Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Alix Steel appeared on NBR to discuss common mistakes gold investors make. (Watch video)
NEW YORK (TheStreet) -- Wild price swings in gold can cause investors to lose focus and lose money.
Over the past 10 years gold prices have surged from $282 to a record intraday high of $1,264 an ounce, but daily volatility can lead to big trading mistakes.
The gold market is ripe with peer-pressure buying. When gold makes a big double-digit move up or down, panicked retail investors can be tempted to either jump into the market for fear of missing the rally or to sell their positions because they don't want to be stuck owning "cheap" gold.
"Most individual investors lose in the gold market because they love [the] chase/buy excitement," says Scott Redler, chief strategic officer at T3Live.com.The first trick to avoid the trading frenzy is to identify your time frame and your reasons for owning gold. An investor buying gold coins as a 30-year investment will have to ignore day-to-day volatility, compared to traders who will try to capitalize on these price fluctuations. The three most popular ways to buy gold are gold coins and bullion, gold stocks and gold exchange-traded funds. The three money-losing mistakes many investors make are overpaying for bullion, picking bad stocks, and buying ETFs for the wrong reasons. Before you pull the trigger, find out how to avoid these common blunders. Gold Coins and Bullion Number one rule: Don't get ripped off. The conventional premium on a one-ounce bullion coin is 5% to 10%. Coins typically come out of the National Mint, where they are made at a 4% mark-up; the retailer's margin is 1% to 3%.
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