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According to the World Gold Council, at least $52 billion worth of gold was sold for investment purposes last year. It is not surprising that a lot of fraudulent dealers are doing everything they can to take advantage of people who want to invest in precious metals but don’t have any idea how to start.
A lot of the total investments are invested in ETFs or exchange-traded funds and precious metals mutual funds. But a lot of people who want to invest in precious metals wants to possess it by investing or buying coins or bars, and that’s where these fraudulent dealers come into play.
Precious metals regulators say that a lot of newcomers that are ripped-off by shady dealers are rising as prices of the precious metal rises. Here are some tips on how to avoid buying fake gold coinage and bars if you want to get its investment value.
Do not pay too much on coins and bars.
If you want to invest in it, you need to remember that it is a valuable commodity, and it is up to you to make sure that you are not paying too much. The day you purchase precious metals, you need to check the market price of gold available in price monitoring websites like www.goldprice.org.
Do not spend more than 5% to 8% markup over the market price, because that is the standard premium. According to experts, the American Eagle gold bullion coinages, one of the most popular ones for investing, first make their way into the gold market when United States mint sold it to authorize buyers and dealers.
You can also buy commemorative edition coins directly to the dealers, but this kind of coins are more expensive compared to other types of coins. Mints are marking up the price of the coins to cover the cost the gold and its actual minting. It also includes the shipping, insurance and handling costs. A lot of dealers say that the markup is about 3% of the market price. Then, the authorized buyers or purchasers as well as the dealers, add their markup price.
Do not buy just for its historical value.
Some dealers engage in a classic bait-and-switch. They will offer buyers bars and coins and try to offer collector or numismatic coinages. These items have little to no value above their melting value (the amount of coinages when melted and sold as common metal).
Primary dealer, Goldline International, comes under fire from the United States government for putting higher markups on historical or numismatic coins even if it has no real value at all.
American Eagle is not the only gold coins for sale that are sold with their value alone. There is also Canadian Maple Leaf, South African Krugerrand, and Australian Nugget.
Do not pay premiums for proof coins
Proof coinages are special ones that are usually for collectors and sometimes mounted in individual protective cases. The dyes that are used to make them are traditionally yielding and finely polished to make it pretty and attractive with mirror finishes.
Proof coinages are valued more by collectors compared to regular currencies. The premiums you need to pay for these coinages may disappear and be inflated, depending on the price in the market. For investment purposes, you need to stick with the regular coinages.
Do not buy coins that are fractional
These kinds of coinages come in a fraction of an ounce like a half-ounce, quarter-ounce or even one-tenth or twentieth of an ounce. You will pay higher markups with these kinds of coins per ounce. The only reason people own them is if they believe that there will be a future meltdown of economies.
At that point, paper currencies will be worthless, and you will need a small amount of gold to buy necessities like freeze-dried food, clothing or even guns and ammo.
Do not buy gold from telemarketer over the telephone
The FTC or Federal Trade Commission reported that a rise in boiler rooms for hawking precious metals coins and bars. Boiler rooms are places that are filled with salespersons who call unsuspecting clients and uses high-pressure sales methods.
Boiler room operators make inflated claims that the potential profit from coins and bars will double or triple your investment in one month. Claims like this are often paired with a warning about stock market crashes and a weak economy, as well as how precious metals will be a good investment with fewer risks compared to stocks.
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