Beware of Gold Scams!
The demand for physical gold has gone through the roof in the midst of economic chaos caused by the coronavirus. We’re beginning to see shortages of some bullion products. As more people pile into the market, the number of scammers looking to take advantage of gullible investors also increases.
Recently, some guy started commenting on the SchiffGold Facebook page, claiming he could sell you “cheap gold” directly from African mines. This was certainly a scam. Why would anybody sell gold “cheap” when they can easily command a market price?
The answer to that question is they wouldn’t.
Nevertheless, hundreds of people will get taken in by smooth-talking scammers.
Here’s the easiest way to avoid getting snookered: only buy gold from reputable dealers.
Rick Rule told CNBC he’s heard from a number of clients that gold scam attempts are on the rise.
These always coincide with an increase in precious metals prices, which usually itself coincides with times when fear of more conventional investment products is high.”
There are a number of things to watch for. If somebody is selling gold significantly below the spot price, it’s almost certainly a scam. Also be on the lookout for excessively high premiums, outrageous shipping costs and claims that coins are particularly rare or collectible.
One scam reported by CNBC is the “empty vault.” In this case, a dealer promises to provide safe storage for metal owned by the investor which either does not exist or is not as promoted. Only buy from dealers who use professional, reputable vault storage services.
Scammers also prey on vulnerable hearts, targeting their victims through dating sites. For instance, according to reports from a Charlotte TV station, Suleman Alhassan and his posse targeted women through dating apps. He promised them romance and wealth. Alhassan claimed he owned a bunch of gold in Africa, but he needed cash to ship it to the US. Then he promised to share the profits with his girlfriend. Alhassan reported pocketed over $1 million before authorities caught up with him.
Sometime scammers will pass off counterfeit gold as the real thing. Again, the only way to be 100% certain your gold is authentic is to buy from reputable dealers. Generally, you will want to stick to sovereign-issued bullion coins or commonly hallmarked bullion products. Needless to say, you don’t want to buy gold from a gas station parking lot!
Also, be wary of high-pressure sales tactics. These scammers will off-employ a bait-and-switch technique. They often advertise coins like American Eagles and Canadian Maple Leafs at low prices to attract buyers. But the reality is that these coins are just used as bait. The goal is to get you on the phone, where their ‘boiler room’ brokers will try to get you to switch from bullion to numismatic coins, which they might call “rare,” “historic,” or “limited edition.” Unless you are a very serious collector who has substantial knowledge of the numismatic market, you should avoid these coins.
Again – I can’t emphasize this enough – the best way to avoid a scam is to deal with well-established, trustworthy professional dealers.
For more detailed information on various gold scams, download SchiffGold’s free report.