How to buy gold: a first-time buyer guide

1. Pick a form: coin, bar or jewelry

• Coins. The American Gold Eagle is made by the U.S. Mint. It is 22 karat (91.67% gold, with silver and copper added for wear). The one-ounce coin holds exactly one troy ounce of pure gold and weighs 1.0909 troy ounces in total. It has a $50 face value that nobody uses. Other well-known coins are the Krugerrand, the Gold Maple Leaf and the American Gold Buffalo.
• Bars. A 1 oz bar from a known refiner usually costs less over spot than a coin. Bars come in sizes from 1 gram up to 400 ounces. Smaller bars cost more per ounce.
• Jewelry. Not a good way to buy gold as a metal. You pay for design and retail markup, and a buyer will pay only a share of the melt value later.

Buy a size you could resell. A 1 oz coin sells to many buyers. A very large bar is harder to sell in pieces. See the live price of each on the gold page.

2. Know the price you should pay

Gold trades at a spot price, the market price per troy ounce. Today it is $4,106.30. A dealer sells above that. The extra is the premium: it covers minting, the dealer's costs and profit. Add them up like this:

Price = spot price x ounces of gold + premium

Example only: if a dealer charges a 5% premium on a 1 oz coin, the price is $4,311.61 with spot at $4,106.30. The premium is whatever the dealer posts, and it changes with the coin, the size, the payment method and the market. Put any price into the premium over spot calculator to see its percentage. Prices are per troy ounce, which is heavier than a regular ounce; the troy ounce converter shows the difference.

3. Compare at least three dealers

Look at the same product at each dealer. Then compare the full cost: the item price, shipping, insurance and sales tax. Lustre's compare pages list dealer prices for the common coins and bars, for example the 1 oz American Gold Eagle, with the premium over spot for each dealer.

• Check that the dealer posts a price per item and a street address and phone number.
• Ask what price you would get if you sold the same coin back to them. A big gap between buy and sell price is a cost.
• Price drops with quantity. Buying 10 coins at once can cost less per coin than buying 1.

4. Pay and get it delivered

• Pay in a way you can trace and dispute if you need to. Bank wire, check and card each have different protections and prices; ask the dealer which price goes with which method.
• Use tracked, insured shipping. Check the package on arrival: count the items, look for sealed packaging and check the weight with a scale if the item is a bar or a coin you can weigh. The fake coin guide shows how weight and size checks work.
• Keep the invoice. You will need the price you paid when you sell.

5. Store it

Keep gold out of sight, dry and insured. Options are a home safe, a bank safe-deposit box or a private vault. Ask your insurer whether home coverage includes precious metals and how much. See how to store coins for handling.

Tax: general information

• Sales tax when you buy depends on your state; many states exempt bullion or set a minimum purchase. See sales tax on gold and silver by state.
• Tax when you sell. The IRS counts metals such as gold bullion and coins as collectibles. If you sell for more than you paid after holding more than one year, the long-term gain is taxed at your rate up to a 28% maximum. Hold one year or less and the gain is taxed as ordinary income. Ask a tax professional about your case.

Red flags

• A dealer who calls you first, or pushes you to decide today.
• "Rare" or "collectible" coins sold at a price far above their gold content. The FTC has described mark-ups of 100% to 300% over market price and says to find out the melt value before you buy.
• Buying "on margin" or with a loan from the seller.
• Asking for payment before they will state a price or a delivery date.
• Anyone claiming to be from a government agency who asks you to buy gold. Real agents never do.

Start with the where to buy gold guide for how to tell sellers apart. When you are ready to sell later, read where to sell gold and silver.

Sources

• U.S. Mint, bullion coin programs: Gold Eagle composition, weight and face value.
• IRS, Instructions for Schedule D: collectibles include metals such as gold, silver and platinum bullion; and IRS Topic 409: 28% maximum rate and the one-year holding period.
• FTC testimony on coins and precious metal investments: mark-ups and melt value; FTC consumer alert on gold bar scams.