In the light of what’s happening to the global economy, putting some of your money in gold is an intelligent investment move.
Gold is a stable commodity that performs well even during times of financial uncertainty, which makes it a safe asset to have on hand. When the stock prices are going down, gold’s price tends to go up. What we’re saying is: you can consider gold as a form of financial insurance.
Gold is also great protection versus inflation. You can look at it both as a store of value and a global currency, one that has proven its value for thousands of years. But nowadays, buying gold bullion is not always a secure and uncomplicated process.
According to Rob Clark, Co-Founder & President of Provenance Gold Corp, a gold and silver exploration Company, hedging is a key decision when people are buying gold. “In terms of physical gold as an investment, it can be a great hedge for other investments particularly in times of stock market crisis or crashes, can be relatively easy to store, is private and confidential in terms of transactions and an extremely tangible asset”.
But it’s always good to learn how you can better protect your gold purchase and your financial stability by straying away from these unfamiliar gold buying mistakes. The more information you have, the better reaction you can have when you encounter situations.
“Gold however can be a market sentiment and world affair driven investment and can be very volatile and does not give out a dividend. Gold also has cycles of bullish advancement as we are currently in now as well as prolonged periods of decline or being flat”, says Clark.
1. Not Understand What They Buy
- Price. It is extremely important for investors to know the current spot price of any precious metal they want to deal in, whether buying or selling. There are bullion items that normally sell just a little over three to five percent above the prevailing spot price and this even depends on the quantity of the gold. Some examples are the American Eagle, Canadian Maple Leaf, and South African Krugerrand. Stay clear of high-pressure selling prices. These prices are so high that gold or silver prices must double or triple in value before you could make a profit.
- Weight. It’s a must that you know how dealers weigh the gold. The most acceptable unit of measure on the international market is in troy ounces. You’d usually find that spot prices are in troy ounces too. Just take note that it is not identical to a standard ounce. A single troy ounce is equal to 1.0971 standard ounces – which means that a troy ounce is much heavier than a standard ounce. In grams, it becomes 31.1035 grams.
- Design. Each coin has its own unique design, rich in very small details so that it’s very difficult to make an almost perfect counterfeit. So, when buying gold coins, look for these details and make sure that they all appear in the coins you are going to buy.
- Purity. Always check for the gold’s purity before buying because not all golds are the same. They can be either 97%, 98%, 99%, 99.10%, 99.99% or 100% pure. Gold comes in many grades and varieties so check the certificates that authenticate their purity to make sure of the quality.
2. Buy The Lowest Coin
If a dealer offers a bullion product with a price that sounds too good to be true or comes with extravagant incentives and even exaggerated claims, be cautious.
Gold and silver bullion products do not normally dip below spot prices. If you have precious metals in your asset holdings, you can go to a dealer anytime and sell the items at once for their full value. With this convenience available to everybody, there is no reason for anyone to make a ‘sacrifice’ sale when it comes to gold or silver.
Legitimate dealers will lose money if they offer items below cost, so watch out. Dealers need to add small premiums above spot prices to cover product minting costs and their costs to keep the business running.
3. Buying Gold Only When It’s Rises
Now is always the right time to buy gold – there is never a “wrong” time. But the Law of Supply and Demand also applies with gold. When more people are buying gold coins, the price of gold can go up and the supply of gold coins in the market can go out. The more people there are who want to buy gold, the higher the demand would be.
But sometimes, the available supply in the market may not be available to meet the demand. Hence, it will affect the price. As demand for any product of commodity increases, whether it’s gold, silver, gas, grain, or foreign currency, prices increase and supply can run low.
4. Purchase Rare Coins For Investment Purposes
You might run into some unscrupulous coin dealers who will try to sell you numismatic coins as an investment and convince you with their sweet talk. Do not fall for this ploy. Numismatic coins are primarily for collecting and are very poor investment vehicles.
The prices for numismatic coins depend on so many things and not just on the spot price of gold. You’ll have to take into account factors like rarity, grade, mintage, and popularity that will reasonably affect their prices. If you really want to invest in physical gold, buy exclusively well-known bullion coins that come with low premium rates.
5. Not Checking Dealer Experience & Reputation
Choose to deal with the ones with plenty of experience in the industry. Find dealers with repeat customers because buyers won’t return if they receive bad service or negative experience from a dealer.
“You must be sure you always go to a trusted source and reputable seller and if you are uncertain don’t commit. Be sure that you can take physical possession of the gold and do not commit to pay any fees or deposits until you are certain it is legitimate, from a trusted source and insist on seeing the certification”, says Clark.
Online forums about investing in gold and other precious metals are one of the best places to get information. You can research potential companies, dealers and investments by asking other players in the field. Many forums also post warnings about scammers, so you can avoid these companies and dealers.
According to Clark “If you are buying gold coins be sure you check their history and review online research and materials to fully understand what you are buying and the current market value for the coin. Choose gold bars or products that are stamped and have serial numbers and if still unsure seek an expert’s opinion or get an independent appraisal done before committing to the purchase”.
You should check the NFA database to get the regulatory history of your dealer. You can see if they have a license, a sanction or even if the NFA has banned them from doing business. If your dealer is not there, that’s even more worrisome – just be very careful who you give your money to.
You may also want to visit the Better Business Bureau. Verify if they appear on their list, how long they have been doing business, their ratings and how good the reviews are.
6. Share Your Purchase With Other People
Once you’ve got your gold, there’s always the temptation to boast about your purchase to friends and family in your social media network. It’s natural because buying gold is exciting. While it is a good move to take steps to secure your financial future, be careful about who you talk to about your gold stash. You may be putting yourself in danger in the process.
Do not make this mistake. Think very hard before posting about your purchase online, whether on your social media account, blog or personal website. You’re aware that anyone, anywhere in the world could access your social media accounts and view whatever you post. Keep your gold in a safe and secure place such as a safe, safety deposit box, or precious metals depository, and keep the number of people who know about your gold to a minimum.