When it comes to investing money, many people want to make sure they have adequate exposure in multiple areas. However, when events like the Great Recession hit, millions of dollars fly out of the stock market and are invested in gold. This makes a pool of victims for anyone who would want to scam those out of their money. If you are thinking about investing in gold, know these four major scams before you do so.
Pretty Packaging Human psychology tells us that if something is in a fancy package, it is worth a lot of money. This weakness is preyed upon by scam artists who put gold coins into fancy packaging and claiming that the packaging protects the gold and cannot be removed. The packaging, in actuality, obscures the coin so you cant tell that it isnt pure gold.
Phantom Gold When you read about this one, you may see the US monetary policy in the mix. Suppose you buy $100,000 worth of gold. Naturally you dont want to transport that much gold to your house (although if you do buy that much, you ought to have a safe!). The dealer offers to store the gold on-site in their high-tech safe. In actuality, there is no gold. The dealer gives you a certificate saying there is gold, but really none is present.
Miss-graded Coins Coins, whether they are gold or not, are graded to determine how much wear and tear they have experienced. A mint condition coin, obviously, is worth more than one that has been handled often. Some dealers will claim that a gold coin is a step or two above its actual grading in order to convince you to pay more for it.
Inflated Values Much like the stock market, the value of gold fluctuates throughout the day. To get you to pay more for your gold than it is actually worth, a gold dealer may give you data showing the value of gold is worth more than it actually is.
Combating these deceptive practices is actually very easy. Before any payment is finalized, insist that a third party (of your choosing) inspects the gold. The dealer will have your check, but before it can be cashed he has to wait a few days while you get an inspection. Any dealer that does not agree to this is trying to hide something, and you should take your business elsewhere.
Investing in gold and gold coins can be a great way to boost your portfolio. But if you get scammed, you can find yourself in dire straits. You should know how to spot fools gold before you put up your hard earned money.