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Know the Signs of Gold Coin Fraud Before You Buy

When you invest money, one of the first things that your investment advisor will tell you is to diversify your portfolio. One of those diversified components should be gold and other precious metals. Since many people are worried about a stock market collapse, they want their gold to be in the form of physical gold rather than a gold based mutual fund. So those investors go out and purchase gold coins or gold bullion. The problem is that they are at risk of being scammed if they don’t know what to watch out for. Before you buy gold coins, know these common gold coin scams.

Packaging Scams – Coins are valued two different ways. First there is value in the gold; an ounce of gold is a closely tracked commodity. Second, there is value in the coin. Just like any coin, a gold coin is valued higher if it is rare, in great condition, or has never been circulated. Suppose there are two coins, one that is slightly worse condition than the other, the lower condition coin will be worth far less (sometimes hundreds of dollars less). Unscrupulous gold coin dealers will construct their packaging in order to hide imperfections so they can claim a coin is in better condition than it really is.

Another way packaging scams are committed is to hide coins that aren’t pure gold. By putting a coin in protective packaging, and then claiming it loses a lot of its value if that packaging is opened or removed, is a way to hide the fact that the coin may actually be 10% copper. Clever packaging, using off-color material, can hide this scam.

False Gold Values – The price of gold fluctuates daily. Many coin dealers know this and will adjust the price of their coins daily. Others will price their coins weekly and hope that the fluctuation isn’t too large to cause a massive loss. The unscrupulous coin dealer will claim that the value of gold is far above what it really is, even going as far as to show you charts and data that have been falsified, in order to get you to buy a coin that is worth less than he or she claims.

Phantom Gold – Let’s suppose you have a lot of money, or perhaps you just don’t like to take risks. There is always the risk of having your gold stolen. If you buy $100,000 worth of gold, you don’t want those coins floating around your house, so you need a safe place to put them. The dealer that sells you the gold may offer to store them, on site, for a small fee (say $1,000 per year). The scam here is that he never sells you the gold. He may have $100,000 worth of gold, but then he sells $100,000,000 worth of gold saying he can house the gold on site. The gold doesn’t actually exist.

Don’t let yourself get scammed when you are investing in gold. And there is an easy way to prevent scams. Before you make any investment, ask for a contract that shows that you can take the coins to a third party dealer to be evaluated. If that third party says the coins are not worth what you paid, then you have the right to return them for a full refund. If a coin dealer refuses to do this for you, then you are dealing with someone that is potentially trying to scam you.

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