How To Avoid The Common Traps For New Investors

Listed below are some traps to watch out for if you are a first time investor in precious metals.

1. The Dealer
   You must make sure that you choose a dealer whose main focus is trading precious metals. They should be able to offer you a range of bars and coins of well-known brands such, as PAMP, and also offer a buy back facility. To avoid this trap, only deal with reputable long established dealers (ABC bullion has been trading continuously since 1972), and make sure you ask them plenty of questions.

2. Buying bullion that is not investment grade
   You need to make sure that your bullion is a tradable, investment grade bar or coin. In gold this means a purity of 99.99% (marked on the bar or coin). In silver, platinum and palladium is 99.9% If you buy precious metal which is not investment grade, you may have trouble re-selling it without first submitting it to assaying.

3. Buying bullion which does not exist
   Some so-called trading companies take your money and then promise to buy you the metal at the time you want to withdraw it (therefore taking a financial risk rather than making an immediate purchase on your behalf). You should ensure that your trades are in physical bullion to avoid the risk of not getting what you paid for.

4. Not understanding the effect the US/AUD exchange rate will have on your investment
   Remember that although the spot price of precious metals are quoted in US dollars, the fluctuations of the Australian dollar can cancel out or magnify the price movement in Australian dollars.

5. Paying too many charges and therefore losing return for your investment
   There are some firms in the market that are charging very high barring and other charges. You need to make sure that you are dealing with a firm that has sufficient scale to offer you attractive prices for their bullion and services.

6. Paying GST
   Remember that GST is not payable on investment grade gold, silver and platinum, such as ABC Bullion and PAMP bars. If you choose a lesser purity item you will pay 10% GST which will reduce any gain you may make in the future.

Every year we see new precious metal investors get into trouble, often with their first purchase of a precious metal. If you have any questions at all, please do ask us to help or explain further; we take pride in our ability to help new investors get it right.

Stop! Do not invest in precious metals until you have asked your trader these 12 questions:

1. How long have you been trading continuously?
   Look for a company - not a trading name - that has been in continuous operation for over 20 years, did they trade through the last bull market in gold and silver in the late seventies?

2. Who is in charge of the firm?
   Are they professional run? Can you meet the CEO and Operations manager?

3. Is precious metal trading the core of your business?
   Look for a company that has precious metal trading as it is core business.

4. If I open a trading account with you, will you physically hold every gram of gold I purchase?
   Avoid firms that make you a promise to secure the physical gold only when you need it. Watch out for operators who will sell you gold for storage accounts and then not actually hold the gold for you at the moment you buy

5. If I want to withdraw my stored metal, will it take less than 3 business days?
   Any longer than this and you should be concerned about what is happening behind the scenes.

6. Can you provide high security storage and replacement insurance?
   This is essential unless you plan to self-store. Replacement insurance is important because it means your investment is covered at its current market value, not the price you paid originally.

7. Will you be willing to buy back gold at any time as part of your normal business operations?
   Avoid firms that only sell bullion as they are not serious dealers.

8. What brand (hallmark) of bullion do you sell?
   Look for ABC Bullion and PAMP brands, for maximum liquidity in Australia. You need to be careful to ensure you are dealing with a professional firm that deals in the GST free forms of bullion.

9. Do you have a physical location, I can visit your showroom?
   A professional dealer should have a retail presence.

10. Do you provide secure meeting rooms and waiting areas?
    You want to be able to trade discreetly and safely.

11. Does the dealer publish their prices, and are they competitive?
    Compare their prices to ABC Bullion’s prices on our prices page.

12. Lastly, and most importantly, here is a question to ask YOURSELF: “Will I feel comfortable investing with this firm and these people?”
    Our advice is - if you have any concerns or niggling feelings about dealing with anyone in the precious metals industry, then please use extreme caution and conduct more research on them or only deal with an industry major such as ABC Bullion.

Please note that although we are happy to comment on the market in general, you should not take any information or opinions provided by us as personal financial advice. We suggest you consult a financial adviser, as your personal circumstances are unique.