Investing » Alternative Investments » 6 Mistakes People Make When Buying Physical Gold
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6 Mistakes People Make When Buying Physical Gold

Gold price is getting higher while gold becomes a more and more popular investment. Here are 6 mistakes to avoid when buying gold.
Author: Russell White
Russell White

Writer, Contributor


As a finance geek and Content editor with 13 years of journalism experience, Russell makes sure every article has the right flow, edits for accuracy, and consumer value. In addition, Russell contributes his own ideas about budgeting, savings, and credit cards.

Review & Fact Check: Baruch Mann (Silvermann)

Russell White

Writer, Contributor


As a finance geek and Content editor with 13 years of journalism experience, Russell makes sure every article has the right flow, edits for accuracy, and consumer value. In addition, Russell contributes his own ideas about budgeting, savings, and credit cards.
Author: Russell White
Russell White

Writer, Contributor


As a finance geek and Content editor with 13 years of journalism experience, Russell makes sure every article has the right flow, edits for accuracy, and consumer value. In addition, Russell contributes his own ideas about budgeting, savings, and credit cards.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO


Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

The information in this content is not advice on financial, investment, tax or other matters. You can trust the integrity of our unbiased, independent editorial staff. We may, however, receive compensation from the issuers of some products mentioned in this article. See how we make money.

Table of Content

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.

Should I Invest in Gold Bars or Coins?

The choice between gold bars and coins depends on a myriad of factors. Gold bars attract lower premium because it is convenient to package them in large quantities.

However, it is quick and easy to liquidate gold coins than gold bars. For a beginner investor, it is better to start investing in gold coins than gold bars, especially if you have a limited budget. A more experienced investor can purchase large quantities of gold bars, since they have lower storage costs than coins of similar quantity.

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What is the Cheapest Way to Buy Gold?

Depending on your investment strategy, gold bars seem to attract lower premium costs than coins even though coins have more overheads in terms of production. However, most reputable dealers often offer lower premium charges aiming at providing competitive prices. Also, buying either gold bars or gold coins attracts lower storage costs. For most dealers, this does not matter whether you’ll be buying coins or bars.

You should also consider whether you will be investing in gold stocks or physical gold. Gold ETFs or stocks are more like traditional shares. They are cheap to invest in, but they attract fees that increase your effective costs per ounce. Just like gold futures, you’ll also receive proceeds in monetary value and not in physical gold. However, for speculative purposes, they are a better option than gold bullions.

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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.

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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.

What is the Best Website to Buy Gold?

When buying gold, you should only buy from reputable and trustworthy brokers. An ideal broker should have the following attributes:

  • Is among the top-rated brokers, i.e., has an A+ rating from BBI
  • Holds a trading license from the National Future Association (NFA)
  • Offers a friendly money return policy
  • Offers a relatively fast and reliable shipping
  • Offers competitive pricing
  • Offers extensive products selection
  • Offers storage services at favorable rates
  • Offers a secure, easy to use, and accessible online platform
  • Offers a favorable monthly saving plan that helps to reduce premium costs
  • Offer a 24/7 responsive customer service

How Can I Avoid Getting Scammed for Buying Gold?

The best way to avoid getting scammed is to buy gold from a reputable broker. The broker must have the required experience, is a big lender, or is certified by a professional body. For example, ensure the broker holds a license from the National Future Association (NFA) and has a clean history with Better Business Bureau (BBB).

Also, when considering between a local dealer and an online dealer, always consider a reputable online broker. Besides the variety of products to choose from, your transaction is much safer. If you are going to receive your gold order at home, choose a broker that offers quick deliveries. However, there is no reason to store gold at your home, especially in large quantities. It is much safer to rent a vault instead.

Lastly, avoid shinny deals. Anything too lucrative is probably a scheme to defraud your investment.

Gold Buying Mistakes - FAQs

The two popular ways of buying gold and silver include buying from a local broker or an online broker. Either option presents a unique proposition.

Through an online broker, you can enjoy a high level of anonymity by having a private shopping session at your home. You also get a big pool of products to select from. Besides, you often get competitive prices compared to a local broker. However, there's no chance of interacting with the product directly. You'll have to wait till you receive your shipment.

While shopping at a local dealer, you can see and touch the gold. You won't have a long waiting time. Besides, you'll have a direct conversation with the dealer. On the downside, you can expect gold sales tax depending on the state. Plus, there are high chances of false advertisement.

Physical gold may be purchased online with reasonable ease. You simply need to find a reliable internet broker and visit their website. Select whether you want to buy a coin or a bar of gold from the website menu.

Once you're happy with the amount, weight, and kind of your order, add it to your basket and proceed to the checkout. You are not required to register with most internet brokers. Check out as a guest if you choose. Enter your payment method, billing address, and order tracking information in the final step.

It's difficult to say how much gold you should buy at any one time. For starters, your investment has no limits. When it comes to portfolio strategy, though, you should be familiar with the gold market. Because, despite the fact that gold has been on an upward trend for the previous century, it is prone to volatility. It can lose or gain value in the short term, depending on how volatile the market is.

As an investor, on the other hand, you should think about things like affordability, storage, and how quickly you can sell your gold. Whatever the case may be, it all boils down to your financial objectives.

The ideal time to buy gold is when there is economic uncertainty such as a financial crisis. Gold tends to be a better hedge against rising prices, and it makes a better hedge against a financial crisis than as a hedge against inflation. When other types of investments such as stocks, bonds, and real estate property are underperforming, the price of gold tend to rise as most investors rush to buy gold as a hedge against the losses accumulated in other types of investments.

Watch out for negative political and economic messaging about debt, credit, unemployment, and currency in the leading economics such as the US, Eurozone and China, to determine when to add more gold to your portfolio.

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