Just when you thought you were saving some money while being closed up during Covid lockdowns, inflation did its dirty work, taking a bite out of your savings.
Naturally, when everything goes up in price (except for your salary🙃), your first thought is probably to put your money into an asset that will keep it safe. One such asset is gold and precious metals.
So, saving in gold: where do you start, and how can you be sure it's real? And, most importantly, what can you do to be 100% sure?
In this article, we will explain what gold purity is and the key things you should pay attention to when buying your gold bars and coins.
Quality and purity of gold: what is it?
The world of investment has its own jargon, and gold is no exception.
Let's break down the concept of gold purity, which is also known as gold quality: it simply means how much gold your gold bar or coin contains.
The amount of gold in your gold product (its purity, for those who follow😉), is expressed in carats or fineness. These units of measurement are called grades.
Understanding the carats of gold
This unit of measurement should certainly be familiar to you if you’re a fan of blingy things: carats are mainly used to measure the quality of your gold jewelry.
The carats are used to determine the proportion of gold contained in your bars and coins, based on a scale rating from 0 to 24. So, a 24-carat product is basically 99% gold.
Understanding the fineness of gold
But, oh, if the carat scale gave you a little headache, perhaps you would prefer to talk about fineness - and that's good because this unit of measurement is most commonly used in investment.
In this case, the purity of gold is measured from 0 to 1000. Thus, a 90% gold coin is graded at 900 thousandths. It's that simple!
Carats, fineness, percentage: units measuring the purity of gold in one table
💡Why do we only use 9 carats, 18 carats, and 24 carats?
If the carat scale ranges from 0 to 24, why do we only use these three grades?
Well, simply because it's just easier for jewelers and goldsmiths this way. These are the grades officially used on the international markets. You can see them in the table above.
Gold bars and coins: a highly regulated market
Worry not! Buying and selling gold coins and bars are strictly regulated, so prepare your checklist, here are the criteria you should be aware of.
Purity, weight, serial number: here’s what you need to know about gold bars
An investment bar should be made of pure gold: its purity must be equal to or greater than 995 thousandths.
But even with these strict criteria, a bar can never be 100% gold, regardless of the method of production, i.e. mining or recycling.
Gold bars come in different weights
Don't want to put all your savings in gold? That’s ok because gold bars come in several weights to fit different investment strategies and goals.
Based on weight, there are gold bars of 1 g, 2.5 g, 5 g, 10 g, 20 g, 1 oz, 50 g, 100 g, 250 g, 500 g, and 1 kg. These are standard sizes. So, if you come across a bar of different weight, be careful: you might need to double-check!
💡Gold bar, or investment gold bar?
For tax advantages associated with gold, your gold bar must be recognized as investment gold.
In some countries, bars of a certain size are not recognized as investments.
In France, for example, investment bars must be strictly over 1 g. In Spain, the minimum bullion size is 2 g.
Gold bars come with certificates of authenticity
When buying gold bars, make sure you weigh your options carefully and pay attention to the following things:
- If you decide to deliver your gold bar, it should come in sealed packaging with a seal number on it or a certificate of authenticity, and an invoice that must be in your name (make sure to keep it!).
- If you decide to store your gold bar in a secure vault, you should get a certificate of ownership that includes your name, address, product name, and quantity.
- On your gold bar, there should be a serial number, the refiner's seal (PAMP for bars sold on GOLD AVENUE), purity (higher than 995 thousandths), and the year of manufacture.
Money, money, money: what should you know about gold coins
The coins you use every day do not contain precious metals. But this was not always the case!
Collectible or investment coins?
As with gold bars, bullion coins must meet several criteria:
- They must contain at least 90% gold,
- They must be (or have been) legal tender in their country of origin, i.e. they must be official currencies,
- They must have been minted after 1800,
- Their quotation, i.e. their increase in value, must not exceed 80% of their intrinsic value.
⚠️ If the coins you want to buy don’t meet these last three criteria, they are probably collectibles and not legal tender.
💡What are the most popular gold coins?
In French-speaking countries, it’s the "Louis d'or", which can be either the 20 Fr Napoleon or the 20 Fr Marianne Coq coin.
In the Commonwealth, it is the Sovereign coin that is most sought after. Its popularity extends far beyond the Commonwealth, to the point that it is becoming very difficult to find!
In the United States and Latin America, it is the 50 pesos gold coin and Krugerrand that continue to attract the interest of collectors and investors.
Prepare your magnifying glasses!
Do you want to get yourself a small piece of history that is also money? You should know that each investment coin has its own specific criteria that should be checked before you buy it:
- the weight of the coin,
- its diameter,
- its face value,
- its design (engraving, minting date, and any other element that identifies it),
- its purity (this one is more difficult to check, as it’s not always indicated on the coin).
When you buy your gold coins through an official dealer, such as GOLD AVENUE, you will find this information listed on the website under each product.
You may have already come across “limited edition” coins, featuring your childhood heroes or famous artists and athletes: while not investment coins, they can nonetheless make for interesting collector's items.
But to avoid scams, remember to:
- Check that their purity is higher than 900 thousandths,
- Ask the seller about the specific features of the coin (number of coins minted, serial number, etc.),
- When you buy a coin, check what documents it comes with (e.g. certificate of authenticity, invoice),
- Check who the producer is (for example, Banque de France or Swissmint).
Producer, price, payment: the 3Ps to avoid scams
Who are the official producers?
Only a few refineries are licensed to produce and distribute gold bullion: this list, which includes 71 refineries, is administered by the London Bullion Market Association (LBMA). Among the most well-known are:
- MKS PAMP
- Hemeirle Meule
💡Where to buy bullion produced by MKS PAMP?
At GOLD AVENUE, you will only find gold bars and coins coming straight from the MKS PAMP refinery, which gives them many advantages:
- Exceptional quality
- The prestigious LBMA Good Delivery certification
- Guaranteed traceability
Watch out for overpriced products
The price of a gold bar or coin depends on 3 factors:
- The quantity of gold your product contains - and therefore its purity. Note that there is the fixed and spot price of gold, which you can follow online.
- Premium (in the case of a sale between private individuals), which is determined by supply and demand and depends on several factors: rarity, condition, etc.
- A dealer's margin on a sale, which may include packaging, delivery, storage, or other costs. On GOLD AVENUE, the margin is clearly displayed under pricing information.
In any case, you should be very cautious and pay extra attention if the price seems either too low or too high.
Never pay for your gold in cash
It's not just common sense: in many countries, you can’t buy gold with cash!
If you buy gold online, remember to check the following things:
- The terms and conditions,
- The HTTPS security certificate,
- Buying process: how long does it take during each stage of the purchase? Is it possible to validate the order with a double click?
... and probably avoid buying second-hand from a private individual.
The collaborative economy is great: it's green, and it's economical. But it’s probably not suitable for buying gold. The thing is, some counterfeiters are very experienced and know how to perfectly reproduce certain coins and ingots: weight, size, and design.
Of course, you may come across an honest seller. But it’s likely they will be unable to provide you with all the documents required when you buy second-hand gold. And what could be the consequences? A lot of paperwork to prove that you are the rightful owner of the gold product, and potential tax exemptions on resale that could pass you by.
Overall, here’s what you need to remember:
- There are two measures of gold purity - carats and fineness. 999.99, or 24ct, is the highest quality of fine gold you can get.
- When buying gold, always choose an official dealer, such as GOLD AVENUE, that can assist you and answer all your questions.
- Make sure you keep all the invoices and authenticity certificates coming with your gold products.
- When getting gold from the second-hand market, make sure you choose a trusted seller and ask for a purity test before buying your products.