4 Questions to Consider When Buying Gold Online

Q1. WHAT ARE YOUR INVESTMENT GOALS?

Cavatoni says the first thing to think about is what you’re trying to accomplish with your purchase.

“There’s a lot of value in determining what you’re trying to achieve,” he says. “If your objectives are clear, the path toward achieving them becomes much easier to see.”

Cavatoni suggests considering how important the following elements are to you and your goals:

• Portfolio diversification: A more diverse portfolio may be better protected against some risks, as factors that affect some types of investments may not affect others.^[1] Gold is often considered an effective way to hedge risks like inflation because, unlike equities, it has historically performed well in periods of financial turmoil. For example, in the last 20 years, gold outperformed most other major asset classes.^[2]
• Collectability: Some types of gold may carry value beyond just their gold content, such as their aesthetics, rarity or history.
• Functionality: Gold jewellery can be worn and used, which may be appealing to some buyers.
• Return on investment (ROI): Some types of investments offer greater flexibility, which has in the past been shown to enhance ROI in some cases. For example, gold futures (agreements to buy or sell gold in the future at specified terms, including price, quantity, quality and date) give investors the flexibility to go either long or short on gold. However, it is important to note that ROI is not a guarantee following any investment.
• Risk level: Every investment, including gold, carries some risk. It’s important to decide how much risk you’re willing to take before making any decision.
• Asset liquidity: Gold is highly liquid, which is an important consideration if you want to be able to sell your investment quickly and easily.^[3]

Once you understand what matters most to you and your investment goals, says Cavatoni, you can assess different gold products to determine how they serve your personal priorities.

Q2. WHAT EXACTLY ARE YOU BUYING?

Gold is available in many formats. Cavatoni says it’s important to know the form of the gold you’re considering so you can properly assess it against your personal criteria. For example, are you buying a physical product or a share in a gold-backed exchange traded fund (ETF)? If it’s a physical product, is it bullion (either coins or bars), a collectable or something functional like a piece of jewellery? Each of these has its own characteristics and performs differently as an investment, so be clear on exactly what you’re getting. 

Storage is another important consideration. Will the gold be delivered to your home so you’re responsible for storing it, or will the vendor provide secure storage? In either case, what’s included in the cost? If it’s being stored for you, is it allocated (you own specific pieces of gold) or unallocated (you own a certain quantity of gold, but not any specific physical pieces)? Cavatoni says it’s vital that you fully understand whatever terms you agree to, so don’t be afraid to ask questions.

Q3. WHO ARE YOU BUYING FROM?

Gold can be a significant purchase, so Cavatoni says it’s important to do your homework to make sure you’re dealing with a reputable vendor. He believes the following questions are a good starting point for gathering the data you need to make an informed decision:

Q4. WHAT ARE THE COSTS?

Before you make any decisions, Cavatoni believes it is important to be well informed, asking as many questions as you need to fully understand all costs associated with your purchase. Your vendor should be able to provide clear, transparent answers about all costs, including at minimum:

• The current price of gold
• Any fees charged by the vendor, and what they’re for
• Sales commissions
• Premiums
• Any other costs, such as delivery, storage and insurance

THE BOTTOM LINE

The questions proposed by Cavatoni are important to ask, but they can’t make the decision for you. Every investor has their own desires and needs; something that’s a deal-breaker for you might be acceptable to someone else. If you’re thinking about buying gold, Cavatoni believes leveraging resources from organizations like the World Gold Council, LBMA, Royal Canadian Mint and other reputable sources that can provide education and information is a good place to start. That said, always consult your financial advisor before you make any investment decisions.

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