you can pretty much figure when your other funds are in the tank for the day Tgldx will help recover them.
    Love your site and info you provide.

  5. The Sun |  Feb 09, 2007 at 11:00 pm

    The reason I added TGLDX to my investments was, as you said, to get some diversifications as the correlation between gold and general markets is quite week, in addition to the excellent growth in the recent years. However, as you experienced, holding too much of the metal may not be a very good idea as nobody know what the demands will be in next two, five, or ten years, though there are predictions that the demands are increasing. The stock market can follow the economy to grow, but gold may sideline when the economy is good. It’s very stable, so the price may not appreciate for very long time.

  6. Gold Bullion Buffalo |  Feb 19, 2008 at 8:15 pm

    The way that graph looks, gold may hit the $1k mark by mid 2008. Does anyone think that the “tax relief refund” that we’re getting will truely help the economy?