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Gold rush: the mistakes to avoid when investing in the precious metal

Paloma Kubiak
Written By:
Paloma Kubiak

The price of gold has surged as US investors flock to the precious metal ahead of next week’s presidential election. But for UK investors looking to profit from the gold rush, here are some mistakes to avoid.

It’s just a few days until the presidential election and with the polls swinging in favour of a possible Trump victory, BullionVault and The Pure Gold Company have reported a huge surge in enquiries and a steep rise in buyers.

Much like the Brexit-effect when UK investors flocked to the ‘safe haven’ of gold and silver in the run up to and following the EU referendum, the US race to the White House appears to be prompting investors to seek shelter too.

New US account openings jumped in October to the second-highest monthly level since January 2013, rising 81% from September and coming 36% ahead of the previous 12-month average, according to BullionVault.

And The Pure Gold Company saw a 36% increase in gold sales since Monday, with a 29% increase in the amount of first-time investors buying physical gold.

Josh Saul, CEO of The Pure Gold Company, said the same clients who missed out on buying physical gold before the Brexit result are making sure they don’t miss out again “as they hedge against currency fluctuations, equity volatility and bank instability”.

So for UK investors who may want to get a share of the profit from gold, BullionVault’s Adrian Ash lists five mistakes to avoid when buying the precious metal:

1) Don’t buy coins or small bars

The extra production costs will eat as much as 10% of your investment. Similar to jewellery, the smaller the gold unit gets, the higher the unit cost. It’s best to buy into the wholesale gold market as much as possible and the most obvious way to invest in physical gold directly is by purchasing bars.

2) Don’t fall for ‘rare’ offers

Truly rare coins are a specialist investment, very different from bullion. A classified paper advert in the UK offering to sell a rare coin shouldn’t be seen as a scam, but it’s a niche market.

3) Don’t be shy of shopping around

Compare prices quickly and easily online and check the reputation of dealers. Check on Google for what the spot price is then look at different offers to check how close to that price you can find. Prices do move, so it’s best not to set a price to buy gold at as it might not be there when you come to search, but by checking to see what others are selling it for, you can identify the best value rate.

4) Don’t get trapped

Make sure you can sell quickly and easily when the time comes. When you need to sell gold, you need to be able to get out as easily as you got in. Further, if you have a small bar for instance, you may see the gold as a beautiful, tangible good so it may stir inertia in selling it. Gold acts as a safety net but don’t get emotionally attached to it – you may need to cut your losses or take profit at speed.

5) Don’t take it home

You risk invalidating your insurance. Where possible, use specialist vaults to save on costs as physical gold comes with risk and hassle. Research suggests that most home insurance policies would be invalidated if you have just three gold coins (3g). Some insurers might want you to have a safe in your home for storage and you could end up having to pay a premium so it’s not as simple as buying and storing it in your property. With gold you need to have liquidity so there’s also no point burying it at the end of your garden – people don’t buy gold to hold forever.