Gold Scams To Watch Out For
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.
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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.)
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.
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.)