How to Buy: Don't Miss Yellow Metal's Next Move Up

With experts predicting rising gold prices for at least the next year, it's no surprise that more and more investors want to know how to buy gold.

According to the facts and figures cited last month by Money Morning Global Resources Specialist Peter Krauth, 2013 should be a banner year for gold. Krauth projects prices for the primary precious metal could easily climb from the current $1,700 an ounce to $2,200 – or even more – a one-year gain in excess of 25%.

That means every serious investor should have at least some gold in their portfolio.

That raises two immediate questions:

1)      What are the best vehicles for investing in gold; and,

2)      What are the best ways to buy the yellow metal?

For each investor, the best approach to how to buy gold depends on your goals and expectations.

How to Buy Gold

If you're worried global political and economic tensions will intensify, then holding the actual physical metal is your best choice.

Possible flash points include strife in the Middle East, a meltdown in the euro-zone debt crisis, a continued slowing of China's growth rate and, of course, the US fiscal cliff crisis, which could plunge America and perhaps the world economy back into recession – or worse.

Under such conditions, purists feel holding physical gold provides the only truly effective hedge against almost certain declines in the value of the dollar and other fiat currencies – declines that could be amplified by sharp reversals in global financial markets.

For smaller investors, how to buy gold in physical form typically means buying gold bullion bars, rounds (unadorned coin-shaped pieces) or minted gold bullion coins.

Bullion bars are produced primarily by private mints, most notably Engelhard, Johnson Matthey PLC (LON: JMAT) and Credit Suisse Group AG (ADR-NYSE: CS). They come in a variety of sizes to suit the needs and resources of every investor. The smallest bars weigh just one gram, recently priced at about $56.48, while the largest are 400 ounces and were going early this week for around $692,500 each.

Gold rounds are offered by the same private refiners, as well as some government mints, and are also available in a variety of sizes, typically ranging from one-tenth of an ounce to five ounces. Prices range from as little as $15 per round over the spot price of gold at the time of the order for smaller pieces to $40 over spot for larger specialty pieces.

Volume pricing discounts ranging from $5 to $25 per ounce are offered on larger orders for both bars and rounds.

Jewelry-type pieces, such as pendants, are also available, but generally carry slightly higher premiums.

Minted bullion coins come in a far greater variety, being produced by most of the private refiners and many of the world's leading government mints. Examples of the latter include the American Gold Eagle, American Gold Buffalo, the Canadian Gold Maple Leaf, the South African Krugerrand, the Chinese Gold Panda and the Mexican Gold Libertad.

Unlike simple gold rounds, government-minted coins typically carry a listed face value – e.g., a $20 gold piece – though the face values typically have scant relationship to today's actual metal value.

Sizes range from one-tenth of an ounce to two ounces, with the one-ounce size being most popular and readily available. Bullion coin prices typically track the spot price of gold, plus a premium of 5% to 6% for the one-ounce issues to cover the cost of refining, minting and marketing. Premiums on smaller coins can run as high as 15%.

Be aware, however, that the premiums for all sizes will be considerably higher if you buy in small quantities or want to pay by credit card rather than with a bank draft or funds transfer.

For example, on Monday one leading US dealer quoted one-tenth-ounce American Gold Eagles at $202.68 each when purchased in quantities of 100 or more using a bank transfer, a premium of 7.4% over the tenth-ounce spot price of $188.72 at the time. However, the same coin, bought in lots of 49 or less using a credit card, was quoted at $212.29, a premium of 12.5%.

Where to Buy Gold

The most important rule, whether you're buying gold bars, rounds or minted bullion coins, is to deal only with reputable dealers having proven experience and clearly stated policies and warranties. This is especially crucial if you're buying by phone or online. Some well-regarded dealers in the US include:

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