You know what happens when a market starts to get red hot? All too easily, even some of the savviest investors can get caught up in the emotions of the times and fall for deals too good to be true … or, end up buying at the wrong time and on the wrong terms.
While at the same time, the hot market brings out the worst in salespeople, who love nothing more than to prey upon unsuspecting investors, and fleece them, left and right.
We’ve seen this happen time and time again in everything from tech stocks and real estate to art and collectibles, even in the latest cell phone to hit the market.
Right now, and in the foreseeable future, we are soon going to see it in the gold market.
For instance, a few years ago, Chinese-made, counterfeit, gold coins hit the market…fleecing untold thousands of investors out of tens of millions of dollars from online gold auctions and even at flea markets.
Over 1 million fake coins are estimated to have been sold, just in the U.S. this past year.
And when it comes to some gold and silver coins, it’s even worse, as today even legitimate “replica” types of gold and silver-plated coins have become a hotbed for scams.
Coin World, a respected weekly hobby publication, recently reported that up to 99 percent of the “replica” items sold into the U.S. market do not contain the required “COPY” markings to make them legitimate replicas.
So, how do you avoid the inevitable gold and silver scams that are out there now, and that could become even more commonplace in the months and years ahead as the price of precious metals skyrocket higher?
For starters, a few simple, common-sense ground rules that I adhere to, no matter what I’m looking at or considering buying — whether it’s gold, silveror a piece of artwork — can easily prevent you from making the most common mistakes and save you thousands of dollars.
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LESSON #1 IS ONLINE NOW:
1. Don’t buy from anybody you don’t know. Period.
You should only buy from reputable and knowledgeable dealers who have a return policy with regard to non-genuine coins.
2. If you sense a “hard sell”, don’t buy.
3. Do NOT buy newly minted so-called “collectible” gold or silver coins. Especially those you see advertised in newspapers or hear of on TV or radio commercials. There are a complete rip-off. True “collectible” coins can cost significantly more than the actual value of the gold they contain.
But modern commemorative coins, often labelled “collectible” rarely hold onto the extra premium dealer’s charge. Reason: They’re not true collectibles; just fancy commemorative type sets. For example, the Royal Mint’s 2008 Chinese Olympic Handover coin, can now be bought for less than its issue price. The same can be said for many other commemorative, so-called “collectible” gold and silver coins.
4. Stay away from reputable-looking companies who over-charge unwary first time gold and silver buyers. You’ll usually find these in advertisements in the mail, on websites, TV and radio. All too often, the premiums are 15-40 percent above the true “spot market” value. One company right now is selling one-ounce bars for more than 33 percent over the spot price of gold.
5. Also keep in mind that bullion coins such as the gold American Eagle or the platinum American Eagle are not collector coins. The rule is that only old United States numismatic or true collector coins can be graded.
Grading gold and silver bullion coins is another scam technique, that some bullion dealers use. Yet, they do not have any collector value, and are, therefore, not worth a penny more than their bullion value (the amount of pure physical gold or silver the coin contains).
Bottom line: Follow the above five tips religiously, and you’ll avoid most all scams that are out there in the precious metals market.
Until next time,
Larry Edelson is the creator of the “Ultimate Gold and Silver Trading Course” and editor of “Real Wealth Report” and “Supercycle Trader.” He also contributes to the Weiss’ daily newsletter, “Money and Markets.”