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How To Find The Best Gold Dealer

Buying gold is not as easy as it sounds and not as uncomplicated as buying insurance. Unfortenately, there are crooked gold dealers out there who just want to make a quick buck without really caring about their product or customers.  In this article, we've summarized the steps you can take to ensure your gold purchase will be free of problems and regrets.

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Table Of Content

With all the turmoil and unexpected events affecting the economy, turning to gold as an investment option is a prudent step.

Gold is a financial refuge as an asset because it performs well even during times of economic uncertainty.  When the stock market is declining, gold’s price goes up.  In short, gold acts like financial insurance for your investments.

Gold is also immune to the effects of inflation.  It is both a store of value and an accepted global currency, the value of which has remained stable and trustworthy for thousands of years.

What is a Gold Dealer?

Traditionally, the term “dealer” referred to a corporation that traded a commodity or product and was available to buy or sell that thing during trading hours. A gold dealer, for example, is someone who stands ready to make a bid and offer price on gold at a time in the precious metals market. These businesses are usually larger and only deal with businesses in the same industry. Banks, refineries, consumers, or producers of gold, silver, platinum, or palladium are examples of counterparties in precious metals. These dealers would not normally deal with private persons like you or me, or with companies that aren't actively involved in the precious metals industry.

Many precious metals companies, coin shops, pawnshops, and scrap collectors engage directly with the public at the retail level. It would have been more appropriate to refer to them as precious metals vendors or service providers rather than precious metals dealers. They are a significant element of the market, particularly for individual citizens who want to acquire physical possession of gold or silver bullion.

Choose Gold Dealer – Factors To Consider

First-time buyers of precious metals often think that all gold-silver dealers are just the same.  This is not the case.

Buyers should be extra careful about sending money to supposed dealers because the government has not regulated the gold/silver industry yet.  Persons with multiple financial wipe-outs and even those with criminal convictions continue to ply their trade.  They have some of the most impressive websites and the smoothest talking brokers.

  • Price & Fees

When it come to gold prices, it’s not who has the lowest prices.  The best thing to do is to compare dealers and check who has the best and most reasonable offer.  Shady operators often bring down their prices to hook customers in, but you’ll know that these offers are too good to be true.

First-time buyers normally believe that getting the lowest price is the most important consideration in the purchase.  It’s not.  What is more important than being able to buy it at the lowest price is the ‘getting’, or how you can take physical possession of what you bought.

Look into and compare the shipping fees.  See if they are reasonable and enough for the volume of your purchase.

Of course, you should keep abreast with the current and fair metal prices, so you will know what is within a reasonable range and not fall for scammers who dangle lucrative baits so they can pull a fast one on you.

  • Delivery and Location

One of the first things you need to settle is whether you would like to transact with an online dealer or a local physical dealer.

1. Online Dealer

More and more people are doing online shopping nowadays because of its advantages.  First, online prices are usually lower than what you can find in traditional stores.  An online shop won’t have to pay for what brick-and-mortar establishments do to keep their business running.  Plus, online stores tend to have a national reach, sometimes even to international markets.  For gold, online dealers usually sell higher volumes of bullion and enjoy significantly lower fixed costs.  Because of this, they can pass on the savings to their customers in terms of lower costs.

However, not all gold buyers would be confident to buy from an online dealer.  Gold is a very expensive commodity, so people are usually wary especially if they would buy it from a faceless representative they only met online.  This is probably why up to now, with all the advances in technology, local gold dealers continue to remain in business.

2. Local Dealer

A good number of gold buyers still prefer local shops because of the comfort, security, privacy, and relationship with the store personnel – which most online dealers often lack.

If you’re only buying small quantities of bullion and paying in cash, your local dealer may not even report it to the IRS, so the transaction remains confidential.

Another advantage of buying from a local store is, you can physically inspect the gold and bring it with you immediately after.  Of course, you may pay a higher price for the gold but there is no shipping fee and you don’t have to wait for delivery.

Because local dealers recognize the unique nature of the business, they are very careful about their own reputation in the community they serve.  Often, the service level they show is above average than most stores.

However, because these traditional stores still pay more in overhead costs and do not necessarily get the sales volume they want, they often have higher prices for their bullion.

Just remember that whether you choose an online or a local dealer, each of them carries their own set of risks.

  • Reputation and Experience

It is a good practice to deal only with companies that have been operating the business for a number of years.  Five years in the trade is acceptable but ten years or more is even better.  Because the price of gold has been steadily rising, expect new players to proliferate every year.

In fact, this trend has already started as more and more new gold enterprises are popping up all over the Internet.  The scary thing is that some of these dealers are merely home-based operations with very minimal or even zero experience in gold dealing.  And don’t fall for their websites which appear to be as appealing as some of the more reputable firms we have seen for decades.  Although some of these online firms will prove themselves worthy, most of them will likely fall short.

Dealers who have been doing business ten years or more have the requisite experience in dealing with precious metals.

The owners are usually individuals who are dedicated to the business and are true believers in the reliability of gold.  They are the kind of firms you want to have a business relationship with.

  • Diversity 

Your dealer should be able to offer you a wide range of gold bullion products to choose from.  Some stores have a small network of suppliers, so they can only offer a specific product or they specialize in one type of product.

For example, you may find one that carries only coins (for example American Buffalo only or South African Krugerrand), or a specific size (1oz coins only) and some that only sells gold bars or gold coins.

  • Safety

The truth is, there is no guarantee when it comes to the business of precious metals.  Due to the spike in demand, many new companies have come up and some of them are there just to take advantage of customers or even dupe them into paying but end up not getting anything.

Scams involving gold coins have been a staple of fraudsters for years.  Tricksters have milked naïve investors through their dishonest schemes and more newbies continue to fall prey to them in their desire to get physical gold as a means to protect their wealth.

How to Avoid Scammers? 

However, you can observe some actions to lower your risk of ending up with a bogus or cheating dealer.

  • Understand what you’re buying.  Learn about the product before you close any deal.
    • Price: Educate yourself to know the current spot price of precious metals you want to buy or sell.
    • Weight: Make sure that you know how to get the weight of gold.
    • Design: Each coin has its own exclusive design with very small details that make them very difficult to fake.
    • Purity: Check for the purity of the gold you’re buying before you pay. They can be 97%, 98%, 99%, 99.10%, 99.99% or 100% pure.
  • Keep away from offers that are “too good to be true”.  If a dealer offers a bullion product with a price that’s so incredibly lower than the average, or bundles exorbitant incentives and exaggerated claims, chances are, it’s a scam to lure you in.
  • Pick the big leaders.  Dealers with a long track record that extends over the years are obviously more reliable.  They have the network, experience, and capacity to handle big demands and even offer greater flexibility.
  • Ask if they have a Buyback Policy. It’s not highly probable that you would hold on to your gold forever because there might come a time when you want or need to sell it.  The easiest way to do it is to sell it through the same dealer that sold it to you, so ask if a Buyback Policy is in place.
  • Skip ‘rare’ coins that are selling way above their meltdown.  Remember this rule:  gold products do not legitimately sell below their spot prices.
  • They should accept various forms of payment.  Legitimate dealers should have no problem accepting multiple forms of payment. They should be able to accommodate cash, credit card, debit card, check, and other forms of payment for your transactions.
  • They should have a positive presence in the NFA database or the Better Business Bureau.  You should search the NFA database and check the regulatory background of your dealer.  You can also refer to the Better Business Bureau and find out if they are on it, how long they’ve been in business, ratings and if they have good or negative reviews.

How to Keep Your Gold Safe?

Gold is nothing more than a chunk of metal. As a result, it can be kept anywhere. However, there are clearly better storage options than simply putting it in your bedroom drawer. You can store your gold in one of three ways in general. They are as follows:

  • Keep it in your house.
  • Keep it in the bank.
  • Pay someone else to keep it for you.

If you plan on keeping your gold at home, a safe-deposit box is a good investment. Also, keep in mind to take all essential precautions to avoid theft and loss.

Unless you have a little amount of gold, storing it with a bank or a third-party is a far better option. It's best to think about the banks and third-party options available in your area. While your gold can be stored thousands of kilometers away from your home, retrieving it will be a major challenge.

As a result, evaluate the rates, reputations, and security features of the storage alternatives near you and choose the one that best suits your needs.

If you're going to use a third-party, make sure you choose one that specializes in gold storage. Several companies can assist you in purchasing, storing, and selling gold. These companies usually have extensive networks that they can employ to move big amounts of gold fast. For the most part, using them will be the best alternative.

How do Gold Dealers Make Money?

Like any other dealer, gold dealers make money from the margin between buying and selling. Here are its main channels:

  • Buy-and-sell spread – Each gold dealer has a “buy and sell spread.” The spread is the difference between the amount a gold dealer will pay for an item and the selling price that same dealer will post. The buy-and-sell spread varies from 0.5 percent to 35 percent each transaction, depending on the dealer, the commodity, and the volume of metal being bought or sold. Serious investors understand that organizations must make a profit to be in business, but understanding the intricacies of a company's buy-and-sell spread can help you distinguish respectable brokerages from commission-hungry salesmen.
  • Purchasing Gold – Gold dealers profit from the sale of gold to the general population. Many gold dealers are merely marketing firms, meaning they facilitate deals but do not maintain inventory. When you sell your gold to a gold dealer, he or she will most likely sell the metals to a large-scale depository or wholesaler. When a wholesaler buys from your dealer, he makes money, and your dealer makes money when he buys from you. Many gold and silver dealers offer commission-free liquidation, which means the amount you're quoted for selling your gold includes no commissions or hidden costs that could reduce your gains at the conclusion of the transaction.
  • Gold Broker Commissions – In order to stay in business, all gold brokerages must make money. Brokers are frequently compensated with bonuses or commissions based on their sales volume. There's nothing wrong with buying gold from a commissioned broker, but it's crucial to understand how much of each transaction goes straight to the broker's pocket.

Find The Best Gold Dealer - FAQs

When there is economic uncertainty, such as a financial crisis, it is the best moment to buy gold. Gold is a better hedge against rising prices and against a financial catastrophe than it is against inflation. When other sorts of investments, such as stocks, bonds, and real estate, underperform, the price of gold tends to climb as most investors rush to acquire gold as a hedge against losses in other types of investments.

To determine whether to add additional gold to your portfolio, keep an eye out for bad political and economic messaging concerning debt, credit, unemployment, and currency in the world's main economies, such as the United States, the Eurozone, and China.

For investors, gold provides a number of essential advantages

Gold has historically been a good inflation hedge since its price rises in tandem with the cost of living. Gold prices have skyrocketed throughout periods of severe inflation in the last 50 years, while the stock market has plunged.

Gold is a good investment during a recession because it has a track record of performing well even when the economy is bad. Unlike the most dangerous investments, such as stocks, gold is a physical asset that people frequently invest in during hard times.

According to historical records, gold's value does not vary as much as equities and bonds. Stock market peaks and valleys appear to have little effect on gold's value. It's an effective way to expand your investing portfolio.

Gold has always been classified as a valuable metal due to its scarcity. Its value has risen steadily since it was originally used as money in circa 700BC. The trend has been consistent from 1900 and 2021.

A more recent striking example is the period from 1998 to 2008, when gold's value tripled, rising from $287.45 to $865 per ounce. It was trending at a stunning $1,800+ per ounce in October 2021.

It indicates that the value of gold continues to rise. Buying gold is a safer way of diversifying your portfolio if you're seeking for a secure investment to hedge against potential financial threats.

Purchasing actual gold or gold stocks has advantages and disadvantages. Gold stocks, for example, are speculative. They are traded in the same way as regular stocks. Their prices change in response to external demand. That is, they adhere to current market trends. They can, however, outperform actual gold even when gold bullion prices fall.
Physical gold, on the other hand, thrives amid economic downturns. They're profitable because of the gold rush to protect investors from the current market crisis.

And, because you own them in tangible form, their intrinsic value remains constant, even if the underlying price fluctuates. But be cautious. You will suffer cumulative storage expenses if you do not store gold bullions on your own. They also draw custodial charges like gold IRAs and insurance.

Depending on your investing plan, gold bars appear to have lower premium costs than coins, despite the fact that coins have higher manufacture costs. Most trustworthy gold dealers, on the other hand, frequently provide lesser premium charges in order to provide competitive costs. Additionally, purchasing gold bars or coins results in lower storage costs. It doesn't matter to most dealers whether you're buying coins or bars.
You should also think about whether you want to invest in gold equities or gold bars.

ETFs or stocks that invest in gold are similar to ordinary stocks. They are inexpensive to purchase, but they come with levies that raise your effective costs per ounce. You'll receive proceeds in monetary value rather than real gold, just like gold futures. They are, nonetheless, a better option for speculative purposes than gold bullions.