The buyers and sellers of gold advertise everywhere. Newspapers, broadcast media and the Internet all are filled with ads offering top prices paid for gold in any condition and in any form from 10-karat gold to pure, 24-karat gold. Even gold fillings and scrap gold are avidly sought.

TUTORIAL: Investing 101

On the sell side, companies offer gold coins, medals or small bars as investments which hints at the prospect of gold reaching higher market prices. Gold traded close to $1,900 in September this year, although the precious metal has since retreated from that high. For the unwary, uninformed or gullible seller or buyer of gold, there's a minefield of scams waiting. For the well-informed, these hazards can be avoided. (For related reading, see Getting Into The Gold Market.)

Buying Gold
Gold coins, both foreign and domestic, are sold at substantial markups over face value. A fair price to pay for American gold coins, according to some authorities, is no more than 3 to 5% more than the spot market price for gold on the day of the transaction. Be especially wary of buying from dealers in distant venues which require the buyer to send money by certified check or bank transfer. Some of these operations are fly-by-night, and frequently the buyer is never sent the gold that was ordered.

Out-of-town dealers often charge exorbitant shipping fees in addition to the markup price, costing the buyer additional, unnecessary expenses. Insurance fees are also charged, adding even more cost. Buy gold only from established, reputable dealers. Before purchasing, research the company online. Check with the Better Business Bureau (BBB) and the Attorney General's Office of your state for any complaints against the company. It's best to buy from dealers in your city with an established street address in a building or store that the dealer has occupied for several years. This stability may indicate that the dealership is operated honestly because of its longevity. If you're buying rare gold coins which have value for collectors, make sure the seller is a member of the Professional Numismatists Guild or the American Numismatic Association. These organizations have strict codes of conduct, and buyer-seller disagreements must be resolved or members of the group risk expulsion.

Selling Gold
Again, experts stress the importance of researching a company before you bring in your gold for sale. Enter the dealer or company name into the BBB's national search engine to obtain a rating. Steer clear of any company with less than a top-rated rating. Prior to selling your gold, know the spot market price for gold on the day you intend to sell. You can find the price online. Keep in mind that pure gold is 24 karats, and the lower the gold content in the items for sale, such as jewelry or gold chains, the less the item is worth. Be aware of low-ball pricing, in which a dealer will offer considerably less than an item is worth. If you're not satisfied with the offer, walk away. Shop around. See what other dealers are offering for what you have to sell. Always remember, the dealer must also make a profit so you'll never get full gold market value for your sales item.

The Bottom Line
When buying or selling gold, a well-informed consumer is likely to side-step the scams practiced by the unscrupulous people who operate on the fringes of this growing market. Research the company you're dealing with. It's probably safer and less expensive to buy from, or sell to, dealers in your own city. Know the price of gold on the day you intend to sell or buy. Walk away if you're not satisfied with the buy or sell price. (For related reading, see How Gold Performed In 2011.)

Related Articles
  1. Credit & Loans

    How to Recover From Identity Theft

    Identity theft isn't going away, and fixing it can take time and money. But doing nothing isn't an option. Rather than become a victim, it is time to take action.
  2. Investing Basics

    Learn How To Trade Gold In 4 Steps

    Trading spot gold or gold futures, equities and options isn’t hard to learn, but the activity requires skill sets unique to these markets.
  3. Economics

    The Effect of Fed Fund Rate Hikes on Gold

    Explore the historical relationship between interest rate increases and the price of gold, and consider what effect a fed funds rate hike might have on gold.
  4. Investing News

    This is the Fastest-Growing Consumer Complaint

    There’s no way to guarantee that your Social Security number won’t fall into the wrong hands. Here are some ways to make yourself less of a target.
  5. Professionals

    Prevent Employees From Hacking You Computer System

    Cyber security attacks from a current or ex-employee can cause a lot of pain. Here is how to avoid such attacks.
  6. Chart Advisor

    Despite Unchanged Rates, Gold Set For A Move Lower

    Despite the Fed's news of leaving interest rates unchanged, 3 charts are suggesting that gold prices are setting up for a move lower.
  7. Mutual Funds & ETFs

    How to Day Trade Using Leveraged ETFs

    Think you have the stomach to handle these volatile instruments? Then read on to find out how you can profit from their wild swings.
  8. Mutual Funds & ETFs

    Top 4 Inverse Commodities ETFs

    Learn about inverse commodity exchange traded funds that investors may want to consider to take a short position in certain commodities.
  9. Economics

    The US Will Remain the World's Reserve Currency

    Learn why the U.S. dollar is not in any danger of losing its reserve currency status and understand how China is pushing the yuan to be a reserve currency.
  10. Mutual Funds & ETFs

    Top 5 Precious Metals Mutual Funds

    Obtain information and analysis of some of the top-rated and most popular mutual funds that offer investors exposure to the precious metals industry.
  1. How should a whistleblower report unlawful or unethical behavior?

    Whistleblowing takes many forms. A whistleblower could expose government corruption, expose unethical business behavior or ... Read Full Answer >>
  2. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  3. What were the primary financial crimes involved in the ZZZZ Best case?

    ZZZZ Best was a company started by Barry Jay Minkow that claimed to be a carpet cleaning business. In fact, it was a Ponzi ... Read Full Answer >>
  4. What techniques can be used for hedging exposure to the electronics sector?

    Hedging exposure to the electronics sector offers an investor a way to insulate his portfolio from losses during periods ... Read Full Answer >>
  5. What techniques are most useful for hedging exposure to the banking sector?

    The banking sector moves in the same direction as the broader market, but its volatility is much lower. The sector's stability ... Read Full Answer >>
  6. Is credit a form of fiat money?

    To understand why credit is a form of fiat money, one must first understand what money is. At its most basic level, money ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!