How do you invest in gold?

How to Buy Gold Bullion

Gold bars are sold by reputable gold dealers in many different denominations.
Gold bars are sold by reputable gold dealers in many different denominations.

Of course, the simplest way to invest in gold is to go out and buy some. But to make sure that you get gold at the right price -- and in a form you can easily sell back when you want to cash in your investment -- you need to make sure you are working with reputable gold dealers [source: Grendon International Research]. The World Gold Council, a gold industry association, is a good source for trusted dealers and it lists them online.

Minted bullion coins are one of the most popular forms of gold bullion. Several countries mint their own gold coins in 1 ounce or partial ounce denominations. Some of the more popularly traded coins are American Eagles, Canadian Gold Maple leafs, Australian Nuggets and the most popularly traded, the South African Krugerrand. These coins are heavily circulated for investment purposes, because their gold content is guaranteed by their respective governments. While the coins have face value and can be used as legal tender, they are more frequently traded for their gold content (usually about 22 karats) [source: United States Mint].

When buying bullion coins for investment purposes, buy several coins at once, and buy the larger denominations (at least 1 ounce, as opposed to 1/10 ounce). Dealers usually add more markups to their prices for smaller denominations and sales of small lots of coins [source: Picerno]. Avoid rare or numismatic coins (coins traded on collector's markets), since they are more often bought and sold for their collectible value instead of their gold content [source: World Gold Council].

Another popular option for buying bullion is to purchase gold bars. Gold bars are sold by reputable gold dealers in many different denominations. Reputable dealers are listed by the World Gold Council, and many banks and brokerage houses will sell gold to the public.

Many refiners worldwide produce gold bars, and all authentic gold bars will be engraved with the refinery's seal. Dealers identify gold by this brand. Any brand is acceptable, as long as it is accredited by the London Bullion Market Association. Buying accredited brands ensures that the bars can be sold back to any dealer [source: Grendon International Research]. Dealers look for brands as proof of authenticity and purity of the gold. Finally, when buying gold bars, it is essential to obtain authenticity certificates from dealers [source: Grendon International Research].

Investors should also keep tax implications in mind. Sales of bullion are subject to federal capital gains tax in the United States, and in other countries, but are tax free in the European Union [source: Grendon International Research]. When it comes to storing and securing gold, investors can either purchase a safe, use a safe deposit box in a bank or pay a dealer to store gold onsite.