how not to buy gold infographic

There are plenty of helpful guides explaining how to invest in gold, but not much is said about the pitfalls you should avoid. Unfortunately, many first-time gold buyers become disillusioned after a single mistake wastes their time or money and erodes their trust. Understanding (and avoiding) these stumbling blocks can make sure your gold investing journey is set up for success so you can enjoy the long-term advantages of gold investing.

#1 Don’t rush into buying gold.

slow down sign

Savvy investment decisions require time, patience, and due diligence. Too often, investors fall victim to FOMO (fear of missing out) due to bullish news or impressive price jumps. This impulsiveness may lead to overpaying for gold products or investing in assets that don’t match your goals. Investing in physical gold has never been a get-rich-quick-scheme.

Do: Take your time, do plenty of research, and request complimentary reports or guides when available. Finding a precious metals advisor that isn’t overly pushy or “salesy” can be an excellent asset in your gold-buying journey.

#2 Don’t buy gold before knowing all your options.

gold investment options

There’s a common misconception that gold is a singular asset. In reality, investors can choose from a wide range of gold assets including gold bullion bars and coins, investment grade gold coins, and gold stocks. Every asset type comes with unique benefits and considerations, so don’t settle for just one type of gold.

Do: Consider your full breadth of options before buying gold. You’re much better off in the long run when taking the time to build an investment plan that works for you instead of jumping on the first asset that catches your attention.

#3 Don’t buy physical gold to capture short-term price movements.

paper gold vs physical gold

Physical gold performs best when held for extended periods. There are price jumps in the short term, but you shouldn’t try to capture these movements. The process of buying and selling physical gold is slower than trading stocks and ETFs digitally.

Do: Buy gold now and routinely add to your position over time as gold prices inevitably rise. This tried and true investment strategy of dollar cost averaging helps you capture the temporary price dips without missing out on the big-picture gains.

#4 Don’t buy gold based on coin grades alone.

coin grading

Coin grading is a popular way to objectively assess a coin’s condition. However, some new investors mistakenly correlate a high grade with a high value. While a graded coin may be a good investment, you should never buy gold coins for their grade alone. This would ignore other relevant factors that determine a coin’s overall value.

Do: Assess a coin’s value based on all relevant factors including purity, weight, grade, rarity, history, population, demand, and numismatic value. Keep in mind that the type of coin can influence what factors are considered relevant when evaluating price. Consulting with a reliable coin dealer can put you on the right track.

#5 Don’t buy “dealer exclusive” or modern-graded bullion coins without research.

exclusive dealer gold coin and modern graded bullion gold coins
Some dealers place unreasonable premiums on so-called “dealer exclusive” coins in an attempt to overcharge unassuming investors. Despite the fancy-sounding name, there’s nothing inherently valuable about these coins. Many are simply worth their weight in gold or silver, just like other bullion coins. Be on the lookout for a similar pitfall with modern-graded bullion coins. Sometimes, coins with impressive grades are sold well beyond their value by sellers hoping investors conflate high grading with high value. Don’t fall prey to these shotty sales tactics.

Do: Your best effort to validate whether a dealer exclusive coin or modern-graded coin has value or rarity beyond its metal content. Your research could include seeking a second opinion before buying coins. The input of a third party with no stake in the game can help protect you from overpaying for a coin. Exercising a little patience and due diligence can save you tremendously in the long run.

#6 Don’t ignore the value of a physical gold IRA.

physical gold ira nest

Contrary to popular belief, the IRS allows investors to hold physical gold in a tax-deferred retirement plan. This specialized retirement account, known as a self-directed gold IRA, allows adding to your retirement nest egg with tangible gold assets and all the associated benefits. Nobody investing in gold should bypass this invaluable investment option without giving it serious consideration.

Do: Dedicate a portion of your retirement savings to physical gold. You’ll maintain the same tax advantages of a traditional IRA while tapping into the benefits of gold and achieving robust portfolio diversification.
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#7 Don’t use leverage.

using credit card leverage to buy gold

Investing in gold is exciting which leads some first-time investors to look for shortcuts to buy more in a shorter period. One of the most common (and least recommended) methods is using leverage. This is where investors borrow capital to increase their holdings with the hope of getting a higher return. More often than not, this overextension can leave investors with larger losses instead of greater gains.

Do: Set a clear budget and regular schedule for buying gold. Automating the process takes all the emotions out of the equation which saves you from poor decisions. You should think about gold buying just like saving for retirement – slow and steady wins the race.

#8 Don’t rely on paper gold in place of physical gold.

paper gold vs physical gold

Another common misjudgment among new investors is ignoring the key differences between paper gold and physical gold. Paper gold in the form of gold ETFs, mutual funds, and mining stocks, only gives you indirect access to gold while still exposing you to the downfalls of traditional markets. Gold is typically easier to accumulate in its paper form, but that doesn’t mean it’s a smart investment.

Do: Focus on accumulating physical gold for true diversification. This is the only way to get access to inflationary protection and steady price action for which this precious metal has become famous.

#9 Don’t fall for “FREE GOLD” offers.

buyer beware myth free gold silver

There’s a myth of free gold and silver circulating in the precious metals investing space which is just that: a myth! Some precious metals dealers rely on the allure of “free” coins, bars, or bullion to capture unwitting investors. In reality, these clever sellers simply shift the cost of the “gift” to other expenses such as the dealer premium. No matter what’s promised, investors invariably end up paying full price.

Do: Trust your instincts when buying gold. If a deal sounds too good to be true, it most likely is. Have your guard up when presented with freebies or “waved fees”. Sticking with straightforward, plain-speaking gold dealers will yield better investments.

#10 Don’t Buy Gold Coins on TV.

gold coins as sold on tv infomercials

(this is not a real offer.)

A lot of people first consider buying gold after seeing a convincing advertisement on TV. Although these enthusiastic sellers make quite the pitch, don’t assume what they’re selling is a good buy. Gold coins sold through TV tend to have inflated prices and might not even have full precious metal content. Some official-looking coins might turn out to be gold-plated commemorative coins.

Do: Feel free to generate interest in certain coins from TV ads, but make sure to follow up with reputable coin dealers in person. They can give you fluff-free explanations of certain coins and what they’re worth.

#11 Don’t buy gold coins from online marketplaces.

In a world of next-day deliveries, some investors are captivated by the convenience of buying gold online. Although Amazon, eBay, and even Craigslist have a wide selection of gold coins, these virtual marketplaces are minefields of potential fraud and scams. Even experienced investors steer clear of these e-commerce sites due to the presence of sophisticated counterfeits and a lack of regulatory oversight.

Do: Feel free to do some preliminary research by visiting online marketplaces, but make sure to buy gold in person with a reputable coin dealer.

#12 Don’t buy gold from an inexperienced advisor.

inexperienced advisor

While it’s always advisable to work with an experienced advisor, it’s especially critical when you’re new to investing in gold. An inexperienced investor might recommend the wrong kinds of assets or encourage you to make purchases at inopportune times. You don’t want to entrust any amount of your hard-earned dollars to green advisors.

Do: Seek out a seasoned precious metals advisor with years – if not decades – under their belt. These experts will take the time to understand your personal preferences, budget limitations, and long-term goals. This personalization will lead to smarter gold investments.

#13 Buying gold coins sight unseen.

buying gold bullion sight unseen

There’s a natural draw to the sight-unseen market as these coins tend to go for lower-than-average prices. However, you shouldn’t put faith in what you can’t see. Cheaper isn’t always better in the gold market. To make matters worse, you might not even know you’ve been fleeced until you try to resell the coin only to realize the value is less than you thought.

Do: Speak with a knowledgeable precious metals advisor to determine the best coins to buy based on your specific investment goals. While seeing a coin before purchase is not always an option, you’ll have the advisor to validate the coin’s condition. Generally, a coin you can physically see can equal higher appreciation.

Make Your First Gold Investment a Success

gold bullion chart

Don’t betray the decades of hard work you’ve invested in building your retirement savings. Take the time to ensure your gold investments fall in line with your specific needs and goals by requesting our Free Precious Metals Investment Guide.