6 Common Mistakes in Gold Investments and How to Avoid Them

Gold is considered to be one of the most stable investments one can make. In 2020 alone, the price of gold rose 24.43%.

Although massive jumps like this don't happen every year, gold is a great long-term investment. Since gold often withstands inflation, stock market crashes, and recessions, it's seen as a pretty safe investment.

However, that doesn't mean you should just buy the first gold bar you see and call it a day. There are still plenty of mistakes in gold investments you might make. Read on to learn what the most common errors are and how you can avoid them.

The Top 6 Mistakes in Gold Investments

As you develop your gold investment strategy, it's wise to consider these aspects of the gold market. Building your precious metal portfolio carefully will only help you in the long run. Although investing in gold is hardly a get-rich-quick scheme, it's a smart investment within a diversified long-term portfolio.

Mistake #1: Buying Gold During the Growing Demand

As with any investment, the most opportune time to buy gold is when demand is low. Since gold isn't going anywhere, there's no need to rush. Take your time and buy when the time is right.

If it seems like everyone is buying gold right now, don't jump on the bandwagon. Buying when demand is high can reduce your return on investment and even hinder inflation risk hedging. Instead, check trends in the gold market to be sure you're investing when demand is low.

Mistake #2: Not Understanding Why You're Investing in Gold

There are many reasons to invest in gold, and it's important to know what yours are. As an investor, you're likely hoping to diversify your portfolio (perhaps in fear of an economic downturn). This means you'll want to take a different approach than, say, a market speculator. 

Mistake #3: Ignoring Spot Price

Whether you're buying or selling gold, it's essential that you check the spot price. If you're an inexperienced investor, this might be a new term. It simply refers to the current price of gold.

To ensure you're buying from a reputable source, make sure the selling price isn't too much higher than the spot price. Otherwise, you may have difficulty seeing a profit.

Mistake #4: Buying "Dark" Coins

"Dark" coins are those sold from an unverified source. With these, you run the risk of overpaying or buying fake gold. For advice on how to avoid these scams, check out reputable gold company Noble Gold at https://www.raremetalblog.com/noble-gold/.

Mistake #5: Not Diversifying Your Portfolio

Investing only in gold is also unwise. Gold should be part of a well-diversified portfolio, rather than your only investment. If you've ever heard the saying, "don't put all your eggs in one basket," that applies here. 

Mistake #6: Not Checking the Reputation and Experience of Your Dealer

Comparing selling price with spot price is a good place to start when checking the reputability of your dealer, but it isn't the only factor. Research your dealer online to confirm their reliability and get a sense of other customers' experiences. Otherwise, you run the risk of walking into a scam.

Investing in Gold Wisely

Avoiding these blunders will have you well on your way to building a portfolio well-diversified with precious metals. 

Now that you know what the biggest mistakes in gold investments are, you're well equipped to spot (and avoid) bad investment advice. For more financial tips, check out our personal finance section.