Common Gold Investment Mistakes and How to Avoid Them

Gold has long been seen as a store of value, and many people prefer to keep their savings in it. But which product you choose and how you buy and sell directly affect the outcome. Thinking that saving is simply a matter of buying some gold can lead to losses without you noticing.

Unplanned, hasty decisions can reduce the benefit you expect from gold. Emotional decisions in particular, when prices are moving fast, can work against the buyer. In this guide we explain the common mistakes people make when saving in gold, and how to avoid them.

Treating crafted jewellery as savings

The most common mistake of people new to saving in gold is buying crafted jewellery, made for its looks, as a way to save. A necklace with stones, a diamond ring or a designer bracelet carries a significant craftsmanship cost. We explain this in detail in what is the gold craftsmanship fee.

When you buy such a piece, a large part of the price pays for design and craftsmanship. But when you sell it, only the pure gold inside is valued and the craftsmanship is not refunded. So it can be hard to make a gain on crafted jewellery even if the gold price has risen. For saving, low-craftsmanship packaged gram gold, Turkish gold coins or plain 22 karat bangles are better suited.

Expecting quick gains from short-term trading

Physical gold is not suited to buying and selling at short intervals. Every transaction carries a buy/sell spread. As we explain in why gold buying and selling prices differ, the price needs to rise somewhat just to cover it.

If you have to sell gold you bought today a few weeks later, you are likely to lose money because of this spread. That is why the money you put into gold should be savings you will not need in the short term. Future price movements cannot be known in advance, another reason not to tie up money you may need urgently.

Ignoring the timing of transactions

The gold price is shaped on weekdays when international markets are open. In the evenings, at weekends and on public holidays, when markets are closed, some institutions widen the spread as a precaution.

Trading at these times can mean accepting a wider gap than usual. If possible, buy and sell on weekdays when markets are open. Check current prices on our market page before you trade.

Buying with all your savings at once, at one price

When prices are rising fast, turning all your savings into gold at once so as "not to miss out" is a common mistake. If you commit all your money at a peak, your savings may show a loss for a while if the price pulls back.

Instead, splitting your savings and buying at different times spreads your purchase price over time. This is called cost averaging. We explain how to calculate it in how to calculate your gold's value and profit.

Neglecting authenticity checks

Buying gold from unknown sellers or suspicious listings because it is a little below the market price can lead to serious losses. Because of its high value, gold is a target for counterfeiters.

Ask for a receipt or invoice, and check the karat hallmark on jewellery. With packaged gram gold, make sure the packaging is undamaged. You will find ways to spot fake gold in our guide how to tell if gold is fake.

Deciding in a panic

The gold price can move sharply during the day on central bank decisions, inflation data or global events. Selling in panic when the price falls, or borrowing to buy because "it will rise even more", are common mistakes.

It is healthier to make decisions according to your own needs and plan rather than rumours or breaking news. Sticking to your plan in the face of short-term swings reduces the losses hasty decisions can cause.

Tying all your savings to one product

Spreading savings across different assets is an approach many people use to balance risk. Within gold, too, you can diversify by product.

You can keep part of your savings in 1 or 5 gram packaged gold that is easy to sell for small needs, and part in larger products. That way you will not have to sell a large piece of gold for a small cash need.

Checklist

For any questions, drop into our store in Ümraniye, Istanbul, or reach us through our contact page.

This article is for general information only and is not investment advice.

Frequently Asked Questions

Does it make sense to buy gold with a loan or on credit?

It is generally not recommended. A loan has a fixed repayment date and interest cost, but how the gold price will move by then is unknown. When repayment day comes, you may have to sell at a loss and suffer both interest and price losses.

Is gram gold better than the quarter coin?

Packaged gram gold is 24 karat and its spread is usually narrower. The quarter coin is 22 karat and also works as a gift. Purely for saving, gram gold is usually cheaper; see the detailed comparison in gram gold or quarter gold coin.

Is it better to keep gold in a bank or at home?

A bank gold account needs no physical storage, but you never hold the gold. Keeping physical gold at home gives you access at any time but requires safe storage. For large amounts, a bank safe deposit box is also an option. See how to store gold safely at home for details.