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For decades, gold has remained one of the most popular investment vehicles known to man. Different sizes of gold bullions or bars flood the gold market, and if you are a first-time investor, it can be confusing to choose. A significant question most newbie investors ask is, “How much does a gold bar cost, and how can I invest in gold?”
- What is a Gold Bar?
- Most Popular Sizes of Gold Bars to Buy
- Variations in the Gold Price
- What is a Loco Swap?
- Materials in a Gold Bar
- Top Companies that Sell Gold
- Is Gold a Good Investment?
- Frequently Asked Questions
What is a Gold Bar?
Most Popular Sizes of Gold Bars to Buy
Gold bars come in an array of sizes, from 1 gram to 400 ounces. As a rule of thumb, the larger the bar, the lower the premium on the spot price per ounce. The spot price is the price for the raw metal “gold” and the premium is the price of refining and producing the bars.
The net cost for producing the bigger bars and the smaller ones is quite similar, and since the bigger bar has more gold in it, the bigger bars are more profitable from the production perspective. It’s a better investment to go for bigger sizes if you can afford it. Standard bar sizes are 1 ounce, 10 ounces, 100 grams, 1,000 grams/1 kilogram and 1 gram.
1 ounce (1 oz) gold bar
The 1 oz size is probably the most common size available. Investors love them because they are conveniently sized and petite. Their weight ties up with the standard spot price of gold, making it easy to calculate your portfolio. For example, if you have four 1 oz gold bars, and the standard spot price of gold is $500, you know instantly that your gold investment is $2,000. Because of its popularity, you can easily resell.
10 ounce (10 oz) gold bar
The 2nd most popular bar size is 10 oz. It is often a preferred choice for governments, corporate entities and even individuals looking to store wealth. Buying 10 oz is easy and straightforward because it is readily available. You can get it from any reputable mints and refiners. The 10 oz goes for around $20,150. Compared to 1 oz, buying 10 oz will give you a lower premium.
100 gram (100 g) gold bar
While the 1 ounce is the most popular bar size, the 100 gram gold bar is the most popular metric bar. They are common among investors looking to add to their gold holding. The 100 gram is quite pricey at roughly $4,200 to $4,310. So investors mostly buy it to get returns on their investment rather than to just store.
1,000 grams/1 kilogram (1,000 g/1 kg) gold bar
The 1 kg is the preferred size of choice for experienced investors who have been in the precious metals industry for a long time and know the intricacies of the trade. The 1 kg bars contain 32.15 oz of pure 24-carat gold, making them ideal for owning and holding raw gold. They are highly sought after, costing between $ 42,579 and $45,127. Larger orders attract some discounts.
1 gram (1 g) gold bar
The smallest gold bar is 1 gram. It is an attractive choice for newbies. It is also commonly given out as gifts to friends and loved ones. They cost between $40 to $50 depending on the manufacturer, and you can conveniently order online.
Variations in the Gold Price
Gold, like other precious metals, is very volatile. Some of the most common factors that influence the physical prices of gold are:
Gold and the other asset classes like stocks and bonds have an inverse relationship. When the stock market or bond interest rate increases, people sell their gold to earn higher interest. But when the stock market dips or interest rates decrease, people buy more gold.
You can buy gold in times of inflation to hedge your funds and protect your portfolio. In inflation times, the currency’s value goes down; hence people look to gold to hold money. Gold serves as an efficient hedging tool against inflation.
Demand and supply is a primary factor in the pricing of gold. When the demand increases above the supply, the low supply will undoubtedly pull prices of gold higher. In the same way, a stagnant or low demand can push prices lower.
In times of economic uncertainties, investors often buy up more gold hoping to secure their assets. In geopolitical turmoils or crises, while the stock market often dips, gold usually does well. Gold is seen as a safe option during crises or instabilities for securely storing funds.
The activities of gold exchange-traded funds (ETFs) affect the price of gold. ETFs are basket funds that allow you to increase liquidity and spread risks over a large number of assets for a minimal cost. The price of gold can be affected by the purchasing and selling activity of ETFs.
The SPDR Gold Shares ETF is an example of a gold ETF. It buys and sells physical gold based on demand from investors.
What is a Loco Swap?
“Loco” is short for location. In stock trading and other digital investments, location is usually not a factor. When trading precious metals like gold, however, location is essential because of the transportation costs of moving the physical assets.
A loco swap is a way to transport gold or silver to another location without physically shipping it. In a loco swap, two parties must agree to exchange (swap) gold they have in different areas (locos) with each other. Under this arrangement, the loco discount or premium is transferred between both parties in addition to the metal price.
Loco swaps enable you to trade at discount or premium to London (spot or base price) irrespective of your location, but rather depending on the local demand and supply at the time. Because gold trades at varying prices in different locations due to demand and supply, the loco discount or premium is often small. The small amount often involved gives investors a false impression of a single global spot price.
Gold prices in the international market are quoted to the price in London — it is the world’s traditional and historical gold market. What is usually referred to as the “spot price” is the price of gold located in London.
Materials in a Gold Bar
Gold bars, also referred to as gold bullions, are made by refining raw gold to a specific purity and weight. A typical gold bar contains the highest degree of purity (99.999% fine gold). The weight of gold bars varies in size and weight. They are commonly measured in troy ounces and the smaller sizes in grams. Following the U.S. Mint regulations, bars weigh from 350 to 430 troy. One troy ounce in gold bar weight is equivalent to 31.1034768 grams, and 1 kg of gold bar weight contains 32.1507 troy ounces.
Top Companies that Sell Gold
Many companies, both big and small, sell gold. However, you need to understand that most of these companies are unverified. Avoid buying gold from sellers unless you can verify their authenticity. Unless you have testing equipment or a smelter, your best option is to buy only from professional gold dealers. You can check out our list of top companies to buy from below.
Interactive Brokers offers fair prices with narrow bid-ask spreads driven by the highly liquid futures market, plus a transparent tiered commission based on order value.
|Up to USD 500,000||1.5 bps of trade value|
|USD 500,000 – 1,000,000||1.0 bps of trade value|
|Over USD 1,000,000||0.7 bps of trade value|
Minimum commission of USD 2.00 per trade, and monthly storage fees of .15 per ounce are applicable to USGOLD.
Is Gold a Good Investment?
Whether you’re a traditional investor or a newbie, gold is an excellent investment to add to your portfolio. This is because gold has an inherent value that is not significantly affected by short-term market volatility.
Besides being used for hedging, having an inverse relationship with the stock market makes gold an effective instrument for diversification. However, a good understanding of factors like “bar sizes” and other market-based conditions that determines the worth of a gold bar is vital for your success as an investor.
Frequently Asked Questions
Q. Is it legal to own a bar of gold?
It is legal to own a bar of gold in the U.S. and many other countries. It was formerly illegal to own gold without a license between 1933 to 1974. However, gold is now globally recognized as a legal investment, just like other assets, such as stocks or bonds.
Q. Do banks sell gold bars?
Most banks do not sell gold bars. The few ones that sell gold only sell gold coins. Buying online is the best way to buy gold. Just like stocks or mutual funds, you can easily purchase from trusted gold merchants.