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Your Ultimate Guide to the Gold Market

The GoldSilver.com Team 
APR 21, 2021

Interested in the gold market, but not sure  how to get started or what any of it means? Here’s a quick overview of the gold market to enable you to begin investing. 

If you have a specific question, these quick links will help you get to your topic faster. 

What Is the Gold Market?

The gold market is the international market for buying and selling gold. Unlike other markets, the price of gold is consistent around the world. The gold market isn’t just about the end product; it also includes the mining, refining, fabrication, and the end-users of sovereign mints and private mints. 

History of the Gold Market

The history of the gold market can be traced back thousands of years. The earliest known use of gold being used as currency was in 600 B.C. 

Investors have used gold as a store of value and a hedge. When uncertainty rises or crisis strikes, investors turn to the gold market. Some recent examples include the instability in international politics, a weakening US dollar, and the COVOID-19 pandemic. 

The gold price always fluctuates, but its long-term value is undeniable. Since becoming legal to own again in the US in 1974, the gold price has steadily gained value independent of any single company, country, or market.

Gold and Currency

Historically, the relationship between gold and currency was very tight. Most countries, including the United States, backed their currency with gold. In August 1971, President Richard Nixon introduced the Gold Reserve Act, which led the United States to abandon the gold standard and transition to a fiat currency system. Other countries have followed suit and no longer use the gold standard--in fact, this is the first time in recorded history that no country uses gold (or silver) to back their currency. 

Because fiat currency can be diluted, this gives gold one its core advantages: it can’t be printed by central bankers or politicians, and thus offers a stable store of value. Gold is the very definition of money, since it holds value better than fiat currency units. 

Global Gold Market

The global gold market is one of the largest in the world. On average about $150 billion in gold trades per day, the third largest trading volume of all financial assets (behind stocks and bonds).

The total amount of above-ground stock of physical gold is currently around 190,000 tons. It rises about 1-2% per year. At $1,700 gold the global gold market is worth about $10 trillion.

Gold’s biggest use is as a form of money. Central banks store gold as part of their Reserves, many institutions hold gold, and of course private investors buy gold.

Gold is also widely used in jewelry, its second biggest source of demand. Gold also has a number of key industrial uses, comprising about 11% of annual supply.

Types of Gold Bullion

There are basically two types of gold that can be bought by investors. Depending on your preferences and how much you are looking to invest, there can be a difference between investing in gold bars and gold coins.

Gold Bars

Gold bars come in different sizes, from 1 ounce in weight all the way up to a heavy 400-ounce gold bar. The advantage of buying gold bars is that premiums are generally lower than coins..This allows you to pay the minimum amount over the spot price of gold and thus give you more ounces for your investment. 

Gold Coins

Like bars, gold coins come in various weights, ranging from the most common one-ounce size all the way up to 400-ounce bars (commonly used by exchanges and funds). You can even buy gold in as little as 1/100th of an ounce

There are also collectible gold coins, though these values are based on factors like rarity and condition and not necessarily the price of gold. Caution is warranted here unless one wants to become an educated collector

One can also buy gold bullion jewelry, which is different than standard costume jewelry in that it can serve the dual purpose of a beautiful adornment and a monetary instrument. 

What Type of Gold Should I Invest In?

While this is a personal decision, generally bars have lower premiums and are ideal for storage, while coins have higher premiums but are more pleasing to look at. Coins usually make better gifts, too.

If buying coins, start with sovereign coins, which are produced by government mints and thus come with purity and weight guarantees. They will also be easiest to someday sell.

Bars have lower premiums because they require less machining than coins, and they also take up less space, which is why they’re ideal for storage. You can store them yourself, but since they were originally minted for storage, and since they’re not as attractive as coins, professional storage is the most logical strategy with them. 

Gold Price

The spot price of gold fluctuates daily, depending on many factors. Stock market activity, monetary policies, inflation, movement of the US dollar, global politics and many other factors can impact its price Investors generally buy gold when uncertainty is high or to protect against almost any kind of crisis.

How Do Real Interest Rates Impact Gold? 

Interest rates have a big influence on the gold price--but perhaps not in the way you might think. It’s not the nominal rate but the “real” interest rate that has the most impact. You can determine the real rate yourself by subtracting the annual CPI reading from the 10-year Treasury rate; if that figure is negative--in other words, if inflation is higher than the interest rate--then that is a supportive environment for gold. Of course the direction or trend of the real rate is important.

History bears this out… even when interest rates were sky-high in the 1970s, inflation readings were higher, making the real rate negative. And it was one of gold’s biggest bull markets in modern history.

Buying Gold

Buying gold is easy. Here are a few tips to help you buy gold. 

How to Buy Gold

Just like any investment, you want to buy low. Traditionally, there have been some patterns of when it’s best to buy gold and other precious metals.

Once you’ve decided to purchase, make sure you are purchasing from a reputable source. Be cautious about prices that seem too good to be true, or significantly higher than the market value.

If you choose to buy gold bars, you can expect the price per ounce to be very close to the market value of gold, with a small potential markup to cover basic business costs. Numismatic coins can be a drastically different experience. While there are a wide variety of coins that are only worth their weight, you could be paying significantly more for rare collectible gold coins. Before you buy a gold coin, investigate the market value of that coin. Compare the price against similar coins recently sold or auctioned to better understand whether the coin is appropriately priced and from a reputable dealer. 

Why Buy Gold

The advantages of buying gold are unlike any other investment. Physical gold is one of the best forms for long-term wealth preservation. It has stood the test of time and is still valuable today. It can’t be hacked, erased, or destroyed, and is independent of any government or organization.

What Affects the Gold Market? 

The price of gold can be affected by many factors. Here are a few of the things that can impact its price 

●  Central Bank Reserves

Just like smart investors diversify their portfolio to include gold, central banks do the same thing. They purchase gold as a stabilizing factor that can help economic growth, but because they are buying such large amounts, it causes a spike in demand in the market, increasing the market price for gold. 

●  Value of the U.S. Dollar

The price of gold is typically inversely related to the strength and value of the U.S. dollar. When the dollar suffers, the cost of gold historically rises, but when the dollar is strong, gold prices tend to drop. 

●  Industrial Demand

Gold is a malleable and useful metal. As industrial manufacturing increases globally, there is a greater demand for gold which creates more demand and increases the price.

●  Gold Production

The Earth has a finite amount of gold, but there’s still mining, refining, and production happening right now. If the production lines for gold are slowed or stop, the supply of gold will drop causing prices to rise.

How to Invest in Gold

The gold market has captured international headlines,  as many investors consider it a strong option for diversification. Here are a few things you need to know when you’re looking to invest in gold. 

●  Invest at the right time. Just like there is a wedding season or house buying season, there is also a season to invest and buy gold. By investing when the price tends to be lower, you set yourself up for greater potential growth. 

●  Beware of scams. Some companies offer gold certificates or offer to “manage” your gold for you. Don’t remove one of the major advantages of physical gold: If you can’t see or hold the gold, there’s a chance you’re not actually investing in gold.

●  Before you invest in gold, think about where you’ll store  it. While a bank safe deposit box or a home safe offer some security, consider the ultimate safety of a private, professional storage program. 

●  Selling gold for a profit is a taxable event for most investors. Bullion is generally designed to be a long-term investment, but investors should always consider the tax consequences before making decisions to sell.

Gold IRA

Since retirement investing is generally long-term, gold makes an ideal asset to include since it preserves purchasing power. By incorporating gold as part of your retirement IRA account, you can defer any taxes on gains until you retire, or even make your gold investment tax-free forever. 

Types of Gold Investments

Some investors buy bullion-backed ETFs or other funds to get exposure to gold. But a gold ETF is not the same as owning a physical bar or coin of gold. 

Gold bullion is a tangible asset you can hold in your hand. A gold ETF gives you price exposure only, as you don’t own any gold and in most cases can’t get any with an ETF. Instead, you are purchasing shares in a trust that holds gold.

Benefits of Owning Gold

Gold has been a valuable asset for thousands of years and billions of investors.. Why? Some of those reasons include:

●  Gold holds its value. No matter what happens in the economy, no matter which country you go to, gold has always been a store of value. 

●  Gold has never gone to zero. If you invest in the stock market, your investment might fail, which is what happened to investors  in Blockbuster or Radio Shack. Gold doesn’t come with that risk. As long as you own your gold, it will have value.

●  It’s good for your mental health. The markets are a stress-filled rollercoaster ride. It can feel like you have no control over your future. By adding gold to your portfolio, you may actually sleep better.

Find out why Mike Maloney, a leading expert in monetary history, economics, and precious metals, chooses to buy gold

Selling Gold - How to Sell

There may come a time when you want or need to sell some or all of your gold. There are basically two options to sell your gold. 

●  Online dealer or local coin shop. Each has advantages and drawbacks. A coin shop might be quicker to get cash, but they typically offer lower prices and may not be able to take large orders on short notice. Either way look for a reputable bullion dealer.

Where we wouldn’t go is a pawn shop. They typically offer prices far below what a reputable gold bullion dealer will offer. 

Also, be careful with online auction sites like eBay, though they can be a source for experienced investors.

Start Your Investment Today

With all the advantages gold can offer, we encourage you to start your investment in gold today. 


Start Your Gold Investment