ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Avoid Gold Bullion Investment Scams

Updated on October 24, 2009

As investors bail out of the weakening U.S. dollar, gold prices are hitting all-time highs. When the precious metal markets turn bullish and enthusiasm among investors rise, watch out! Such trends never go unnoticed by scammers looking to profit from the latest “gold rush.” So if you are looking to add such investments to your portfolio, it is wise to be especially cautious.

During the last major bull market for gold the 1970’s, scam artists abounded. It only makes sense that they are back for more. The crooks of today have a new tool at their disposal to lure unsuspecting victims: the internet. Although the safeguards put in place are far more sophisticated, scam artists have always been able to keep up with the changes. The more regulated the means of security taken, the more ingenious the hackers, criminals, and scammers show themselves to be.

The best scams appear to be clever ideas and great business opportunities on the surface. Professional-looking individuals well-versed in the art of sales have a carefully constructed pitch waiting for you. The goal is to come off as legitimate as possible, seeking inspiration from those who are.

Gold scams come in many flavors, from buying fake gold mines to buying non-existent gold bars. Bullion scams have a pattern in that many involve offshore gold stashed in remote places, in Swiss vaults, or straight from mines in South Africa. The gold being sold may be described as 99.9% pure gold bars, coins, powder, refined, unrefined, or etcetera.

Gold Storage Scheme

Storage scams are commonly spread either via the web or an unsolicited phone call. The offer is to sell a given amount of bullion, at a below market rate, and then for an for an additional contracted fee (of course), store it for you. Your “agent” handles all the leg work, and even commits to sell the gold on your behalf as prices rise, promising substantial returns. Since taking physical delivery and storing large quantities of gold bullion is a major undertaking itself, the arrangement seems convenient and also prudent. The trick here of course, is the seller is never required to show you the product in person. Soon, your “agent” is never to be seen or heard from again. The gold, which probably was never purchased, vanishes into thin air as well.

Fake Gold Mine Scheme

Mining scams are presented as an opportunity to beat the middle man and go straight to the source. The mining company claims to have a massive amount of gold or valuable assets that cannot be sold openly for whatever reason. These assets are of course being offered at deep discounts for a limited time. As with most good swindles, the events quickly evolves into a real-life Soap Opera.

An expert was hired by an investment group on the East Coast to investigate one of these large-scale operations in Arizona. He was flown to Phoenix along with a handful of other prospective buyers. The flight took place at night and the group was blindfolded. The story was the gold miners didn’t want to comply with Government mining and environmental regulations. They decided to make it an underground operation (literally) and avoid the hefty taxation. This was a contributing factor to the low asking price.

When they had arrived and taken off the blindfolds, the group was escorted underground to tour the mining operation. A mere four miners were milling one-ton-per-day, and only at night to keep the location a secret. Being far savvier than the rest, the investigator noted that the rock wasn’t even mineralized. Still, the mine reported that were keeping up a steady pace of producing 200,000 ounces of dore gold a week. Two attendees agreed to purchase that week’s production at a half off the current price of gold since it had not been refined yet. Obviously, once the funds were secured the mining company did a vanishing act.

How to Invest Safely

How can you protect yourself? It is well within the ability of scammers to put together a slick site created for the sole purpose of generating leads or even extracting funds without human contact. Do some research on the company name before proceeding. Inquire with the Better Business Bureau (BBB) about any reports filed against the company and the manner in which they were handled. Another trusted source to check for reports of fraudulent activity is Complaints Board.

If the company you are considering is never mentioned by reputable sources, seek out another gold dealer or investment firm that is. Your safest bet would be to deal only with a well-established Wall Street firm that’s thoroughly regulated and insured.


    0 of 8192 characters used
    Post Comment

    • profile image

      Michael 8 years ago

      Not all storage arrangements are scams. Nor is buying from someone below spot necessarily a scam... could be they bought it way below current value. Still, prudent to be cautious, of course.