Four Ways Gold Dealers Rip You Off

Buy Gold and Silver Safely lists four ways gold dealers rip you off as follows:

Gold Dealer Rip Off #1 - Threats of Confiscation - This is the number one tactic gold dealers will use in telling a story about how a certain type of gold could be confiscated, while another type of gold wouldn’t.

Gold Dealer Ripoff #2 – European Coins Will Give You More Gold For Your Money - This ploy was the number one question gold dealers would ask a potential buyer of gold. They would ask the question; “Do you want a coin that is rare and pretty, or one that gives you the most gold for your money?” Most people won’t realize it, but it is a trick question as either answer the gold dealer makes their large commission.

Gold Dealer Ripoff #3 - First Strike or Early Release Coins - Another ploy gold dealers practice is to get people to buy their bullion coins that normally have a 2% to 10% markup at a 30% to 100% markup (some gold dealers will mark them up for less). What they do is get the new American Eagle gold coins produced at the U.S. Mint that come out of production early each year certified by National Guaranty Association (NGC) as a higher value collector’s coin that may someday be worth much more.

Gold Dealer Ripoff #4 – Just Get the Money In-House and Let a Senior Sales Representative Take Over the Sale - Another tactic gold dealers will use is if a caller is adamant about buying bullion coins like the American Eagle 1-ounce bullion coins, they will write up the order, but can’t confirm the price until they receive a check or have the money wired in (the check of course would have to clear first). Once the gold dealer has the money in-house, they will call the buyer back and attempt to switch them to the rare collectors’ coins. If that gold sales representative fails to do so, they will get one of the in-house seasoned pros on the line to hardball you, scare you, play upon all your fears about what’s going on in the economy and how the government is going to someday take your gold from you, in trying one last effort to get the sale. Their sales pressure is immense.

A few thoughts on these:

• If you're interested in buying physical gold or silver, I can't think of a better resource for you to use than the site Buy Gold and Silver Safely. The author has a no-nonsense approach to educating his readers and exposing the often deceitful practices of others. I interviewed him for my series titled How to Buy and Sell Physical Gold and Silver and it was one of my best articles of 2010.
• All the confusion/sales pressure/lies noted above are just another reason that I think gold is a loser investment -- especially these days. The bubble is going to burst soon, right?
• That said, there does seems to be a place to buy gold as a holder of value (versus a gainer of value -- like you'd want from an investment) and I might consider it in the future for such purposes. But again, at today's prices it just seems like madness to put any significant amount into gold.

Anyone out there buy gold (in any form)? Any buy physical gold (or silver)? Why did you buy, how did you buy, and do you have any advice for the rest of us to complement or refute what the author says above?

Comments

[Doug Eberhardt]

FMF, Thanks for posting my article.

There are some good gold dealers out there and some that aren't. It's just important that investors know what to expect when calling in. They also should know what type of gold and silver to buy that makes most sense for their portfolios, which is why I wrote the article.

A reason why many may want to diversify into gold and silver, taking advantage of this current dip in price (dollar cost averaging in) is the underlying economic data that our Federal Reserve and government via congress have to overcome.

To put it bluntly, our economic destiny is "unsustainable" and the little bit of reduction ($100 billion) that the newly established congress will be trying to push through this year, is peanuts compared to what cuts are needed.

I provide details of this "economic destiny" in "Bernanke’s Psychological Warfare On Gold and Silver"

http://buygoldandsilversafely.com/gold/bernankes-psychological-warfare-on-gold-and-silver/

Gold and silver are insurance against the U.S. dollar portion of one's portfolio (U.S. stocks, U.S. corporate bonds, U.S. government bonds, U.S. treasuries, U.S. CD's etc.).

It's also insurance against the Euro, Yen, Pound and every other currency that will be fighting each other for lower value in the years to come.

Thanks again for posting...

[Servius]

I don't know that gold and silver are loser investments yet. Certainly if you bought gold in 1982 you lost but gold didn't peak until after interest rates shot up in the late 1970s.

It seems to me that with QE1, 2, ... n, and with interest rates being kept near 0 by the Fed while unemployment is still high, the bubble is forming in stocks again.

[Jim]

I tihnk the bottom line here is that if you want to invest in gold bullion then don't pay much more than spot costs.

If you don't know what you're doing it would be easy to get confused by talk about needing an MS-69 certified coin so it will be worth the most.
It looks like the tactics above are all about getting the customer to buy a rare coin for its collector value. Rare or mint coins do have more value than plain currency but if thats not what you want then you shouldn't buy it and it sounds like the dealers often have unreasonable markup on them.

And of course some dealers are bad and some are just fine. I remember seeing Golddline was selling some gold bullion coins for about double the spot value and I found other coin dealers selling similar coins for far lower markup.

[MBTN]

Tried to post this once, but it looks like it didn't take. If this is a repeat, I apologize...

Anyway, I don't think #2 and #3 are necessarily ripoffs. Some people buy gold and silver coins for their collectible values, not for their metal value. If you are just looking to acquire the metal, Jim's advice makes sense. Buy the coin with the lowest markup over the spot price, period.

If a collector is offering to sell you a silver coin for $100 when the price of silver is $28 a ripoff? Maybe the coin is a mint condition perfect coin or some other rare edition. Obviously, if you don't care about that stuff, it might appear to be a ripoff. However, a coin collector might view it as a bargain.

This is the same with all collectibles. I might view a million dollar Picasso painting as a ripoff. After all, I can buy a canvas and some paint for $10 at my local art supply store. Why am I going to pay a million bucks for those same materials? Is this a ripoff? Of course not! If I were an art collector who has an appreciation for art, a million dollars might be a reasonable for an original painting by one of the masters.

[CALWEST]

The reason why most people invest in precious metals is for protecting your wealth. Paper money cannot do that. Gold and silver cannot be printed at will by the Federal Reserve. Gold and silver have been used as true money for
6 thousand years. If you think that gold and silver are over priced today, wait until the end of the year...gold 2000.00 an oz...silver 50.00. YOU CAN BANK ON IT...

[Rory]

Biblically, the only 'money' in history is gold and silver. It will always be so. I collect gold and silver not for investments (although it has been nice in recent history), but for the worst case scenario imaginable - when the 'stuff' hits the fan scenario... also loading up on non-perishable food stuffs and other items needed.

I will then provide my holdings to my kids when I move on, and am teaching them the same - prepare for the worst, hope for the best.

[RichGuy]

Buying precious metals as a hedge against the total collapse of the US economy is absurd. People will turn to bartering, NOT trading gold bars. Think about the recent collapse of a local economy during natural disasters, for instance in New Orleans during the hurricane. People wanted bottles of water and food, and nobody who had water or food was trading it for gold that I saw on the news!!

[Beastlike]

Rory - I hope you're stocking up on "lead" bullets too! lol.

[Doug Eberhardt]

Rich Guy, you're comparing an episode where paper money was still used as currency with one where it wouldn't.

In Argentina, when their currency the peso collapsed during their hyperinflation episode, swap meets popped up so people could still exchange valuables for the "scrip of the day" that could be used for purchasing food, medicine etc.

I wrote an article on this called, "How Gold Would Be Used In Hyperinflation"

http://buygoldandsilversafely.com/hyperinflation/how-gold-would-be-used-in-hyperinflation/