So you have decided to buy gold bars, congratulations! Owning gold is a solid step towards financial independence. Gold requires no bank or government or corporation to fund their value, and this reason alone is enough to add gold bars to your financial holdings. Gold bars, and gold bullion in general do require your due diligence in both the purchasing and selling phase however, and the holding phase in-between. Let’s look at some common pitfalls novice gold bullion buyers make.

Buying Gold Bars Based Solely On Price

The old saying, “If it seems too good to be true, it usually is…” holds true to buying gold bars. Their are counterfeit gold bars and gold bullion coins coming out of China by the thousands every week. Many find their way to the hands of unsuspecting Americans. Some of these people are unscrupulous and sell these gold bars and gold bullion coins as legitimate ways to invest in gold through auction sites, websites, etc. In other instances, someone who thought they bought real gold bullion years ago, now sells the counterfeit unsuspectingly to a new owner, and the new owner just traded good funds for bad gold bars.

Buy Gold Bars Based On Reputation And A Solid Buy-Back Policy

A truly honest and reputable gold company like ITM Trading will have a time proven track record, an A+ Better Business Bureau rating, and a knowledgeable staff that has been with the company for many years. A solid gold company (pun intended) will also have a solid buy-back policy in place. You should ask about and fully understand this policy before you purchase even a single silver dime with your hard earned money.

The Importance Of Understanding The Buy-Back Policy

For instance, for the sake of easy numbers lets say gold is $1000 an ounce, and you want to purchase an ounce. The gold company has to make a profit, and the gold wholesaler that they purchase from has to make a profit. Fortunately for you a good gold company will sell gold bars and gold bullion at a very small profit. So, that being said, let’s apply a 4% markup to the $1000 gold bar, thus making the cost of the bar $1040. Here comes the interesting part; lets say that a pawn shop around the corner from you is willing to sell the same bar for $995. Wouldn’t that price be a much better deal? For the sake of argument, let’s say you buy one bar from ITM for $1040 and the pawn shop bar for $995. Now, to make the scenario interesting, lets say financial tragedy strikes a month later, and you are forced to sell both bars, and let’s say that the price of gold has stayed steady at $1000. ITM’s buy-back policy is such that they will purchase back your bar for what they can purchase the same bar for from their wholesalers on the day your bar arrives at ITM for liquidation, and in this market scenario ITM liquidate your coin for $1005. The pawn shop, on the other hand, makes it’s profit by applying a 50% cost of doing business to each of their transactions and offers $495 for the bar you just paid $995 for! After a bit of negotiating they offer $550. While this scenario may seem a bit extreme, it really isn’t. The pawn shop is not in the gold business. The gold company is. Even if you buy from a gold company, make sure you ask about and understand the buy-back policy, it makes all the difference.