With gold prices rising thanks to the economic and market chaos, the shiny yellow metal’s profit potential is drawing some unscrupulous gold scam artists out of the woodwork.
Here are some of the most common and most damaging gold scams out there right now.
Gold Scam 1 – Grading Games
The Con: In gold coins, MS-70 is the top of the heap – a “mint state” coin that has never been handled. But what’s an easier way to increase the value of a coin than to lie about the condition?
For instance, a 2002-W $50 Gold Eagle is worth $1,650 at a grade of MS-60 — a very clean condition, but not perfect.
MS-70 for the same coin tallies a tag of $2,850.
An unsuspecting (rookie) coin buyers may not be able to tell the difference, thereby overpaying by hundreds of dollars.
Solution: Check the grades of coins with an independent source before buying-
Or better yet on your computer!
Both NGC and PCGS offer this option and you can check them on your smartphone as well.
I HIGHLY recommend that you become associated with both sites.
Every coin PCGS and NGC grades are serial numbered and in some cases PHOTO graded .. Remember "Trust but Verify" or just buy through a reputable dealer.
The TWO best coin grading company's are PCGS and NGC .. and to a lesser extent ANACS although they have been making great strides to polish up their act .. I'd stick to one of the three.
Gold Scam 2 – Pretty Packages
The Con: Be very cautious about grading certificates and “slabs” or other ornamental holders that prevent you from examining the actual coin itself.
Some disreputable dealers like to put inferior products on fancy plaques or behind layers of plastic to prevent you from inspecting the piece.
You could fall prey to the aforementioned grading scam this way, or worse, buy a coin that is a gold-copper alloy or should I just say- counterfeit.
Solution: Never buy coin "paper weight's" items or gold coins in pretty packages or encased in acrylic.
If you’re decorating a room it can be excused, but no serious investor/coin collector cares whether his gold coins are displayed in a pleasing or cool manner.
Quality and value matter more.
Gold Scam 3 – Skewed Salomon Index (your begging to get screwed here)
Stick to physical ...
The Con: If you want to buy gold as a hedge against inflation or to garner a decent return, that’s admirable.
But beware of the Salomon Brothers Index quoted by dishonest dealers as proof that you will get rich quick.
This annual index, formerly compiled by the New York investment bank Salomon Brothers, can show appreciation of 12% to 25% a year by a trick of math – but the reality is that the Salomon index was based on a list of 20 very, very rare coins.
Gold eagles you get at the local coin shop are far more common and less likely to appreciate at the same rate.
Solution: Be realistic with your expectations, and don’t get pressured into buying due to some get-rich-quick scheme.
As the saying goes, “If it sounds too good to be true, it probably is.” Just stay away !!
The Con: Though it may seem hard to believe, some brazen dealers traffic not in counterfeit gold coins, but in coins that never existed in the first place.
They prey off gold investors’ practical fear of holding a large amount of physical gold in their homes. What if a robber takes all my gold? ..
Where can someone find a place to store a bulky coin collection? ..
These “helpful” dealers offer to keep the coins in escrow to avoid such problems.
Only, a far greater problem is that the gold coins never existed in the first place.
And to top it off, these charlatans will actually charge you a storage fee for the gold they don’t possess!
Solution: If you’re getting into gold coins, you simply must take possession of them.
Their are risk and reward to all manner of investments, and if you want to play physical gold, you have to understand that proper storage is something you need to do and part of deal.
Gold Scam 5 – Executive Order 6102
The Con: Believe it or not, the most brazen gold con of all time was undertaken by Uncle Sam. Executive Order 6102 was signed on April 5, 1933, by President Franklin D Roosevelt, “forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates” by U.S. citizens.
The result was a massive seizure of gold from safety deposit boxes.
Some U.S. citizens who owned large amounts of gold had it transferred to countries such as Switzerland, but others were forced to take the $20.67 per ounce the government offered in exchange for the precious metal.
So much for future appreciation.
Solution: Call me a conspiracy nut, but there’s no guarantee against a second Depression breaking out or U.S. sovereign debt avoiding a downgrade like the one Greece recently endured.
So it’s in your best interest not to put your gold in a bank deposit.
Again, if you truly want to hedge your risks and buy gold coins, you have to plan for everything.
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