5 Common Pitfalls to Avoid When Buying Gold
Investing in gold and other precious metals is a smart investment that provides financial security during economic downturns, but there are several common pitfalls to avoid when buying gold. Inexperienced gold investors can make short-sighted mistakes that can cost them dearly. Failure to research and prepare for your investment choices could lead to a financial disaster. Too often, unsuspecting new gold investors jump into bad deals with dishonest brokers.
Republic Monetary Exchange doesn’t want to see this happen to you, so we have compiled a list of mistakes to look out for. Here are five common pitfalls to avoid when buying gold.
1. Not Exploring the Different Types of Gold Investment Options
Many new gold investors choose to buy physical gold bars or bullion coins. When securing your future with precious metals, it’s important to understand the variety of products available.
I. Certified investment-grade coins
For universal, undisputed value, certified investment-grade coins ensure pricing consistency and guaranteed authenticity. Graded coins have been certified by Professional Coin Grading Services and Numismatic Guaranty Corporation, the two largest grading companies in the United States. Certified investment-grade coins include Gold Indian coins, Gold Liberty coins, and Gold St. Gauden coins.
II. Gold bullion coins and bars
Gold bullion coins and bars maintain a purity of at least 99.5% and have a wide variety of weights and sizes, ranging from 1/10 oz. coins to 1 kilo bars. Popular bullion coins and bars include Gold American Eagle coins, South African Gold Krugerrands, and various sizes of gold bars.
These items are appreciated for both their aesthetic value and precious metal content. If you choose to invest in collectible gold coins, choose premium investment grade coins to satisfy your enjoyment of coin collecting and to provide you with economic protection in the long run.
2. Failing to Learn About the Logistics of Gold Ownership
If you wish to buy gold bullion bars or coins, you need a secure place to store your investment. A safety deposit box at your bank is a good storage method if you are not worried about having constant, instant access to your gold.
Alternatively, you could install a safe at your home to store your gold and other valuables. There are several storage options to consider, including:
- At home
- Buried outside
- Upright safes
- Floor safes
- Bank deposit box
- Private depository
Each option has its share of pros and cons, and you will need to weigh your options carefully to secure your financial future.
3. Misunderstanding How Gold Prices Work
The price of gold changes constantly. The price of gold at any given moment is called its spot price. The spot price of gold is calculated by averaging out prices from professional gold brokers and traders around the world. When you buy gold from a broker, you should expect to pay approximately 5-8% over the spot price.
Beware of brokers who charge more than this – they are trying to rip you off. In addition, some states charge sales tax on precious metal purchases, which can have a significant impact on your final bill.
Republic Monetary Exchange’s home state of Arizona does not tax precious metals, whether you buy from us in-person or if we ship your gold to you out of state.
4. Investing in Gold for Short-Term Gains
When you sell your gold, you will generally sell it at around its spot price at that time. Remember, gold prices are constantly fluctuating. While long-term gold prices have always increased, you could see losses if you need to liquidate your gold a few weeks or months after purchasing it.
You should also consider broker’s fees and insurance costs when calculating how much profit you want to realize on your gold investment. Therefore, it’s important to be prepared to wait it out until gold prices have increased enough to make the investment worth your while.
An exception to this rule would be ratio-trading, in which investors take advantage of the fluctuations in prices between different types of precious metals to make short term profits. Gold and precious metals are about long-term financial security, and not minute-by-minute investment gambling.
5. Failing to Work with a Trustworthy, Reputable Broker
There are a lot of scammers out there who make a fortune by cheating investors out of their wealth. Beware of any dealer who attempts to pressure you into buying by using scare tactics. For example, the dealer may tell you that the coins you are considering are not subject to government confiscation.
As a rule of thumb, don’t buy gold from pawn shops. You will have no method of recourse, should you discover later that the bullion is not what the pawn shop said it was. The most certain method of securing gold is from a reputable local dealer.
Why Buy Gold from Republic Monetary Exchange?
The team at Republic Monetary Exchange is committed to 100% customer satisfaction. Each of us is experienced and knowledgeable in the buying and selling of precious metals. Every Account Executive is committed to educating our clients about precious metal investments and providing reliable advice that helps each client meet their goals. We are more than equipped to help you dodge these common pitfalls when buying gold.To start building your gold IRA with a broker you can count on, call Republic Monetary Exchange today for a free expert consultation.