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Avoid these 4 Mistakes When You Buy Gold

posted by Chris Valentine

What should you be avoiding when you buy gold? There are several pitfalls when it comes to buying bullion that can leave you paying more than you need to. Gold is an excellent investment for conserving your wealth and reducing risks in your portfolio, but only if you buy the right way.

The optimal way to buy gold is online in the form of coins and bars. Simple, straightforward 1 oz. gold coins or bars released by national mints and sold online are all you need to succeed. But because there are so many options, here are some of the things you should avoid.

1) Commemorative or Collectible Gold Coins

Commemorative coins like special-issue commemorative editions of the American Gold Eagle get a lot of advertising because they have higher markups than your standard-issue, current year bullion coin. To save money buying gold coins, don’t buy for historical value or future numismatic value. You’re buying a commodity and asset appreciation through investor sentiment, supply, and demand are your most reliable price influences. Collecting coins is a fine hobby, and you can still make money, but you are gambling if you hope to maximize your investment gains that way.

2) Fractional Gold Coins

Another thing to think twice about when you’re going to buy gold online is fractional coins, i.e., 1/10 oz. coins, ¼ oz. coins, or gram bars. They can be tempting for first time investors because 1 oz. of gold is currently priced around $1,300 USD and a fractional seems much more affordable. However, the cost per ounce is much higher due to increased production costs.

If you are looking at fractional coins, you may want to consider investing in silver coins instead. Silver is a fraction of the cost, easier to buy in greater quantities (and therefore save), and provide many of the same benefits that gold provides investors. There may be a niche for gram gold or other fractional coins, but for the average investors they are simply more expensive.

3) Local Gold Shops

When you go out to buy gold bullion, it’s always better to go with an online gold seller. Local shops have a few things going against them:

  • Higher rents for retail spaces
  • Higher insurance premiums due to their increased visibility and risk of theft
  • Advertising costs

In addition to the higher costs, local shops may not be in sync with the local commodities market. Gold is traded 24 hours a day, 5 days a week. Websites reflect those changes faster. If you are looking to buy gold online, you are already on track to reduce your premiums and save money. The only reason to consider local sellers is security, but today, there is a wide range of reliable online sellers that provide zero-riskpurchases.

4) Selling Gold at Discount Prices

When you’re seeing financial warning signs and need to sell off an asset to pay off debt, gold’s liquidity can make it a quick fix. But you should never, ever sell bullion at discount prices at a pawn shop or a cash-for-gold business. These types of businesses will never give you the real value of your product. But where can you sell gold then? Part of the appeal behind buying bullion its liquidity. There is no shortage of buyers who will pay fair prices for gold coins. You should be able to sell for as close to spot gold prices as possible. Your best options to get those prices is going online to the same people who sell coins and bars.

Avoid these 4 pitfalls and you can get the best prices when you buy and sell gold.

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