The majority of my equipment I got from random loot, chests and the occasional quest reward (my first choice was experience, though, when there was an option). I did purchase some equipment, though more so near the end of the game.
Have you maxed Lockpick? Some people wait to learn that skill, to get better quality loot if they open locked chests at a higher level. By then you basically end up with more gold (which is easy to get, especially after getting the battle tower) and possibly equipment upgrades that you obviously were not in great need of, if you could wait to open the chests.
Have you gone back and checked the merchants in the village since getting to level 7? Merchant inventories should be reset each time you level.
Other than the smith, there is the jewelry merchant near the church, 3 in the Black Boar inn... It may take another couple levels to get there, but there is a smith near the top of Lovis tower who will trade with you.
If you save before getting too near a merchant/chest or running the crosshairs over them/it, you can check the inventory and reload if there is nothing of value. I wouldn't waste a lot of time reloading, though, especially since the game seems to keep track of how long it has been since you last loaded the game, and tends to give you better loot if you don't reload. Due to the random item generation, though, you can get better loot sometimes if you try a few times, which can come in handy for chests that always give a good quality item (ie the chest that will be opened if you mindread Lovis) or boss type opponents that always drop something when defeated (save just before finishing them off), etc.
Have you finished off all the places and quests that you can in the starting section of Broken Valley?
Past where you meet the dragon knight, the next easiest areas would be along the mountains to the south east (north of the path going by Lovis' tower), and to the west and up the northern path through the mountains (level 6/7 goblins in both sections). After that, the derelict tunnels would probably be easiest (with lots of chests to loot), with the two goblin entrances already cleared above ground.
Welcome to the forum.
