Physical Gold Trading: Benefits, Cons, and How to Buy

How to buy

There are two main ways to buy gold: purchasing physical gold or investing in gold-leveraged securities like gold stocks, mutual funds, or ETFs. Bullion is physical gold of high purity and usually comes in the form of ingots, bars, coins, or rounds. Bullion derives its value from the gold content of the precious metal rather than the form of the metal, and it's measured in what's known as a troy ounce (standardized at 31.1034768 grams).

Owning gold has several benefits, including being a physical, valuable asset that can be easily passed on to others, providing stable value, and not needing to watch it closely like you would with a portfolio of stocks, mutual funds, ETFs, and bonds. However, there are also cons, such as the need for a secure vault or insurance to protect it, the possibility of scams being committed by fraudulent online gold dealers, and the fact that gold dealers typically charge a markup from the precious metal's spot price when you buy or sell it. There are many retailers that allow you to buy gold online and feature a variety of gold coins, rounds, and bars. These dealers often offer discounts to members of the military and for buying in bulk. Buying more than 100 gold bars (or 500 gold coins) is considered a bulk purchase, but this will depend largely on the individual seller. You may also be able to buy smaller gold bars, ranging from half a gram up to 100 grams, in stores that specialize in numismatics, pawn shops, or some jewelry stores.

Bullion Dealers

Gold ticked up on Friday but was on course for a second straight weekly fall after hot inflation data cooled prospects of early rate cuts by the Federal Reserve. Spot gold was up 0.2% to $2,007.69 per ounce at 11:00 a.m. ET (1600 GMT), but has lost 1.8% for the week so far. U.S. gold futures rose 0.3% to $2,020.00 per ounce. The dollar index was up for the week so far, and the benchmark 10-year Treasury yield extended gains, making gold less attractive. Data showed that U.S. producer prices increased more than expected in January. Another report on Tuesday showed that U.S. consumer prices rose more than expected last month. Even though gold is considered an inflation hedge, higher interest rates dim non-yielding bullion's appeal. As the Fed is not likely to cut interest rates in March, gold will probably struggle to gain much above the $2,000 level, said Everett Millman, chief market analyst at Gainesville Coins. Economic growth in the U.S. is fairly robust, indicating higher inflation, which is a headwind for gold and "I expect gold prices to further fall to $1,960s level," he added. Traders have pushed back their expectations of a U.S. interest rate cut from March to June. Markets are currently pricing a 73% chance of a cut in June, according to the CME Fed Watch Tool. Fed Atlanta President Raphael Bostic said on Thursday that more time was needed to weigh the prospect of a rate cut. On the physical front, gold premiums in India rose to more than four-month highs this week as demand picked up, with jewellers stocking up for the wedding season. Spot platinum rose 0.5% to $902.55 per ounce, palladium was up 0.6% to $958.96, rose 11.3% for the week, and silver gained 1.2% higher at $23.18.

Market Update

Gold traded with a slight uptick on Friday, helped by a slip in the dollar index (DXY) and US bond yields after decline continued on softer economic data. The lower-than-estimated retail sales have once again left Street confused as to which way the economy is headed. A rate cut expectation will likely be the key driver for bullion in the near term. Bullion traded in the red in the opening trade today with MCX April gold futures trading at Rs 61,661 per 10 grams, up by Rs 39 or 0.06% while the spot gold price was trading at Rs 61,946 per 10 grams, down by Rs 115 or 0.19%. The MCX gold futures are trading at a discount of Rs 285 or 0.47% to the spot price.