Gold Bullion Is Money; No Buyback Guarantee Necessary

This article was written by Dickson Buchanan, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

Money is not a collector item, and buyers should beware of Scammers trying push buyback guarantee contracts on customers for products they should never be considering in the first place.

Despite our efforts to reveal the most common gold scams, there always seems to be a new trick up the gold scammer’ sleeves. At this time, we are hearing about a lot of companies offering special buyback guarantees or special contracts that “ensure” clients a buyback price on the products they are selling.

At first glance, this is all sounds good. Who doesn’t want the added security of a contractual agreement to buy back a certain product at a later date? However, upon closer inspection, such an agreement is a proverbial wolf in sheep’s clothing.

There is a reason scammer companies put all of the focus and attention on a guarantee to buy back their products. It’s because they want to take your attention away from the actual products they are selling you. In such “deals,” they often brush over which products you are actually buying, and 99 times out of 100, they are selling you a collector or numismatic gold or silver item.

Collector’s, special editions, limited mintages, numismatic coins, and similar gold and silver products are NOT a good purchase for anyone looking to invest in physical gold and silver.

Why?

Because all such products have a much higher transaction cost associated with them. Only collectors should buy collectible coins, not investors who are looking to get gold and silver at the lowest possible cost. To be sure, those higher costs secure a much higher profit margin for the scammers. Of course, it’s not an honest margin; it comes at your expense!

As an investor buying specialty coins, you are paying too much over spot price for the metal upfront, and you will not be able to recoup that additional cost if you ever need to sell at a later date – no matter what the guaranteed buyback is. When you buy collectible coins you are stuck with a large and costly spread right from the start. Often this spread is in the 20-30% range and can get as high as 50-70%. This is like incurring a huge fee on your investment that is charged right out the gate, and it is virtually impossible to ever recoup.

What’s worse is that such buyback guarantees are often not even enforceable. Scamming companies know this.

Scamming companies will often create a strawman argument saying that other bullion companies don’t guarantee to buy back their products at a later date. But this is completely false. Just because certain companies don’t have a specific buyback program (SchiffGold is happy to buy back our gold or silver products whether you bought them from us or not) or guarantee does not mean that the products they are selling are not marketable. If the products being sold are internationally recognized gold and silver bullion products and meet industry standards for purity, fineness, weight etc, then there is no need for a spiffy buyback contract because there is a ready market for such products anywhere in the world. This makes buyback contracts superfluous at best and misleading at worst.

Think about it this way. When you withdraw dollars from your bank, do you ever request a special contract guaranteeing your bank will accept those dollars if you decide to deposit them at a later date? Of course not! That is because dollars are considered money and there is a ready market for dollars at your bank or at any other bank around the corner or across the world.

Gold and silver bullion are the same way. Not the collectible coins, but the bullion coins and bars which come from the US Mint the Royal Canadian Mint and other reputable mints around the world. When buying or selling internationally recognized gold and silver bullion, there is no need for complicated contracts in either buying or selling because these products are super liquid and recognized all over the world. The spreads are small and the transaction costs are minimal compared to collectible and numismatic gold and silver items.

We list which coins should be considered bullion and which coins are not in our Classic Gold Scams report which is free and can be downloaded here.

While we offer to buy back all gold or silver products that were purchased from our firm or any other firm, we do not try to confuse our customers at the point of sale by telling them they should buy a product with a buyback guarantee. Instead you ensure the authenticity, recognizability and marketability (that is the ability to sell at a later date with minimum transaction costs) of the assets you are purchasing right from the start simply by buying bullion products.

Buyer beware! Implicit buyback guarantees are foes, not friends, and should be seen as a red flag warning that you are probably being sold a product you really don’t want buy.

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