The Value of Gold is Obvious, But Beware these Gold Investing Scams

Published December 10, 2012 | By glen

Gold Nugget

A key sign of a scam an investment sold as safe and highly profitable with a guaranteed return. Due to the fluctuated value of gold, any precious metal investment is in fact often very high risk. Investment scams are complex and convincing. It is essential to avoid falling subject to these crooks as you can result in losing anything from several thousand dollars to much more in the space of just a few months. Following are some of the most common and most dangerous scams.

1. Mint Condition Gold Coins

The most valuable gold coins of all are those that have never been used. This presents con artists with the obvious opportunity to market their coins as being in mint condition when really the value of gold is significantly less.

If you are buying coins, you should always have the gold examined by an independent third party before committing to any sale. Any reputable dealer will encourage such a transaction.

2. Unreasonable Expectations

All sales pitches are designed to be as convincing as possible, but this can sometimes mean the truth becomes slightly twisted. One classic example of this is the Salomon Brothers Index, frequently referenced by gold coin dealers who are less than honest and looking to make an easy sale. This annual index is based on a list of 20 very rare coins so is therefore quite unrepresentative of the value of gold coins in general. Similarly, if a dealer ever quotes a value of gold that appears to be too good to be true, it most likely is.

It is easy to steer clear of get rich quick schemes by maintaining reasonable expectations. Use your knowledge of the precious metal market rather than simply listening to the promises of your dealer.

3. Holding Gold for the Buyer without “Visitation Rights”

Many people who choose to invest in precious metals are afraid to have all the worth in their homes in case of housebreaking; the value of gold is obvious even to the most unknowledgeable of robbers. Also, there are some significant advantages to storing your gold offshore.

A common scam has developed from this fear where dealers offer to hold the gold on behalf of the purchaser, often with no fee involved. Unfortunately for the buyer, in the case of a scam, this gold does not even exist.

When dealing with a seller that also stores your gold, ensure that they do allow you to “visit”, and that the company deals in real gold, and not gold backed paper.

4. Presentation of the Gold

Collectors’ items and coins are sometimes presented in ornamental holders or plaques that prevent the buyer from properly examining the gold at all angles. A common technique used by con artists to place the gold behind a layer of plastic to make the metal appear more pure than it really is.

Avoid buying gold that is sold in any unnecessary packaging. This technique is aimed at inexperienced buyers; dealers know that serious investors pay no heed to the display of their gold.