According to the article, there are three main mistakes to avoid:

Rule #1 – Don’t get ripped off by premium

Many companies charge a high premium over the spot price of gold for bullion purchases. TheStreet.com article specifically mentions that buyers should not pay more than 5% to 10% over spot. There is very little in the way of discounted gold and silver when, according to the article, “Premiums can reach as high as 75% or more based on the gold item. (One well known online) gold dealer is selling a one-tenth of an ounce gold eagle coin for $162.12, (at the time of this article that was) a 35% mark-up.” This is hardly a discount way to own gold or silver coins.

A typical and reasonable mark-up would be only 3% to 5%. Now, if price is your only issue and you are looking to buy cheap then gold bars are the way to buy gold bullion. Eagles, Maple Leaf’s, Krugerrand’s etc are slightly higher due to the expense of the minting process and marketing expenses.

Rule #2 – Gold-related stocks

It is difficult for investors to pick the right gold-related stocks. (Just review how good your adviser has been in even picking blue chip stocks for you over the last few years.) Gold mining companies, like any business, depend on good management practices, corporate business strategy and their ability to beat the competition to be successful. As the article states, you “have to pick the right stocks, which is a risky business.”

We believe that investing in gold companies exposes gold investors to the same risks that any stock market investors have. We recommend that people looking to actually diversify their portfolios look to physical gold and rare coins, rather than just investing in another company’s stock.

Rule #3 – Believing that exchange traded funds (ETFs) are physical gold

Many investors come across ETFs like GLD, IAU and SGOL when starting their research in precious metals and mistakenly believe that shares in these funds represent actual gold. According to theStreet.com article, “It’s also hard to determine if the gold in the ETFs really exists” and “The funds hold gold and issue shares, but you own a paper representation of gold.” And holding “paper”, whether it is in the form of shares or dollar bills, is the reason we are in the difficulty we find ourselves in now.