Gold shines in 2024, outperforming many other investment assets this year. The course of gold can be followed until late 2023. its price It rose to a record high of $2,135.39 per ounce due to geopolitical tensions, rising inflation and other factors. Amid these pressures, investors have fled to safe haven assets such as precious metals to protect their portfolios.

These conditions persisted into 2024, leading to the ongoing crisis. rise in gold prices. The price of gold rose from $2,063.73 on Jan. 1 to $2,752.19 on Oct. 25, according to American Hartford Gold. While the price has fallen since this point, this rise demonstrates gold’s appeal as a store of value and hedge against inflation.

Perhaps unsurprisingly, gold’s impressive return on investment has generated much media coverage and interest in gold investing. However, new investors should be careful as they may not be familiar with the common pitfalls of gold investing. Below, we’ve compiled five common mistakes new gold investors make, so you can take steps to avoid them.

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5 common mistakes new gold investors make

Before investing money in gold, make sure you understand these five simple but easy mistakes to make.

Investing in the wrong gold asset type

To avoid choosing the wrong type, it’s important to be clear about your goals and what you’re looking for before investing in gold. Gold comes in a variety of forms, from gems to jewellery. coins with gold IRAs And ETFs. Each type serves different purposes and carries unique advantages and disadvantages.

Physical gold, such as bars or coins, provides tangible ownership, but you must store it securely; This can be cumbersome or costly. On the other hand, options such as gold ETFs make it easier when you want to sell by providing access to the value of gold without the hassle of physical storage. For example, if you don’t want to store physical gold and prefer the ease of management of an ETF, it may not make sense to invest in it.

You can find out more about your different types of gold investments here.

Choosing the wrong type of gold coin

Brandon Thor, CEO of Thor Metals Group, says choosing the wrong type of coin is a common problem. Thor advises new investors to choose well-known coins rather than the proprietary coins offered by some dealers.

“This is a huge problem in our industry. Think about it. If you’re a predatory company trying to make a huge profit on the sale of a metal, is that going to be any easier to achieve while overcharging for an American Eagle? The fact that he can control the price with some specially minted special coins and therefore it is not possible for the buyer to control the price of the metal? You and the silver-tongued seller are eating the ‘bad deal’ stew.”

Thor suggests that doing research online is one of the best ways to increase your odds of investing in the right nugget. “Google the recommended metal. If the coin shows up in only a few places, it’s a specialty coin with an illiquid market. Stay away. You want the coins (or bars) you see everywhere because that indicates they’re universally liquid and It also gives you a solid case for making price comparisons, which will ensure you don’t get a raw deal.”

Mixing gold stocks with gold

“The biggest mistake I see new investors make is mixing gold and gold stocks,” says Jeff Clark, founder of TheGoldAdvisor.com. “These are completely different assets; gold is a form of money, while gold stocks are speculation for a particular miner. Gold can hedge against recessions, stock market weakness, geopolitical conflicts, and crises of all kinds. It outperforms bonds, including U.S. Treasury bonds.” Investing in gold should be done with this in mind. Mining stocks, on the other hand, are a speculation on how well a miner will perform, but if they do well, they will provide more returns, especially junior mining stocks.”

If you’re considering investing in gold for the first time, consider your goals and preferences and whether you want to invest in physical gold or gold. gold stocks. Physical gold can serve as a safe haven during an economic crisis; If you are looking for stability, you can choose this. On the other hand, if you’re willing to take on higher risk to potentially earn higher returns, you may want to investigate mining stocks.

not trusting your instincts

It’s important to read reviews and do your research to make sure any gold dealer you work with is reputable. If an agent says something you don’t like, follow your gut, Thor says.

Thor reminds new investors that the value of bullion comes from its weight, purity, quality, and the supply and demand market that exists for the metal in question. For this reason, discussions with gold sellers should focus on the fundamentals of gold, not its superficial features.

“Most people have watched enough TV shows and movies and have enough common sense to understand that when investing in gold, conversations with metal dealers should never be about the animal on the coin or any particular imprint or imprint. People know this instinctively, and the advice given by the metal broker is unlikely to be They know it doesn’t make sense, especially when it’s given to justify a metal with a high market value compared to the spot (current market price), but they underestimate their instincts and put too much emphasis on ‘so-called expert opinion’. Trust your instincts, not science, and you won’t have any problems.”

Investing too much in gold

Financial advisors and gold experts are generally careful not to buy too much gold for several reasons. First, the power of gold and its appeal to investors lies in its role as gold. portfolio diversifier And protection against inflation. It can help stabilize against volatility in stocks and bonds, but investing too much can limit potential returns.

Second, other assets such as stocks or real estate may offer higher long-term investment returns. Adding gold can bring long-term stability to your portfolio, but it can cause greater volatility in the short term and generally does not have the growth potential of other asset classes.

“Just like any other alternative asset in a diversified portfolio, the key is to keep the position under control – under 5% of investable assets,” says Dinon Hughes, financial advisor at Nvest Financial. “Given that gold is up more than 30% to date, it doesn’t necessarily mean it’s a ‘set it and forget it’ either. What might have started as a small position can now be a more significant portion of your net worth than you have. Gold speculators are calling it wrong.” It lends credibility; not as a wealth builder in a diversified portfolio, but more as a hedge.”

In conclusion

Gold’s impressive performance in 2024 has enabled many new investors to try their luck in precious metal investing. However, potential investors should beware of common pitfalls. To get the most out of the gold in your portfolio, clearly define your investment objectives and the level of risk you are willing to take. Limit your portfolio’s gold allocation and research and compare reputable gold dealers to increase your chances of a successful foray into gold investing.

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