If you are thinking of investing in bullion or bullion coins, the Federal Trade Commission (FTC), the consumer protection agency for the United States, says your best bet is to do your research. Misinformation can have serious consequences.
Bullion refers to a quantity of precious metal, usually gold or silver, measured by weight, typically chosen as ingots or bars, and sold by banks, coin dealers and investment firms. You can also buy gold and silver bullion as coins.
Bullion coins are made from precious metals, usually gold or silver, and purchased for investment purposes from banks, commodities broker-dealers, brokerage firms and investment firms specializing in the sale of precious metals. Its value is based on its weight in gold or silver. Prices fluctuate daily, depending on the spot price of gold and silver in world markets. The most popular bullion coins include: American Eagle 1-Ounce Gold Coin; American Buffalo 1-Ounce Gold Coin; Canadian Maple Leaf 1-Ounce Gold Coin; British Britannia 1-Ounce Gold Coin; South African Krugerrand 1-Ounce Gold Coin; Austrian Philharmonic 1-Ounce Gold Coin and the Canadian Maple Leaf 1/2-Ounce Gold Coin.
The United States Mint has produced gold, silver, and platinum since 1986, and guarantees its precious metal content.
Foreign governments also make coins, but they may not be manufactured to the same standards as United States coins and are not guaranteed by the United States government. The value of foreign currency bullion depends mainly on the intrinsic value of the coin if it is melted and sold. The condition of such coins or their relative scarcity is not the most relevant factor in determining its price.
Investigate Before Investing
Investing in bullion or coins is an important decision. If you think about it:
1. Ask the specific amount in ounces (or percentage of an ounce) of the precious metal. The melting value for virtually all bullion coins and collectible coins is widely available.
2. Consult a reputable trusted financial advisor who has investment experience. You may want to talk to other coin and bullion investors, too.
3. Shop around. Most banks offer gold bullion and silver bullion, often with a lower margin than dealers. You can also compare the prices of other dealers online.
4. Obtain an independent valuation of the particular coin or bullion you are considering. The valuation of the seller could be inflated.
5. Consider the additional costs associated with the investment. You may have to buy insurance or you may need to make arrangements for storage to protect your gold bars or coins. These costs can reduce the investment potential of precious metals.
6. Beware of buying ingots or bars that will not be delivered to you, but rather to a "safe place" by the seller or by a third party. When buying metals without taking delivery, you face the risk that the metal does not exist, is not of the quality described, or is not adequately insured.
7. Stay away from sales pitches that minimize risk or say that disclosures or paperwork formalities are not necessary.
8. Refuse to "act now" regardless of consequences. Any seller that demands you buy right away should be a warning sign to a prospective purchaser.
9. Verify the dealer by searching online for reviews or ratings. The Better Business Bureau is an excellent independent source of customer complaints and the responsiveness of businesses to consumers.
10. Request a guarantee or certificate of authenticity for the content of gold or silver.
Popular Scams and Frauds
Bullion scams often involve false claims about metal content, rarity or value. “It is important to be educated, which is why we recently published a free Gold and Silver Investors Power Guide for new and experienced investors looking to understand how precious metals can help diversify their investment portfolio,” explains Anthony Allen Anderson, VP of Sales and Marketing at GSI Exchange, a leading coin dealer and precious metals investment services company where clients can
buy gold bullion online based in Calabasas, California and an A-rated company by the Better Business Bureau.
False claims - sellers often overprice their coins, unscrupulous bullion dealers lie about the content, or try to convey common gold coins as rare collectibles. Some deceitful dealers may even try to sell counterfeits that are not gold coins. Others may try to sell the coin ingots in the same design as the coins of the United States Mint, but of different sizes. In fact, they issue special coins that look like bullion coins struck by overseas governments but may have little or no gold content. Your best option is to choose your dealer carefully.
Leveraged investment - Leveraging investments are high-risk investments that can result in the loss of more money than you initially invested. In general, in a leveraged investment scam, a seller by phone or a website indicate that the price of the metal is about to skyrocket and you can make big profits by making a small payment for the metal, often as low as 20 percent. According to the dealer, by paying only 20 percent of the purchase price, you can get more metal than if you have to pay 100 percent of the acquisition price.
Borrowed money – Some financial institutions lend up to 80 percent of the purchase price of the metal, claiming to hold the metal for you and charge monthly storage costs and interest charges. Instead of sending a bill for these expenses, the entity will reduce its capital in the investment. Once your capital falls below a certain level (for example, 15 percent of the purchase price), the financial institution will issue a "Share call," forcing you to pay additional funds to bring your investment back to a certain threshold. If you cannot pay or refuse to pay the extra money, the lender will sell the metal to pay the loan and will send you a bill if the sale of the metal does not cover the amount you owe.
These investments are high risk because they get a call for stock if the price of the metal falls, remains flat, or just do not do enough to offset the expense of storage.
According to Todd William, founder and CEO of Reputation Rhino, an
online marketing company in New York City, “every business knows that customers and clients are researching products and services online before deciding to buy,” and a reputable business will do everything possible to put customers first, so choose your dealer wisely.
Author Bio:
V. David Ben Melech is a former securities attorney and has over 15 years of experience providing a wide range of legal and strategic advisory services to Fortune 500 companies and financial institutions on a broad variety of regulatory, enforcement, compliance, risk management and transactional matters.