Buying & Selling Gold Bars – Everything You Wanted to Know
Gold bars are some of the most popular gold bullion investments in the market today. They provide investors with many different options with respect to sizes, manufacturing processes and refiners or producers. Some are small, others quite large, some are hand poured, others struck, some are sealed, some are raw, some come with an assay card, some include a serial number, while others do not.
The number of possible options may seem overwhelming, especially to new or first-time investors in physical gold. In this piece, we’ll attempt to answer the numerous questions that we’ve received over the years in hopes that this information will help you to narrow down the best options for you.
Our goal is to arm you with the information that you need to be successful when buying or selling bars and/or bullion.
What is a Gold Bar?
First things first – let’s define a gold bar. A gold bar is a physical piece of gold typically rectangular in shape produced by a private refiner or manufacturer. Gold bars are usually 24k or .999 fine gold, but there are exceptions, which we’ll discuss in further detail below.
One way in which a gold bar differs from a gold coin is that a gold bar is not legal tender and doesn’t include a face value. With few exceptions, gold coins are government issued and are considered legal tender.
In many parts of the world, gold bars are the preferred form of investment. Some cultures refer to them as “gold biscuits” and use them as an investment as well as in the production of gold jewelry. In fact, 24k gold jewelry has become more and more popular in recent years. Because 24k gold is soft, it doesn’t hold up as well as gold jewelry composed of base metals, but there’s no matching the brilliance of the color.
It should be noted that bars aren’t limited in shape to rectangles. In fact, over the years, we’ve seen all types of shapes, including squares, hexagons, circles, ovals and pendants. While many of these items technically fall in the category of gold bullion, more times than not, they are still commonly referred to as gold bullion or bars by the general public.
Price of Gold Bars
Gold bars are a cost-effective way for individuals to invest in physical gold, as they typically trade at lower rates than gold coins. The reason for this is two-fold.
Firstly, most gold bars are produced by private manufacturers as opposed to government mints. Private manufacturers have a lower cost of production, which in part is due to the more streamlined design. This contrasts with the more intricate design and sophisticated manufacturing process used to produce most gold coins.
Secondly, at least in the United States, gold coins are more widely traded and recognized. Investors place a higher premium on something that they’re familiar with. Furthermore, government-issued gold coins are backed by the government of issuance, which provides a bit more assurance that the gold meets the purity and weight specifications.
While bars are typically less expensive than gold coins, this isn’t always the case. One contributing factor is the size of the gold bar, which we’ll discuss next.
Sizes of Gold Bars
As we referenced in our introduction, gold bars are produced in many different sizes, anywhere from 1 gram, or less, up to 400 ounces. The most common size gold bars are 1 gram, 2.5 grams, 5 grams, 10 grams, 20 grams, 1 oz, 50 grams, 100 grams, 10 oz and a kilogram or kilo.
Typically speaking, bars less than one ounce, except for the 20-gram gold bar, sell at a higher premium than 1 oz bars. Alternatively, gold bars greater than 1 oz tend to sell at a lower premium than 1 oz bars.
While 400 oz gold bars exist, they’re mostly traded at the institutional level and between central banks. The largest gold bar traded at the retail level is a kilo gold bar, which is 32.15 troy ounces. These bars can be acquired at the lowest premium on a per ounce basis, but at a price tag of over $50,000 per bar, very few investors have the means to acquire a gold bar of this size.
The sweet spot for bars, and those most frequently requested by the public are 1 oz bars. The premium on these bars is reasonable and it’s easy to keep track of the value of your gold investment, as the spot price of gold is quoted in ounces.
Smaller gold bars can be convenient, especially if you don’t have the funds for a larger investment or if you are buying with the intent of bartering at some point in the future. Larger bars are best for investors with substantial means that are attempting to accumulate as much physical gold as possible at the lowest price per ounce.
How are Bars Packaged?
Bars come in all shapes, sizes and packaging. Older bars were hand poured and may or may not include packaging, whereas most modern gold bars do. On occasion, bars produced in the 70’s and 80’s were raw without any type of way to authenticate them.
Eventually, they were produced with serial or assay numbers and a corresponding certificate of authenticity (COA) was included to verify the authenticity of the item. Even so, in the earlier days, the COA was
separate from the gold bar which wasn’t necessarily housed in a sealed package.
Fast forward a bit and gold bars began to be sealed by the manufacturer.
Some of them included a COA or “assay card” while others didn’t. Still, having sealed bars felt a bit more comfortable than handling a piece of raw gold. Today, the production and packaging of most bars has changed. Most modern bars are sealed with an assay card.
An assay card is a credit card type COA that is part of the packaging of modern-issued gold bars. It includes details on the gold bar, such as the weight, size and fineness. More times than not, it also includes a serial number that corresponds with the serial number on the gold bar.
Some of the more recent bars include additional anti-counterfeiting measures, such as a UPC or bar code that you can scan to verify the authenticity. Others have a hologram-type sticker that can be matched to the serial number on file. We’re likely to see additional anti-counterfeiting measures introduced in the years to come as gold bars continue to increase in popularity and value.
Producers of Gold Bars
Hundreds of producers of gold bars exist, which can make the decision of which manufacturer to choose somewhat overwhelming. Fortunately, we have a way of narrowing down the list for you to a few dozen producers. The London Bullion Market Association (LBMA) good delivery list is a good place to start. A current list of LBMA-approved producers and be found at the following link.
These companies are in good standing with the LBMA and meet their strict criteria with respect to ethical standards, operations, weight, and fineness of the bars. Companies that fail to meet these requirements can be delisted. This can be important for some folks, as only gold bars produced by LBMA-approved manufacturers are IRA eligible. This means that they can be purchased and invested in retirement programs such as self-directed IRAs and solo 401ks.
As a side note, when purchasing precious metals for a retirement plan, it’s important to engage the services of a custodian and depository. Also be aware that you’re not legally able to physically hold precious metals when purchasing gold bars through a retirement plan. This means no home safes or safe deposit boxes. If you do, the IRS may view that as a withdraw and assess taxes and penalties.
While any of the producers on the LBMA good delivery list will make a fine choice, a few producers are especially well-known and frequently requested by the public. These name brand bars are the most frequently traded in the market.
This list includes, but is not limited to Pamp Suisse, Credit Suisse, Royal Canadian Mint and Perth Mint. These bars tend to trade at slightly higher premiums than some of the other approved refineries.
Most bars are produced by private manufacturers, but there are a few exceptions. At the time of this writing, the Royal Mint in Great Britain, the Royal Canadian Mint and the Perth Mint in Australia are all government mints that produce gold bars.
Karats of These Bars
While we suggest that you limit your gold bar purchases to LBMA-approved refiners, most gold bars from recognized manufacturers should suffice. However, it’s important that you only purchase gold bars composed of 24k .999 fine gold.
The reason for this is three-fold. One, gold bars with a purity of less than 24k gold are not eligible under a retirement plan. While your intent may be to invest in physical gold outside of a retirement plan, you may be limiting yourself if you ever decide to change course.
Secondly, bars with a purity of less than 24k have a very limited market. As a coin dealer, we don’t purchase gold bars that are less than pure gold, nor will most of our trading partners or fellow dealers. In most cases, the only option for individuals interested in liquidating bars that are less than .999 fine is a refinery.
Most refineries are only available to individuals in the industry. The few that cater to the general public will likely charge you a large fee or commission to melt and assay your gold.
Thirdly, bars with less than .999 fineness may have been mined and produced illegally. A good bit of illegal gold from Africa, Central and South America has made its way across our borders in recent years. Not only do you run the risk of owning a piece of gold that was smuggled into the country, but it could have been produced on the back of slave labor and or at the cost of permanently destroying land for future generations.
Where you choose to buy or sell gold bars can be just as important as all the factors discussed above, if not more so. The most obvious reason is that you run the risk of buying a counterfeit gold bar when you’re transacting with someone that is not an expert in the field.
This includes jewelry stores, pawn shops, some “we buy gold” stores, individuals through trading platforms such as Craigslist or Facebook and even individual sellers on eBay. A couple of years ago, we evaluated a handful of gold bars that our customer purchased from an individual on an online auction site that turned out to be fraudulent.
This may sound like there are few, if any, options left for someone interested in transacting in gold bars, but that’s far from the case. The companies with the most experience in this field are gold coin and bullion dealers. If you live in a larger metropolitan area, then you probably have one within driving distance.
We suggest that you consider this option first, as in many cases, it’s going to be your best choice. If not available, or if you’re not happy with your local choices, there are plenty of online coin and bullion dealers. Additionally, there are companies that you can transact with through the mail, such as with Atlanta Gold & Coin Buyers.
To help narrow down your search of potential coin dealers, we recommend that you first check their status with the Better Business Bureau. While it’s nearly impossible to keep everyone happy, you shouldn’t see a pattern of negative reviews or complaints. We also suggest that you confirm that they’re in good standing with the American Numismatic Association and check to see if they’re members of some of the other industry-leading organizations, such as Certified Coin Exchange, CoinNet and Roundtable Trading.
Choosing one of these reputable dealers or companies will not only greatly improve your chances of purchasing authentic gold bars but will likely also result in a lower price when buying and a higher price when selling the bars if and/or when the need arises.
In conclusion, we’ve addressed many different aspects of gold bars, beginning with a basic definition of the items. We also discussed the various sizes available, including different shapes, how they’re struck and packaged, which producers are likely your best option, the purity of the bars, and finally, who to choose when buying or selling gold bars.
Being familiar with these factors should greatly improve your chances of success and help you to maximize the value of your purchase or sale.
As metro Atlanta’s leading gold coin and bullion expert, we deal with gold bars and coins daily. Ranging from 1 gram to 10-ounce bars and above.
We’re able to walk you through the process and help to address any questions or concerns that you might have. Additionally, we regularly do business through the mail and welcome you to contact us regardless of where you might be in the United States.