When buying gold there are many pitfalls to avoid before spending your hard earned money. I've compiled a list of the ten best gold investing tips for new investors who want to get the most value for their money.
1) The first tip, and I believe the most important tip before buying your gold is to shop around. It might sound obvious, but there are many new investors out there who get emotional about buying gold and they settle for the first place they find online. Do your research before buying because it could cost you thousands of dollars if you make a mistake.
2) Never buy numismatic gold coins unless you are a collector. Numismatic coins are collector's coins and they carry a large premium over the spot price of gold. Numismatics include extremely rare coins, graded coins, shipwreck coins, etc. Remember, you are investing in a commodity (gold) so you want the most gold for the money.
3) Only buy bullion coins and bullion bars. Gold bullion is simply gold that is produced in mass quantities. Gold bullion is 99.9% pure gold and comes as government minted coins, rounds, ingots, and bars. Buy gold bullion because the premium that it carries over the spot price is minimal. For example, the gold price today is about $1,100/ounce. If you were to buy a numismatic gold coin it might cost between $1,500 and $100,000 for one coin. A bullion coin like the American Gold Eagle might be $35 over the spot price. A much better deal.
4) Compare the different gold bullion products. Usually gold bullion that is minted by government mints like the Perth, Australia mint or U.S. mint carry a higher premium than gold rounds. Gold rounds are not considered coins because they are not legal tender. They do not have a face value on them like a U.S. gold coin does. These rounds are usually cheaper to buy.
5) Steer clear of fool's gold. Fools gold is terminology used by many to describe the gold ETFs (Exchange Traded Funds). GLD is one such fund that can be invested in through your broker. The problem with these ETFs is that you do not physically own the gold your are investing in. The ETFs are derivatives so you are only getting exposure to the price of gold. The GLD is widely thought to not have the gold that they claim they have because they will not allow a third party audit of the stored gold.
6) Be weary of the gold futures contracts traded on the COMEX (Commodities Exchange). These are simply futures contracts to buy 100oz of silver per contract. When the future date arrives and the gold price has gone up, you make a profit. The COMEX too has been under scrutiny for supposedly defaulting on gold delivery to customers. People are also claiming the the COMEX is using cash settlements in place of physical delivery of the gold to their customers. Technically, this is considered a default.
7) Diversify your physical holdings. Just like any investment portfolio you want to buy different kinds of gold. Don't just put all of your money into American Gold Eagles. It's a good idea to diversify because you never know which coins might carry a much higher premium when you go to sell them.
8) Buy different denominations of gold coins. You can purchase most gold coins in 1/10 ounce, 1/4 ounce, 1/2 ounce, and 1 ounce. Some coins are even minted in 10 oz or higher. It's important to remember that the smaller coins carry a higher premium just do to the fact that it took more time and energy to mint.
9) Beware of putting your gold into bank lock boxes. It's better to find a place to hide your gold that nobody else knows about than to trust that a bank will let you get your gold out in the event of a bank run. Another option is a super heavy safe that is bolted to the ground.
10) Never tell anyone that you are investing in gold. If the time comes when the gold price goes bananas, which is what economists are expecting to happen sooner than later, you want to make sure that your investment stays unknown to possible thieves.
This is by no means a comprehensive list of gold investing tips, but it might be of help to you if you are new to gold investing.
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