Insurance Policy

Gold bars can be insured under a person’s regular home owner's policy, but most institutions will only cover up to $1500 of the value, said Pascal Dessureault, a spokesperson with Toronto’s TD Bank. There are some bullion-specific insurers that will charge between $1 and $2 per $100 of gold you own, annually. You can also keep bars at a gold storage facility, which should have its own insurance policy to pay for any items that may get stolen or damaged in a fire.   

When Jeff Goldman was young, gifts from his grandfather were never in short supply.

While most of those presents, like the Whirlybird helicopters and an assortment of GI Joe action figures have come and gone, there is one memento he has kept since he was 10 years old: a shiny gold coin, weighing just one-tenth of an ounce.

Three decades later, Goldman still keeps the coin in the top drawer of his bedroom dresser.

“It reminds me of my grandfather,” said Goldman, now 45 and a sales executive in south Florida in the US. “Unlike toys or clothes that fall apart, a coin is a coin and I’m always going to have it.”

What’s more, his grandfather’s gift sparked his collection, which now includes 20 ounces in 17 gold coins, worth about $26,000 at today’s $1,300 an ounce price.

Goldman’s collection serves as both an investment and as something to pass down to his own children and grandchildren one day. He keeps the collection locked in a bank safe, but he visits his stash about once a year.

“I like to go and say hello,” he said.

Why buy gold?

Whether for social stature or for investment reasons, people have bought physical gold bars, coins, flakes and jewellery for centuries.

Throughout most of the world, gold is a favourite investment to hedge against a weak global economy and stock market fluctuations, as the metal tends to rise in value during a recession.

While investors can buy exchange-traded funds that take a stake in gold that’s stored in a bank vault, a lot of people prefer holding bars and coins for a sense of security.

It’s mostly used for investment and hedging purposes in Europe, North America and Asia, but in places like India and in many Arab countries, gold is emblematic of deep-rooted tradition.

In Arab countries, gold offers stability in an often-unstable part of the world.

“In the Arab states you never know what will happen. There could be a revolution somewhere tomorrow,” said Abdulkader, a Riyadh-based sales executive who didn’t want his last name to be used. He said he owns nearly a kilo of gold, worth about $45,500.

Husbands also give it to wives at marriage — “it’s the ultimate jewellery,” Abdulkader said — and they sometimes take it back when finances are tight.  The wife might come to you and say, ‘please sell my gold and use the money.’ The wife can then support the family.”

Meanwhile, in India, brides receive gold from grooms as a wedding gift. There’s also a tradition for the groom to give gold to his bride’s mother, said Bhushan Joshi, the Pune, India-based manager for capital markets and wealth management at Capgemini, a global consulting firm.

Cost of gold

The cost of gold is fairly easy to calculate, as the bulk of the price is based on the day’s spot price, said Danny Kroll, founder and operations manager of Toronto-based Canadian Bullion Services, a company that sells and stores physical gold and silver.   

The spot price —always priced in US dollars — is currently $1,300 an ounce. Not sure what an ounce amounts to? It’s about the size of a AA battery. Your morning slice of toast is probably just over an ounce, too.

Additional fees from anywhere between 5% and 50% are tacked on by the broker facilitating the transaction. Those fees vary significantly depending on who’s selling, so be sure to ask around for a good price. As of 27 May, a one ounce bar or coin on Kroll’s site costs between $1,434 and $1,504.  

The type of coin or bar can also affect prices. Many coins have intricate designs etched into them, while some pieces of gold are rare and considered collectables. One of the rarest gold coins is the $20 1.2 ounce 1933 Gold Double Eagle, which sold for $7.6 million at a Sotheby’s auction in 2002.

A one-tenth ounce 2014 Canadian Maple Leaf gold coin sells for $150.84 on Kroll’s site, while it goes for slightly less on Montreal-based gold site Kitco.com.

How to find it

The ease of access to gold depends on the country. In India, you can find gold at banks, jewellery stores and other locations that specifically sell gold and silver, said Capgemini’s Joshi.

In Saudi Arabia you can buy gold at a number of different precious metal stores, said Abdulkader. He had been shopping at five locations, but now buys from two dealers with reasonable fees.

In developed countries, you can walk into a bank that sells physical gold —not all do so check their website — or buy online, just like you would a book or item of clothing.

A number of cities also have vending machines that dispense gold. Yes, just like you buy water or pretzels or your favourite candy bar, you can also buy gold bars or coins. You’ll find them in Dubai, Abu Dhabi, Las Vegas, New York, Nuremberg, Cascais in Portugal and other locales. Just pick your product — you can buy one ounce coins or bars of between 2.5 and 250 grams — insert cash or a credit card and then grab your gold just as you would a soft drink. The price is recalculated every sixty seconds and is based on the spot price, plus a 5% commission.

Gold doesn’t come with a certification. Bars and coins do have their purity marked directly on them, said Kroll. Look for gold with a .999 on it, which is the purest gold you can buy.  There are ways to create counterfeit bars and coins, so you need to make sure you’re working with a reputable person. Ask other gold buyers for their preferred dealers as a start.

When talking to a dealer, ask where they store the gold and where it has been sourced, as you’ll want to be sure that your broker is getting his or her gold from a reputable source, such as a mint.

“I shopped around to seven dealers,” said Paul McMichael, a London-based IT executive, who bought his “small holding” of gold via the web.

How to pay for it

In countries where gold is regularly bought and sold, you can just walk in to a store, hand over cash and then leave with a bar, coin or jewellery, Joshi said. “It’s like a grocery store,” he said. “Go and pay and then take the gold.”

North Americans can go to a bank or coin dealer with cash, but it may take longer to receive the gold, as a lot of companies have to get the coins from a mint, a bank or other dealers, Kroll said.

Goldman bought his gold from a coin dealer in Austin, Texas, in the US. He walked into the store, had a conversation about what to buy and then wrote a cheque. “It’s just like opening a bank account,” he said. He had to wait four days to get the goods.

Buying gold online is similar to buying anything online. Some places will take a credit card, others won’t. In that case, you’ll have to pay your balance through a wire transfer or through online banking, in the same way that you’d pay a bill.

How to store it

In India, a lot of people keep their gold bars and coins in lockers at the bank, said Joshi, while gold jewellery is usually worn.

In North America, banks and dealers offer storage facilities, but you can also get the gold shipped by a traditional courier — the boxes are unmarked and it’s less conspicuous to deliver it this way than on an armoured truck — to your home.

Kroll said that 95% of his clients want their gold at home, though McMichael and Goldman both keep their metals in storage facilities.

Storage costs vary. In India, the costs are negligible, according to Joshi, but Kroll charges 5% a year on the value of the assets stored. 

Goldman plans to store his gold for the long term. While he would use it if the American dollar suddenly became worthless, the beauty of gold, as his grandfather’s coin taught him, is that it can be held on to for years.

“He told me that good things come in small packages,” said Goldman. “He said I was too young to know how important the gift was then, but that I would understand it someday. And now I do.”           

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