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Keep upgrading.
As you level up, you will throwing out old item. However, max out item help you climb level and questing faster.
Don't worry about resources. You will have a ton of gold "trash" later on. Each time you kill boss, participate in world map event, it throw one or two gold item. Most of gold item are weaker than what you have. So, break them for materials.
I wouldn't spend veiled crystals on upgrades until ~40+, but that's just me. The initial couple of upgrades are cheap enough that I don't think taking those is any issue.
Starting at about level 20, I always upgrade my weapons up to the third level (the first three upgrade levels only require common components). The fourth level requires more rare components which I want to preserve for the endgame.