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How to Protect Yourself from Online Gold Scams
Don't Get Scammed When Buying Gold Online
Buying gold? Protect yourself from online con artists
As the American dollar continues to depreciate, investors are looking to tangible assets such as gold and other precious metals. As a result of increasing investment, the price of gold has appreciated considerably and is now over $1800/ounce. Experts estimate that gold could eventually peak at $5,000/ounce before the current recession ends.
A side effect of the current “gold rush” is that many gold scam operations have popped up online. The scam operations prey upon novice gold investors who do not have much experience in purchasing gold bullion and coins, especially online. How can you protect yourself from being scammed when purchasing gold and other precious metals online? Here are eight steps that you can take to protect your investment:
1. Find out if the company belongs to any trade associations. There are several well-respected gold bullion and coin trade associations, namely the American Numismatic Association (ANA) and the Industry Council for Tangible Assets (ICTA). Both of these associations require that their members adhere to a code of ethics concerning the purchase and sale of precious metals. Failure to comply by this code of ethics results in expulsion from the association. A gold dealer should belong to at least one, if not both, of these associations.
2. Find out if the business belongs to the BBB. The Better Business Bureau (BBB) is a consumer advocate agency that maintains a list of businesses and their accreditations with the agency. Ratings from A to F are also assigned to each listed business, with a rating of A+ being the ideal. Businesses that fail to s ideal; however, businesses can receive any grade between A and F. Businesses can also be revoked from association with the BBB in light of unaddressed consumer complaints or other shady business practices.
3. Find out the customer satisfaction history of the online gold dealer. By typing in the name of the dealer, followed by the word “scam,” into a search engine like Google or Bing and perusing the 20 or so results that come up, you can find out a lot of information about the business and its reputation. Dissatisfied customers are more likely to post complaints online or even devote entire web sites to exposing a business as a scam. The claims of such dissatisfied customers are worth investigating when you are considering sending thousands of dollars to an online dealer.
4. Find out the longevity of the online business. Scam artists know that consumer demand for gold has skyrocketed and have planned accordingly by setting up “fly by night” web sites that promise incredible deals to investors. Some scam operations offer gold at extremely low prices, claiming that it was recently discovered at a previously undiscovered location in Africa or Asia. Other scam operations promise to hold the purchased gold in their secure vaults or offshore accounts, claiming that this protects the consumer from government seizure of gold assets. Both of these gold scams have swindled many investors out of their money.
5. Buy only from gold dealers that will send you physical gold. Some online dealers will claim that gold is too prone to damage or theft if sent through the mail. This is not true, especially since gold can be insured (just like any other valuable that is mailed). Never purchase any gold from a dealer who will not offer to send you the actual physical product. On a similar note, do not invest in gold mining operations or futures which are based on gold speculation. Such “gold” often disappears the moment that the dealer decides to close down his/her web site and move on to the next scam.
6. Make a small initial purchase. Regardless of whether the gold dealer is offering you a bulk purchase discount, do not purchase large amounts of gold when first establishing a business relationship with him/her. Instead, make a small initial gold purchase of ½ to 1 ounce size and see if that sale results in a tangible product being delivered to your door. Once you know that you can trust the dealer and the quality of the shipped gold, you may increase your order amount.
7. Purchase known brands of gold bullion. When starting out with gold bullion, buy gold that carries a purity stamp, weight and manufacturer’s name. For example, gold bullion is often stamped with the PAMP (Produits Artistiques Métaux Précieux) symbol, which is a refiner of precious metals and is accredited by both the Swiss National Bank and the London Bullion Market Association. Typically, PAMP produces and stamps its gold bars with the 99.99% purity mark, signifying that the bars contain nearly 24K gold. PAMP gold bars have been traded since 1979. Credit Suisse also produces and stamps its own gold bars, which are guaranteed to be .9999 pure gold and come in one-ounce sizes.
8. Purchase gold bullion coins. Gold coins that are marked as gold bullion coins are valued for their gold content rather than collector or historic value. As a result, they are easier to appraise and trade in for cash. The U.S. Mint produces the American Eagle and American Buffalo coins as its flagship bullion coins, the Canadian Royal Mint produces the equivalent Maple Leaf coin, and South Africa offers the Krugerrand coin. Most of these coins are stamped as .999 pure gold or better; the exception in this group is the American Eagle, which contains 91.67% pure gold (i.e., 22K).
Online gold scams have multiplied since the value of gold dramatically increased in the past several years. Scam artists prey upon novice gold investors who do not know how to value gold or what trade associations regulate gold dealers. Take the following steps to avoid becoming a victim of an online gold scam.