Investing in 1-ounce gold bars this July? 4 costly mistakes to avoid
If you want to ensure that your investment portfolio is prepared to weather financial storms, there may be no better asset to invest in than gold. For starters, gold is a well-known safe-haven asset, meaning that it tends to retain or increase in value during periods of economic uncertainty. That, in turn, helps to offset losses from other assets when the market is volatile.
Gold is also an effective tool in terms of portfolio diversification and inflation hedging — both of which are valuable in today's inflationary climate. And, gold's recent upward price trajectory has only added to the allure. Since the start of 2024, gold's price has hit several new record highs, climbing to $2,160 per ounce in early March before hitting $2,439.98 per ounce in late May.
Gold prices have cooled a bit in the time since, but there are still many good reasons to buy in. And, there are numerous options to choose from, including gold IRAs, gold stocks and gold bullion. However, 1-ounce gold bars, in particular, may be worth a look, as these compact bars offer a mix of affordability, accessibility and value. But if you're going to take that route, be sure to avoid the costly mistakes outlined below.
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Investing in 1-ounce gold bars this July? 4 costly mistakes to avoid
If you plan to invest in 1-ounce gold bars this July, here are some of the expensive mistakes to watch for:
Ignoring current market trends
Timing the gold market can be tricky, but you should still pay attention to market trends to try and make an informed decision on when to buy in. After all, failing to research and understand recent price movements and market sentiment could lead to buying at an inopportune time, which could be a costly mistake, especially if you buy at a peak.
So, stay informed about geopolitical events, economic indicators and central bank policies that could impact gold prices. For example, you may want to keep an eye on inflation rate trends, rate decisions by the Fed and any significant geopolitical tensions that could drive investors toward gold.
Find out how gold investing could offer big benefits in today's economic climate.
Overlooking storage and insurance costs
Many new gold investors forget to factor in the cost of secure storage and adequate insurance when buying physical gold bullion. And, while 1-ounce gold bars are compact and easy to store, the fees for storage and insurance can still add up over time, whether you're using a bank safe deposit box or a private vault.
For example, annual storage fees can range from 0.5% to 1% of the gold's value, which could amount to hundreds of dollars per year for just a few 1-ounce gold bars. And, standard homeowner's insurance often has limits on coverage for precious metals, so you will need to ensure that you purchase a policy with adequate coverage for your gold bars.
Falling for counterfeit products
With gold prices near historic highs, the incentive for counterfeiters is strong. And, purchasing a fake gold bar could result in a loss equivalent to the entire value of your investment, so it's important to avoid this costly mistake, if possible.
That's why you should only purchase from reputable gold dealers with a long-standing presence in the market. Be wary of deals that seem too good to be true, especially from online marketplaces or unfamiliar sellers. And, familiarize yourself with the characteristics of genuine 1-ounce gold bars, such as precise weight, dimensions and specific markings.
You may also want to use a professional assay service for verification, especially for larger purchases. It's a small price to pay for peace of mind and protection against potentially devastating losses.
Misunderstanding the impact of premiums
The price you pay for a 1-ounce gold bar isn't just the spot price of gold. There's typically a premium added in, which can vary significantly between dealers. In turn, failing to shop around and compare premiums could result in overpaying for your gold.
For example, if the spot price of gold is $2,000 per ounce, you might find premiums ranging from 3% to 8% or more, meaning you could pay anywhere from $2,060 to $2,160 or higher for the same 1-ounce bar. Over multiple purchases, these differences can add up to substantial amounts.
To avoid this costly mistake, take the time to compare premiums from multiple dealers. And, be aware that extremely low premiums might seem like a good deal, but can also be a red flag for counterfeit products.
The bottom line
Investing in 1-ounce gold bars can be a smart move for the right investor, but before you do, make sure you're well aware of the costly mistakes that can come with this type of investment. Otherwise, you could be paying a lot more for your gold bars than you bargained for. And, remember that while gold can be a valuable addition to your investment portfolio, it's crucial to approach it with the same careful consideration and due diligence you would apply to any other investment.
