Expert Investors Warn Against These Gold Buying Mistakes

The market is showing all sorts of signs for buying gold. A serious investor should always have gold in his or her portfolio for diversification purposes. Gold is also a very important resource to have in times of crises, if you remember from back in 2008. As the market becomes ripe for buying gold, buyers and sellers alike tend to rush. It’s easy to make mistakes when buying gold in high selloff season, especially if you are a first timer, warn expert investors. So, to make sure your gold purchase is secure, don’t make the following mistakes:

Not Buying Actual Physical Gold

If you want to protect your cash assets in gold, then you need to own actual, real gold, says entrepreneur and investor John Burgess. Owning stocks or shares in gold mining companies is not equivalent to owning real gold. ETFs are not gold either. In both these instances, what you ultimately own is either a cash asset or a piece of paper. If you want to protect yourself in a time of financial crisis, you need to own gold coins, bars or bullion, not an ETF promissory note.

Buying Collectibles or “Scrap” Gold

Scrap gold refers to gold from jewelry or similar items. These types of gold have value, but not the same value as a minted coin or a professionally marked gold bar. Keep in mind that there’s a major distinction between collectible gold coins and recognized gold coins. Collectible coins are valued in terms of currency, where enthusiasts speculate on the price. They don’t have actual value in terms of gold until melted and turned into bullion or bar. Actual gold coins that you can trade are national mints, like American Eagle coins. So, when you buy gold, make sure you purchase legitimate coins or bars that you can trade.

Not Checking Spot Prices

When you are a new gold buyer, you will always be at risk of getting scammed. When you buy gold from a dealer, the dealer will charge you a service fee. So the entire fee you pay for gold will be higher than market prices. However, it shouldn’t be incredibly high. Before you buy, always check gold spot prices for the day and the averages. The entire purchase should not be two percent more than the spot price. If you are paying five percent or more over the spot prices for an ounce of gold, then you are getting scammed.

Buying from Online Dealers without Business Addresses

Buying gold online is very convenient, but is also rife with scams. Before you make a purchase, make sure to research the seller. The seller should have a legitimate business address the in the country of operation. This should be a street address that you can see on Google Maps. Having a business address indicates that the seller is running a registered business, and your purchase will be protected by domestic and international laws.

Lastly, veteran investors warn people never to buy gold as an investment vehicle. Gold is not like stocks or bonds. Your purchase won’t grow over time. Gold is a hedge against currency fluctuations. It’s a form of protection for your cash assets in case of another financial disaster. Always keep this in mind when “investing” in gold.