As the price of gold continues its upward trajectory so does the presence of scammers looking to make a quick buck. Considering many investors are pretty new to gold, it can be pretty easy for fraudulent brokers and dealers to sell investments that either don’t exist at all or are completely different than advertised.
With economic uncertainty comes much higher interest in gold and with that comes hucksters who promise quick riches.
One such example is a Florida company who recently pled guilty to defrauding over $25 million from 1,400 separate investors. Based in Ft. Lauderdale, the Gold Bullion Exchange told investors they could obtain gold bullion through a small down payment to the company’s ‘leverage’ program.
Prosecutors in Florida and the U.S. Attorney’s office discovered the company hadn’t purchased any gold at all.
Another scam involves the supposed gold holdings of Libyan leader Muammar Gaddaffi. Circulating as an email from the leader’s wife in what’s known as the ‘Nigerian Letters,’ unsuspecting investors receive a message saying several tons of gold need to be offloaded and only you can help.
Recipients of the letter are asked to assist in moving the deposed leader’s gold but not before disclosing personal information and handing over a transaction fee to the sender of the email.
Although authorities are on the lookout for gold investment scams, it’s impossible to get them all.
Regulators at the Financial Industry Regulatory Authority (FINRA) recently issued an alert for gold scams, particularly those involving gold stocks. FINRA VP for Education, Gerri Walsh, says many con-artists are making claims of big returns that are largely based on thin-air.
Walsh encourages investors to do their research before transferring any funds. If it’s physical bullion, make it sure it actually exists. If it’s a gold stock or Exchange-Traded Fund (ETF), be sure you find out exactly how the fund invests in gold. And check FINRA’s website to verify the company before investing.
Other things to be on the lookout for:
- Beware of companies who tie the price of stock to the price of gold. A rise in gold prices doesn’t guarantee a rise in a particular company’s stock price.
- Watch out for companies who change their name or trading symbols to align more closely with gold. One company who claimed to be a gold mining company was actually a firm who provided golfing opportunities on private courses.
- Bullion dealers who warn about potential gold confiscation, basically scaring investors into purchasing numismatic (collectors’) coins rather than bullion coins, or ones more suited for investment purposes.
If you’re looking to invest in gold, only use reputable dealers who can deliver your purchases directly to you. There’s also self-directed, precious metal IRA accounts where you can buy gold and silver but you should always be able to verify your holdings and know where they’re stored.
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