Precious metal at a high: Want to buy gold now? Here’s what you need to know

In the USA, gold bars are already available in supermarkets – and are sold out within a short time. blue News has found out where to buy gold in Switzerland and what to look out for.

The price of gold is climbing from record to record. This means one thing above all: although the precious metal is more expensive than ever before, people are continuing to buy it. In the USA, the Costco supermarket chain offered gold bars in its stores – they were sold out within a short time.

In Switzerland, gold is available from banks and jewelers. But what do you need to look out for if you want to hold some of your assets in this sought-after precious metal? blue News asked banks, a gold dealer and universities. The following comments are based on statements from Christian Brenner, Managing Director of the gold trading company Philoro Schweiz AG, Martin Grollimund, Head of Precious Metals Trading at Raiffeisen Switzerland and Thorsten Hens, Professor of Finance at the University of Zurich.

It is demand that is driving the price up. According to the experts interviewed and others, central banks are playing a major role in the massive purchases. The Chinese National Bank in particular is increasing its gold reserves, explains Thorsten Hens from the University of Zurich. Martin Grollimund from Raiffeisen emphasizes that numerous central banks in emerging countries have also been reducing their dollar holdings and replacing them with gold since the start of the war in Ukraine.

In Switzerland, banks and companies specializing in gold trading sell gold. They offer bars and coins such as the Goldvreneli. Jewelry stores also offer gold for sale.

Caution is advised with online offers and stores that advertise themselves with crowded flyers. Izzy Mag” has shown that there are dubious gold dealers: a senior citizen offered a genuine 100-gram gold bar to a buyer as a decoy. However, he didn’t even want to pay her half the value at the time.

Gold has to be genuine, of course. An initial indication of whether it is genuine is provided by a neodymium stone, a strong magnet. Gold repels this.

Professionals have a range of other methods with which they test the authenticity and purity of gold: with ultrasound, X-rays, by determining the electrical conductivity or with nitric acid.

Ultimately, you have to trust the seller, i.e. the bank, the dealer or even the private individual, that what they are handing over to you for your money is actually gold and that the proof of origin is based on facts.

If you buy gold bars, coins or similar, you have control over this valuable asset and are independent of the financial system. However, you are responsible for storing your gold in such a way that it is not stolen. To do this, you can turn to banks or other professional providers who rent out safe deposit boxes.

As a study by the University of St. Gallen recently showed, many people in Switzerland store their gold at home, either in a safe or a hiding place. According to the survey, some have buried it in their garden.

If you don’t want to keep your gold in your own hands, you can buy a gold ETF. This is a fund that invests in gold on the market. Some funds offer the option of actually taking physical delivery of the gold if necessary. However, the unit for many gold ETFs is the standard bar weighing 12.5 kilograms (currently the equivalent of almost CHF 1 million). You can buy fund units for a smaller amount. In this case, however, it is generally not possible to issue physical gold.

Digital gold is still in its early stages: its providers usually have a certain amount of gold in their safe and sell shares in it in digital form. The tokens represent a certain amount of the precious metal. They can be resold without the gold having to be transferred from one safe to another. Thorsten Hens warns that digital gold is still part of the alternative financial system. “You have to take a close look at whether the gold has been deposited,” he warns.

The right form for you also depends on what you intend to do with the gold, especially how long you want to keep it in your possession. More on this under “What should I consider when choosing a storage location?”

In addition to the material value of the gold, there are the minting costs for the bar or coin. In other words, a kilogram bar costs slightly more than a kilogram of gold on the day of purchase. The precious metal product must therefore increase in value by at least the amount of the minting costs so that you can sell your gold without making a loss. The spread between the buying and selling price of gold bars is generally somewhat lower than for coins. And the higher the value of an individual bar or coin, the lower the proportion of the production costs for this piece of gold.

In terms of price, gold jewelry also includes the work of the goldsmith or jeweler and possibly precious stones or other valuable materials. Christian Brenner from Philoro recommends jewelry as an investment if the gold value accounts for at least a quarter of the price of the entire piece of jewelry. Anyone who sells jewelry to a precious metal dealer only receives the value of the precious metal it contains. In this case, the finger ring or necklace will fetch significantly less than it once cost.

In addition to authenticity, the origin of gold can also play a role in resale. The most important proof is the LBMA standard of the London Bullion Market Association. This centuries-old trading place for gold places high demands on the quality of the gold and also prohibits gold of dubious origin, so-called conflict or blood gold, emphasizes Christian Brenner. Gold without a guarantee of origin is very difficult to sell to banks and dealers, the gold trader explains further. “Transparency regarding the origin and the companies involved in the supply chain is very important when procuring gold,” emphasizes Grollimund from Raiffeisen.

There is also Fairtrade gold, which places even higher demands on the extraction of the gold and the trade in it. ZKB even offers Max Havelaar gold bars.

Grollimund also refers to the Swiss Better Gold Initiative, which supports small producers in less developed countries to improve their environmental and social practices.

Banks and other providers offer safe deposit boxes. The smallest ones start at less than 100 francs per year. For several hundred francs, there is a drawer that can hold a considerable treasure trove of gold. As a long-term investment, gold in a safe deposit box entails annual costs that should not be underestimated.

A study conducted by the University of St. Gallen in collaboration with Philoro found that 5 percent of Swiss gold owners have buried their gold in their garden. It should be noted that a normal metal detector does not detect gold. A special gold detector is required for this. This is in case you no longer know exactly where your gold treasure is.

As a precious metal, gold has the property that it hardly reacts chemically with other substances – it does not rust and is not damaged in any other way. Nevertheless, it is advisable to pack it in such a way that nothing sticks to it even after years in the ground.

Security against theft, damage or other impairment is one thing. Do you trust professional custodians or a bank more than your home? Then leave your gold there.

According to Christian Brenner, home insurance policies cover the value of gold at home. However, the premium can be high depending on the value of the gold storage – which is not really surprising. In any case, you should discuss with your insurance company whether and how they insure your gold against loss.

What you need to think about: Do I want to be able to take my gold with me at short notice or exchange it for cash at any time? If you have it at home or in a place that you can access at any time, you have maximum flexibility. Not all bank and other safe deposit boxes are accessible 24 hours a day.

Here is a brief digression: until the early 1970s, the price of gold was fixed because the dollar was pegged to it. At that time, a troy ounce (31.1 grams) cost 35 dollars. Then the USA removed the gold peg from its currency, making gold freely tradable. Since then, the price of gold has risen, apart from a few sharp upward or downward swings. Until the noughties, it was mostly between 300 and 500 dollars, then rose sharply to over 1000 dollars. In 2020, it exceeded the 2,000-dollar mark for a troy ounce for the first time.

Since the beginning of 2024, gold has gained more than 30 percent in value. This is due to global geopolitical uncertainty, which sends currencies, commodities and stock markets on ups and downs. The US elections and what might happen under the next administration are also prompting some people to exchange at least part of their assets for the stable precious metal. The fact that central banks have also been buying money on a large scale in recent months has driven its price up even further.

The NZZ quotes an expert who states that gold gains above-average value in times of crisis. When world events calm down, they tend to stagnate.

The price of gold can also fall, as it has repeatedly done in the past, sometimes even sharply in a short period of time. In the long term, however, it has always continued to rise. It is therefore realistic to assume that the current price of over 2700 dollars per troy ounce is not the all-time high.

For Thorsten Hens, Professor of Finance at the University of Zurich, it is clear that gold purchases – which are driving up the price – are strategic and not speculative. This means that the buyers do not intend to sell the gold again soon, but to hold it as a long-term asset.

Martin Grollimund from Bank Raiffeisen also expects the price of gold to continue to rise in the medium term – for the same reasons that are responsible for the current high price. However, he emphasizes that temporary price dips cannot be ruled out. He recommends using this as an opportunity to buy gold.