How To Invest In Gold For Beginners: Complete Guide

Roy Guller

Gold is one of the more commonly known and utilized investment pieces among beginners and experienced investors.

Many people make the mistake of assuming that investing in gold is too old-fashioned of an investment, but that simply isn't true. Gold was once the primary currency in many cultures but slowly evolved into backing the value of currencies and became a collector's item. 

Even though gold doesn't play the same role in the economy as it used to, it is still a valuable resource. You can use it for many applications, including investments, collecting, currency, medical uses, technology building, and, of course, jewelry and other fine accessories.

Gold still has a place in this world, and most investors use it as part of their diversification strategy.

How To Invest In Gold For Beginners

Gold IRA

One thing you'll quickly discover when it comes to gold is that the government wants to take a large slice of your metaphorical investment pie.

The IRS considers gold a collectible, which is usually taxed at a whopping 28% (28% is the capped amount). However, if you choose to invest in an IRA account, such as a Traditional, Roth, or SEP, only approved coins, bars, and bullion are permitted.

If you invest in gold via an IRA, you may pay anywhere from 0-28%.

Your contributions are not taxed with a Traditional IRA and a SEP IRA. You will only pay taxes on your gold when you use the funds in your IRA account. SEP IRAs are also tax-deductible, so you can use them to lower your total income taxes for the year.

For a Roth IRA, contributions are taxed upfront but will not pay any taxes when you begin to withdraw from the IRA account.

Choosing to use an IRA completely eradicates capital gains tax. IRA accounts protect the assets within them from being taxed, even if the investments grow in value.

Keep in mind that there are specific rules that the IRS enforces when it comes to investing in gold. For instance, you cannot physically store the gold yourself, and the gold must be at least made of 99.9% fineness. To learn more about the laws of investing in Gold through an IRA, check out my article, Gold IRA Tax Rules.

Gold ETFs and Gold Mutual Funds

An exchange-traded fund, or ETF, purchases items on behalf of the investor. When you purchase a gold ETF, you buy gold in a stock format. You don't physically own a chunk of gold and, therefore, do not have to store it. Gold ETFs are convenient because they allow you to possess an investment with the equal value of gold but without all the hassle.

With an ETF, you don't need to worry about transporting precious metals, finding a safe place to keep the item, or worrying about theft or maintenance fees.

A few fees come with gold ETFs and mutual funds, but they are almost always much more affordable than the management of physical gold.

With ETFs and mutual funds, you also have the privilege of quick, easy investment sales. Many people choose ETFs because the barrier to entry is relatively affordable; you can buy smaller amounts than traditional bullion, coins, or gold bars.

Purchase Gold Certificates

Think of a gold certificate as kind of like a paper ETF. When it comes to gold certificates, you have two options; unallocated and allocated.

You can purchase a gold certificate from banks that still own gold. They will not give you physical possession; instead, your certificate acts as proof that you own unallocated gold. You own the equivalent value of gold, but not the physical, tangible precious metal itself. Banks can divest or foreclose and liquidate, which is the risk of investing in unallocated gold certificates.

If the bank divests, they simply give you your money back. If the bank goes under, your certificate becomes completely worthless. The gold never belonged to you. It belonged to the bank. Holding onto the gold certificate of a bank that went under is like holding onto a stock certificate for a company that no longer exists (or went bankrupt).

An allocated gold certificate is more secure but also comes with extra fees, usually associated with the bank storing your gold. Many times, it's more expensive to pay the bank to store gold than to store it elsewhere or at your home.

With an allocated gold certificate, you are generally given the serial number of each gold bar you possess, which is kept at the bank. If the bank divests, goes bankrupt, or shuts down for other reasons, you can present your certificate to get your specific gold bars back.

Purchase Physical Gold

Owning gold coins, bars, or bullion could be a good idea if you enjoy investing in what is tangible. You can buy collector-type coins, called numismatic coins, or currency-style coins, called sovereign coins.

The government usually backs sovereign coins with a face value. Still, the raw gold is typically worth more than this assigned face value.

Numismatic coins are for collecting. They are challenging to acquire, difficult to sell, and take a considerable amount of knowledge to invest in properly. Some of the most common sovereign gold coins are:

  • American Gold Eagle (one ounce with .9167 purity or fineness). The face value is $50.
  • American Gold Buffalo (one ounce with .9999 purity or fineness). They also have a face value of $50.
  • Austrian Philharmonic (one ounce with .9999 purity). They have a face value of one hundred euros.
  • Canadian Maple Leaf (one ounce with .9999 purity). They have a fifty CAD value.
  • South African Krugerrand (one ounce with .9197 purity). They do not have any face value.

Purchase Gold Jewelry

This avenue will take a considerable extra amount of education and time to understand fully. Still, it can be a profitable investment venture.

A general rule for investing in gold jewelry is that retail and commercial jewelers have higher markups and less overall value. For them, you are paying full price for the value of the gold, and the art and effort that goes into creating the piece is not as unique. Jewelry is more common.

Private sellers and certain artists are better options, as are yard and garage sales. Artistic pieces can accumulate value through rarity.

You can also hold gold jewelry to the same standard as bullion. You should look for pieces that are .9999 fineness or better or are twenty-four karat. The purer the gold, the more it is worth overall.

Why Should You Invest In Gold?

You should invest in gold because it is a fantastic way to diversify your investment portfolio. A well-diversified portfolio is better suited to overcome changes to the economy, good or bad, and keep you in a relatively stable position.

Gold is known to rise in value consistently. While it is not among the speediest earners out there, it is reliable and more likely to be stable even when other investments drop.

If you like tangible investments, gold can feel reassuring. Many people collect gold as a safety net if banks, digital currency, or credit cards stop working.

What Is The Easiest Way To Invest In Gold As A Beginner?

The easiest way to invest in gold is to purchase physical pieces. The second most straightforward way is to buy a gold certificate from your bank. This is not always a secure option, especially with unallocated certificates.

The most affordable way to invest in gold, especially if you don't have a lot of cash, is through an ETF or mutual fund.

The best way to invest in gold if you don't want to pay high (or sometimes any) taxes is through a gold IRA. This way is pretty straightforward too. If this option interests you, check out some of our Gold IRA company reviews.

Is It Profitable To Invest In Gold?

Gold is a profitable investment. It is consistent and steadily climbs in value, even during uncertain times.

Still, other investments are much more volatile and rise and fall much quicker than gold. It's wise to diversify your portfolio to have riskier investments paired with more reliable ones, like gold.

What Should You Know Before Investing In Gold?

  • Gold is a good investment that only takes a little bit of knowledge to use to succeed.
  • Always do your due diligence when investing, and take the time to research corporations and retailers who are selling you gold or other investment opportunities. There are some devastating gold IRA scams you will need to avoid, but gold is not complicated.
  • As inflation becomes a more substantial possibility (or reality) in the economy, gold's value tends to rise.
  • Bullion is not the same as gold coins.
  • Gold stocks do not equal ownership of gold. Many gold stocks allow you to invest in companies that are tied to gold, such as mining companies. Still, these investments do not directly allow you to invest in gold itself.
  • Physical gold is taxed like a collectible, so you may pay up to a 28% tax, depending on your marginal income tax bracket.
  • You are also hit with capital gains tax when you sell tangible gold pieces after owning them for less than a year. If you sell after owning for at least a year or longer, you are limited to a 25% capital gains tax. If you make less than $41,675 or less as a single filer or $83,350 as a married couple filing jointly, you have a 0% capital gains tax. For those who make $41,676 to $459,750 (single filer) or $83,351 to $517,200 (married filing jointly) you pay a 15% capital gains tax. Finally, those who make more than the above numbers will pay a 20% capital gains tax.
  • You must file returns when you sell twenty-five ounces of gold (or more) in one transaction. For this, declare your capital gains or losses on Schedule D. You do not have to report your gold purchases to the IRS unless you buy the gold in cash AND the purchase price exceeds $10,000. Because of this, gold transactions are rarely reported to the IRS, even through professional gold dealers.
  • Physical gold investments can be a burden to store. If you already have a safe place to store your tangible investments at home, investing in gold will not cost you anything besides the room they take up in your house (or fireproof, floodproof, burglar-proof safe). If you do not have a place within your residence where you feel comfortable protecting your gold, you will have to pay someone else to do this. Transporting, storing, and insuring gold can be surprisingly expensive, so always read the fine print and shop around before making any decisions.
  • If you want to pay minimal or no taxes on your gold, you should strongly consider investing in gold via an IRA. This is a safe, secure, and hassle-free way to add gold to your portfolio with much better tax rates.

Is It Worth Investing In Gold?

It is worth it to invest in gold. Gold can be a valuable part of your diverse portfolio that is intended to keep your investment on the up and up, even during uncertain and stressful times, such as recessions, depressions, inflation, pandemics, or even speculated economy downfalls or stagnation.

Gold investments come in many options, so it can be a good learning experience to look into each type. You can be highly hands-on or passive, depending on what suits you best.

In short, yes, gold is worth investing in.

Investing in Gold Shouldn't Be Confusing

Investing in gold as a beginner may feel intimidating, but it is relatively simple.

Gold is a viable, consistent earning investment vehicle known for its ability to weather difficult financial times well.

There are various gold investment options to suit your needs; each ranges in complexity, necessary knowledge, financial accessibility, and investment methods.

About Roy Guller

I have been an investment adviser for more than 30 years and managed more than 500 million dollars for my exclusive group of clients. My expertise lies in retirement funds and I want to share my wealth of experience with you so you can make the right decisions for your future.