Investing in Precious Metals? Don’t Make These 7 Beginner Mistakes

With so much uncertainty surrounding inflation, supply chains, and the general economy, an increasing number of people are turning to precious metals as secure long-term investments. With that said, it’s important to remember that there are certain risks associated with any investment, and precious metals are no exception. Understanding the many misconceptions and intricacies of precious metals can help you avoid losing money or potentially getting taken advantage of when you make a purchase.

The precious metals market in the U.S. is currently valued at more than $182 billion, with analysts predicting continued growth into 2027 and beyond. Meanwhile, inflation rates continue to rise throughout the country in response to unprecedented economic factors. These uncertainties have fanned the flames of the global precious metals market in recent years, causing many Americans to consider investing in liquid assets such as gold or silver as a means of protecting their hard-earned wealth.

Before you leap into buying gold, silver, platinum, or palladium, it can help to start with gaining a deeper understanding of how the market functions. Here are seven beginner mistakes people frequently make when buying precious metals for the first time.

Mistake No. 1: Overlooking the Potential of a Precious Metals IRA

Many new investors tend to focus on buying coins or bullion, but it’s also a smart strategy to reap the benefits of precious metal prices without needing to store the physical metal yourself. Similar to a traditional retirement account, a self-directed precious metals IRA contains holdings of gold, silver, platinum, or palladium with at least 99.5% purity.

Contributions to a precious metals IRA go toward the acquisition of these assets from a qualified dealer, after which they are transported to a secure facility for storage. Here, your metals will remain protected under lock and key until you decide to close your account or liquidate your holdings. Although there are storage and maintenance fees associated with precious metals IRAs, this type of investment is an excellent way to get exposure to the market without taking on a tremendous amount of risk.

Opening a precious metals retirement account or a more targeted gold IRA provides attractive growth potential when compared to investing in stocks, bonds, or mutual funds. For one thing, metals like gold are finite resources, and this scarcity puts continual upward pressure on their value. This is why metals like gold and silver have successfully weathered economic downturns for hundreds of years, insulating investors from sudden currency devaluation and other unforeseen financial crises.

Mistake No. 2: Buying From Unverified Dealers

The value of any precious metal is contingent on its purity, so it’s important to buy bullion, coins, or jewelry only from a certified dealer. There are plenty of bad actors looking for inexperienced investors to scam. Before you buy, make sure you’re purchasing your gold, silver, platinum, and palladium from a verified, authorized provider who can guarantee the authenticity of their inventory.

Take the time to acquaint yourself with the difference between karat weights and how they impact a precious metal’s price. For investment purposes, it’s usually best to focus on buying only the purest possible ingots or coins. If you’re uncertain about a metal’s purity or providence, it’s probably best to move on to another dealer you know and trust. Many pawn shops and online retailers may appear to offer excellent deals on precious metals from time to time, but unless it’s a reputable source, you can never know for sure what you’re buying.

Mistake No. 3: Being Fixated on the Spot Price

Another common mistake new investors make is getting too wrapped up in the current spot price. The going rate for 1 ounce of a metal like gold or silver will fluctuate daily, but its long-term growth potential largely remains consistent. 

Instead of following price changes every day with bated breath, it’s much better to take a broader perspective when buying precious metals. Try to avoid feeling anxious about slight drops in prices over a few days or weeks and instead try to think about appreciation over many years. 

Although many investors may sell stocks the moment their value drops, this approach isn’t recommended with assets like precious metals. Remember, every sale of gold comes with a premium, and panic selling at or near your buying price can lose you a hefty sum of money. The appeal of investing in gold, silver, platinum, or palladium is that these assets tend to retain their value over time, so don’t get scared off by a small drop in the spot price shortly after buying.

Mistake No. 4: Buying Scrap Precious Metals

For beginner investors, it’s advisable to avoid buying precious metal scrap because this raw material is less valuable than coins or bars. One of the issues with scrap precious metals is that it’s difficult to sell them on the open market unless the material is broken down, refined, and processed. In addition, it can be challenging to determine the potential value of scrap metals before refinement as the purity will vary depending on where they come from.

After all the costs of purchasing the scrap, transporting it, and extracting the metal, many investors find that they’re left with a relatively modest profit margin, if any. This is why extracting precious metals from scrap is usually not cost-effective unless it’s done in bulk, involving thousands of pounds of discarded precious metal holding items.

Mistake No. 5: Not Doing Your Research

Those who are inexperienced with precious metals should take the time to study the market, identify trends, and explore all the avenues for investment. Because risk profiles and financial objectives vary from person to person, you’ll want to find an opportunity to enter the market that you’re comfortable with. This could mean buying pure bullion or simply purchasing a few pieces of jewelry to keep in a safety deposit box. If you’re more comfortable with traditional equities, you may want to consider buying shares of a gold mining stock that pays out dividends to its shareholders. 

In short, even if you expect outstanding returns, it’s usually best to avoid jumping into precious metals without doing your fair share research first. For professional advice and guidance, it may help to speak with a precious metals expert before committing to any major financial decision.

Mistake No. 6: Being in It for an Immediate Return

So long as the U.S. dollar remains relatively stable, you’re unlikely to see a sudden spike in the price of precious metals. In this way, investing in gold, silver, or other precious metals is a long game, and not a get-rich-quick investment strategy. Expecting overnight returns on your investment is not a viable attitude when it comes to this class of assets. Instead, successful investors in precious metals recognize that gold, silver, platinum, and palladium serve primarily as a highly secure store of value.

Although precious metals rarely skyrocket in price over the short term, coins, bullion, and jewelry are solid investments due to their resilience against market pressures and their ability to grow steadily over time. Resistant to inflation, precious metals are excellent at providing a buffer of protection if there is ever an economic collapse that paper currencies can’t survive. If for any reason the U.S. dollar loses its purchasing power, precious metals like gold will likely become a standard of currency for many just as they have done throughout history.

Mistake No. 7: Not Properly Diversifying Your Portfolio

Creating a healthy, diversified portfolio of investments is often one of the first things a new investor tends to overlook. Try to avoid putting all your eggs in one basket if you’re interested in entering the precious metals market. 

As a general rule, many financial advisers suggest allocating 10% of your overall investment portfolio to precious metals, with the remaining 90% going to traditional investments like stocks, mutual funds, or ETFs. Likewise, it’s essential to diversify your holdings within that 10% devoted to precious metals. In other words, consider allocating 3% to mining stocks, 3% to silver bullion, and 4% to a gold IRA. Finding the right combination will depend on your unique financial goals.

Start Investing in Precious Metals With a Trusted Partner

The current economic climate has many people asking themselves, “Should I invest in precious metals?” 

At Wall Street Metals, our answer is a clear and resounding yes. If you’d like to secure assets like gold bullion, silver, or other precious metals, you’ve come to the right place. We have a wide selection of certified products to suit your investment preferences, from beautiful sovereign coins to platinum or palladium assets. For those interested in saving for retirement, ask about opening a gold IRA and start building wealth for the future. No matter what you’re looking for, our team at Wall Street Metals has what you need. Let’s start a conversation today!

 

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