There are now many sophisticated ways to invest in gold, from gold-backed electronic accounts, to gold futures, to exchange-traded bullion on the stock market. Still, for some, there is nothing quite as satisfying as holding a real gold nugget, straight from the Earth. Luckily for these folks, there is a way to buy gold directly from mines, or even from individual prospectors. The market for gold in raw form is different than that of refined gold or gold coins, so it's important to understand that this is a different sort of investment.
Locate several reputable, convenient mines. You have to realise that gold mining is limited by geography, so not every area is going to have a gold mine close by and, even if there is a mine close by, mining in a particular region may not be as robust as in a further region that will therefore be able to offer gold at less expense. In a world market, gold is fungible, meaning that price is the same wherever you purchase it. However, buying gold direct is more subject to regional considerations, namely, transport, and considerations such as collectable value.
A paper by the U.S. Geological Survey (USGS) identifies California, Nevada, South Dakota, and Alaska as major mining states. So, a search for mines in the one of those states closest to you would be a good start. Then, see if any of those mines have websites or phone numbers, and you will then discover whether or not they sell gold directly.
There are a number of websites that compile mines that sell gold directly. One such site is called gold-nuggets.org, which specialises in Australian gold. Because Australia is the second-largest gold producer in the world behind China, according to a "Mining Weekly" article, prices there may be able to compete with, and even edge out, the cost of U.S. gold, even if it's local.
Identify the nugget you desire. The reason that the direct gold market is not as uniform as the bullion market is that the product itself is not uniform. Each nugget is valued on its own terms, with the shape and overall appearance of each specimen giving it added or detracted value. The primary factor in the gold nugget market is the rarity in relation to size. Unlike with most products, where buying in larger quantities often results in a discount, the price per ounce actually tends to increase when you buy nuggets directly from the mine. This is because, quite simply, larger intact nuggets are rarer than smaller nuggets.
Perform a gravity test on the nugget to determine gold content. This is the most important element in ensuring that you do not get defrauded. According to gold-nuggets.org, the formula for obtaining the amount of gold in a nugget containing other materials is "3.1 --- the weight in water, minus 1.9 --- the weight in air." So, weigh the nugget. Then, put a container of water on a scale and zero the scale. Submerge the nugget, and make a note of the weight. Plug the numbers into the equation.
Once you determine that the dealer is asking a fair price based on the actual weight of the gold in the nugget, you are safe to make the purchase.
If possible, talk with other gold investors to help verify the reputability of the mine from which you plan to make a purchase.
Tips and warnings
- If possible, talk with other gold investors to help verify the reputability of the mine from which you plan to make a purchase.