Investing in physical gold is a great way to protect your financial future, but there are a few things you should know before jump-starting on saving or investing in gold bullion.

So you’ve heard that investing in physical gold is a great way to protect your financial future? You’ve come to the right place.

Before you dive in and start buying up bullion though, take a look at our top 6 gold investing tips.

We’ll take you through all you need to know before you get started, as well as the most common gold investment mistakes to avoid. There’s even a glossary at the end, for a quick look at the lingo.

Whether you’re after beginner gold investing advice or you’re an experienced buyer, we’ll explain how to invest in gold safely and do all you can to make the most of your money.

Let’s go…

1. Timing is everything

In times of economic or geopolitical turmoil, it’s common for first-time investors to turn to gold.

You’ll likely have heard it referred to as a ‘safe-haven asset’, which is an understandably appealing prospect.

The downside? When a significant economic or geopolitical crisis erupts, the price of gold often skyrockets.

As with any investment, planning and research is everything, and it’s important to make decisions based on your long-term investment strategy. This should take into account things like providing protection against inflation, currency fluctuations, and other uncertainties.

If it feels like you’re investing based on emotion or as a quick reaction, pause.

By only buying gold in a crisis, you may miss out on potential gains that could be made by investing in calmer times and over a longer period.

To maximise the advantages of your gold investment, buy gold and precious metals without waiting for a crisis to arise, and keep adding to your collection on a regular basis.

This way, you’ll be able to benefit from its potential for long-term growth, as well as cost averaging. This means investing the same amount regularly, regardless of the current price of gold.

2. Find a trusted gold dealer

As with any other investment, when it comes to buying gold bullion, don't just jump in blindly. If it’s your first time buying gold, it’s crucial that you do your research and find a trustworthy reseller.

Speak to several, and only buy once you’re completely comfortable you have all the information you need.

Don’t be afraid to ask questions. If they’re a legitimate reseller, they’ll be happy to talk you through the process and their products, and will never put pressure on you to invest.

Red flags: asking for money upfront, a lack of transparency about the process or the product they’re selling.

Green flags: total transparency about the purity of their gold, a clear breakdown of any fees involved and clarity around every detail.

Questions to ask your gold dealer:

• What gold products do you offer?
• What’s the purity of your gold?
• What are your fees?
• Is the gold fully allocated or is it shared?
• Do you offer secure gold storage?
• What are my options when I decide to resell my gold?

3. Think long-term

When it comes to buying physical gold, it’s a good idea to take a long-term investing approach. Think of it as a means of wealth preservation rather than a quick source of income.

Of course, everything depends on your investment strategy and goals. While it's possible to speculate on the price of gold, it's generally not a short-term investment due to its historical price fluctuations and long-term appreciation trend.

As with any other physical product, from cars to clothing, resellers will apply a fee at purchase. For precious metals, this fee is often called the ‘premium’, which includes production and logistical costs as well as the reseller’s margin.

Therefore, after their purchase, gold investors have to wait for the gold price to rise enough to cover this initial cost before they can start seeing a profit. And as we know, gold tends to move slowly, and historically increases in price over the long term.

Which ties in to our first point: if you buy only during troubled economic times, you’ll have to wait longer to recoup that initial cost.

4. Gold bars vs. coins

One common mistake when it comes to investing in gold is only buying one type of product. For instance gold coins.

What you buy all depends on what your aim is though.

If you’re looking for a cost-effective investment, gold bars may be a better choice. They’re quicker and simpler to produce than carefully crafted coins, so you tend to get more gold for your money.

On the other hand, if you're interested in collecting rare coins or you’d like to give gold as a gift to someone special, coins or collectibles might be a better option.

Gold coins can also be easier to sell in small amounts because of their lower weight and smaller size. This makes them a more flexible choice for investors.

The main thing to remember is that you don’t have to choose one or the other.

Consider diversifying your portfolio with various types of physical gold products, such as bars, coins, and collectibles.

There’s no one-size-fits-all approach when it comes to investing, and before you buy, you should determine the best strategy based on your specific investment goals. For a quick comparison of all of our products, see our full gold product price list.

5. Check for purity

One thing that’s easy to overlook when buying investment gold is purity.

The purity of gold is determined by the amount of pure gold that is present in the product.

For example, if a gold coin is made of 24-carat gold, it means that it's made of 99.99% pure gold (the highest possible gold purity). But, if it's made of 18-carat gold, only 75% of the coin is pure gold, while the rest is made up of other metals.

Why is this important? Because the purity of your gold products affects their value, durability, and liquidity (ease of resale).

To be considered investment gold, a product must have a purity level of at least 99.5%. Any purity level below that is great for jewellery or industrial use, but not for investment.

6. Diversify, diversify, diversify

If you’re looking to invest in gold, it’s likely you already know about diversification. In fact, it’s often the reason people start buying gold.

Diversification means buying different assets within different classes to spread the risk of your investments and balance your portfolio between risk and safety.

Gold is a great diversifier, as its price is often uncorrelated, or negatively correlated (meaning it tends to go up when other assets go down) to most other assets, and particularly stocks.

But after that initial gold purchase, as you keep investing in different assets, it’s easy to forget to check if your portfolio is still balanced and well diversified.

Be sure to regularly check how your general investment portfolio is balanced to make sure it fits your strategy.

If you feel like you have too many risky assets and not enough safe-haven assets like gold, it might be time to sell some of your risky assets, or to buy a bit more gold.

Depending on the level of risk you’re comfortable to take, experts often talk about keeping between 5% and 20% of your portfolio in gold and precious metals.

Fancy branching out into silver, platinum and palladium? Read our beginner’s guide to precious metals

Glossary

Allocated gold
Allocated gold is owned in full by the buyer and is 100% earmarked for the owner. A certificate will be offered as proof of ownership of a precise allocation of gold. It can be stored at the owner’s home, or in a vault maintained by the gold dealer. The latter is usually the preferred option, for obvious reasons of security.

Shared gold
A shared gold allocation, sometimes called pool-allocated gold, is when you own a fraction of a co-owned pool of gold bars or coins. So instead of owning a specific, individually identifiable gold bar or coins, you own a percentage of an overall reserve.

Bar vs. bullion
Bullion is the umbrella term for a bulk quantity of gold. A bar is simply one form of bullion, along with ingots or coins.

Cast vs. minted
Cast and minted refer to how physical gold bullion is made. Cast bars are made of molten gold which has been poured into moulds. They often have a simple stamped design showing the manufacturer, purity and weight of the bar.

Minted bars on the other hand are cut from rolled sheets of gold, and often feature intricate designs and details. They’re usually subject to a higher premium, but make an attractive investment for collectors.

Cost averaging
Cost averaging, also known as dollar or pound-cost averaging, is an investment strategy where a fixed amount of money is invested at regular intervals – for instance £500 a month – regardless of market highs and lows. So one month it might buy you 4g of gold, another it might get you 5g. The theory is that it evens out over time, rather than single lump sum investments, which might be more vulnerable to market volatility.

Premium
The fee charged by a gold dealer to cover the cost of production and logistics, with a small margin added on top.

Purity
Gold purity is measured in carats (karats in the US) but can also be shown as a percentage. 24-carat gold is the purest and contains 99.99% pure gold. 18-carat gold contains only 75% pure gold (18 parts of the overall 24). The other 25% is made up of other metals. This is fine for jewellery, but investment gold must have a purity level of 99.5% or above.