The holidays are around the corner and for some families gathering together, the conversation will turn to the state of the economy and what to do with one's investments. Eventually, because of the heavy advertising on television and radio by gold dealers, the conversation may turn to acquiring gold for one's portfolio. After all, if you listen to Glenn Beck, then you are probably very worried about the state of the economy.
While there is good reason to be worried about the state of the economy, there is even greater reason to be worried about who you buy your gold from and what kind of gold you should buy. The same is true for silver.
Much of this information is found in my book, "Buy Gold and Silver Safely." In this book I go into further detail as to what lengths gold dealers will go to in trying to separate your hard earned money from you and putting you into inferior gold and silver investments.
Gold Dealers Know How to Talk the Talk
There are many gold dealers who rip you off without you knowing they are doing so. The ironic thing about this is no one seems to be exposing the many gold dealers who do this as frauds.
In fact, I tried to let congress know of what these gold dealers were up to by pointing them to Chapter 8 of my book, the chapter that exposes gold dealer tactics. Congress actually wanted me to "definitely" testify against gold dealers back in September of 2010, and then the next day, after my book was sent to the Energy and Commerce committee for review, decided against my testimony. This was after they said to me "people need to read what you have written. It's exactly what we have been speculating."
How do I know what Congress wanted to hear? I worked for one of these gold dealers that they were investigating for six months back in 2005. But what I find fascinating about this whole ordeal where Rep. Anthony Weiner's office was trying to discredit Glenn Beck by attacking his advertisers, primarily Goldline International, is that nothing has been said of it since. Goldline had gone out and hired a lobbying firm and that was the end of that I guess. Weiner's office has been silent on the issue since September as it seems to have been swept under the rug.
Even the NY Times, who interviewed me for a story on Goldline and Glenn Beck, has not printed that article critiquing the industry. If you ask me, they are all in it together, keeping the truth from you, the consumer! I guess they would prefer you fall prey to unscrupulous gold dealers who profit from your ignorance about buying gold and silver.
The Purpose of Writing This Article
This article addresses the 4 ways gold dealers rip you off. It is meant as a point of discussion around the dinner table over the holidays in protecting individuals, mother's, father's and grandparents from making big mistakes in buying gold and silver.
Instead of ignoring conversations about investments this holiday season, reach out and help those who are considering investments in gold and silver with this information so they don't make the same mistake that countless others are, costing them 30% or more of their investment. Help your families keep the wealth rather than give it to greedy gold dealers. It's important more now than ever to join the conversation and do what's right for the family.
As 2008 - 2009 showed, the advice given by financial advisors failed everyone once. But physical gold and silver investments did not fail and haven't now for 10 straight years. Get educated on that for what you do not know about gold and silver. Learn the truth before you go trusting someone on the other end of the phone who will feed you the following lines of mistruth and myth.
If you are reading this article after the holidays, the gold dealer tactics will still be in play. It's what keeps them in business and able to afford the expensive advertising on television and radio.
The 4 Ways Gold Dealers Rip You Off
Gold Dealer Rip Off #1 - Threats of Confiscation
This is the number one tactic gold dealers will use in telling a story about how a certain type of gold could be confiscated, while another type of gold wouldn't. In fact, I dedicated an entire article to it called; Gold Confiscation Won’t Happen Here and added an analysis of silver confiscation.
It is an easy subject for gold dealers to talk to people about because not nine in ten people know anything about it. So armed with a little history, it's easy for the gold dealer to tell a story and convince most unaware buyers of gold to purchase the more expensive type of gold they recommend; the kind they claim can't be confiscated.
All you need to know is the Executive Orders that once directed the government to confiscate anything more than $100 of gold back in 1933, are not in existence today. Every single Executive Order has been rescinded.
But that won't stop gold dealers from still trying to claim the government can confiscate certain gold and not other gold that has a premium associated with it. They will claim that gold and silver that have a "recognized special value to collectors of rare and unusual coin" will not be confiscated. This is pure baloney.
While it is true that these coins may be collectors’ coins, it is irrelevant because again, all executive orders pertaining to confiscation of gold have been rescinded.
If a gold dealer uses this tactic, just hang up on them. Tell them, "I've heard enough" as the next words out of their mouth will be an attempt to sell you gold or silver that is highly marked up compared to the spot price of gold, to the tune of 30% or more in some cases. Even 10% of a mark up is too much to pay.
Technically, the government could confiscate anything they wanted to with existing laws in place. Would they try and do so by knocking on everyone's door and searching homes, boats and motor homes for their gold coins, or would they just talk to the custodians of the Exchange Traded Fund (ETF); GLD and ask them to hand over their tonnes of gold?
Before any potential confiscation were to occur in America, they would have to repeal the second amendment of the Constitution first. Don't buy expensive gold because of any worries about what may or may not occur in the future. Be smart with your money.
Gold Dealer Ripoff #2 - European Coins Will Give You More Gold For Your Money
This ploy was the number one question gold dealers would ask a potential buyer of gold. They would ask the question; "Do you want a coin that is rare and pretty, or one that gives you the most gold for your money?" Most people won't realize it, but it is a trick question as either answer the gold dealer makes their large commission.
If the potential customer answers rare or pretty coin, which almost never happens, they end up with a St. Gauden or some pre-1933 coin that has a high premium to spot associated with it. These coins may or may not appreciate more than the spot price of gold moving forward. More importantly, the premium one pays for them could disappear as the U.S. currency falters or defaults. This means that when it comes time to selling it, buyers will only be interested in the gold content, not the rarity.
But worse for the potential customer is the fact that if they answer, "most gold for your money," the gold dealer will push them toward European gold coins like the Swiss francs, British Sovereigns or French Roosters. These European coins do give more gold for your money, but only compared to the rare coins, not to gold American Eagle bullion coins. This is the dirty little secret about how gold dealers profit from those who call in to buy what they think is bullion gold, but turns out they pay a 10% to 30% or more premium to acquire it.
I go into more detail with this tactic in "Don’t Buy European Gold or Rare Coins – Gold Dealer Ripoff And Media Bias Exposed."
Gold Dealer Ripoff #3 - First Strike or Early Release Coins
Another ploy gold dealers practice is to get people to buy their bullion coins that normally have a 2% to 10% markup at a 30% to 100% markup (some gold dealers will mark them up for less). What they do is get the new American Eagle gold coins produced at the U.S. Mint that come out of production early each year certified by National Guaranty Association (NGC) as a higher value collector’s coin that may someday be worth much more.
They may call these coins “First Strike” and have their salespeople tell prospective buyers that these coins were the first minted for a certain year (the first 100,000, let’s say) and therefore are considered to be more valuable than the coins minted later in the year.
What the gold dealer will do is buy the American Eagle gold bullion coin from the U.S. Mint for the normal 3% or so markup in price over spot. They will take this coin and send it to NGC and have it graded. The cost to grade the coins might be $50 each.
The coins will come back graded an MS 69 on average, with some coming back as a MS 70. Now the gold dealer can sell these coins with a 100% or more markup over the spot price of gold. This is pure genius from the perspective of the gold dealer, if you ask me. Take a product worth x and sell it for 2x through the telling of a fable.
However, since there was no way to prove the coins were “First Strike” coins, NGC and the gold dealers had to regroup and subsequently came up with the new description “Early Releases,” which they use today.
From the NGC site:
To qualify for Early Releases designation, all coins must be received by NGC within 30 days of their release by the US Mint, or documented as being received by an NGC approved depository within this same 30-day period. Coins being sent directly to NGC do not need to be accompanied by original packaging or shipped in sealed mint boxes, but must arrive within the time period described above. The Early Releases request must be noted on the submission invoice, and additional service fees apply for the special label and designation verification.
The ability of gold dealers to profit on such a story is in my opinion one of the reasons the U.S. Mint keeps running out of coins. What gold dealer wouldn’t want to double their money at the expense of the buyer?
Gold Dealer Ripoff #4 - Just Get the Money In-House and Let a Senior Sales Representative Take Over the Sale
Another tactic gold dealers will use is if a caller is adamant about buying bullion coins like the American Eagle 1-ounce bullion coins, they will write up the order, but can’t confirm the price until they receive a check or have the money wired in (the check of course would have to clear first). Once the gold dealer has the money in-house, they will call the buyer back and attempt to switch them to the rare collectors’ coins. If that gold sales representative fails to do so, they will get one of the in-house seasoned pros on the line to hardball you, scare you, play upon all your fears about what’s going on in the economy and how the government is going to someday take your gold from you, in trying one last effort to get the sale. Their sales pressure is immense.
The senior sales representative gets on the phone to try and talk the buyer out of purchasing gold bullion coins and make them feel guilty about their purchase, even to the extent of yelling at them or calling them an idiot. Then they will put the buyer on hold for five minutes for no reason if they don’t get their way. They will treat the bullion buyer like dirt, so the buyer needs to expect this treatment and keep asking “when will I receive my coins?” Even then, make sure the coins received are the coins ordered and for the price quoted by checking the paperwork.
This tactic is used quite often on IRA or Roth IRA rollovers or transfers where funds are received by the new custodian. The sale of the gold and/or silver has to be conducted through a gold dealer and the sales person who makes the trade locks in the price. Unfortunately, many of these salesmen can charge up to 30% for even bullion coins that are acquired with your IRA. They know that once they have the funds in house, they have more control over the sale.
Not all gold dealers are alike, and if an investor is prepared with the right questions, they can separate the good ones from the bad ones. Caveat emptor!
Other Points of Interest When Considering What Type of Gold to Buy
Many gold dealers won't buy back gold and silver bars. This means you may have to pay the extra cost to have them assayed when it comes time to selling.
Gold dealers will use every trick in the book to get potential investors to forget about investing in gold bullion and end up selling them either a pretty coin or something else that won’t be easily liquidated if the U.S. dollar were to decline to new lows or default altogether, except for the gold content value of the coin.
While rare coins could go up in value beyond the gold content, as the economy deteriorates and it comes time to liquidate one’s collection, most buyers won’t care about any collector’s value. All they’ll want is what the gold ounces will buy them in the marketplace.
What investors need to do is buy bullion gold with their Federal Reserve Notes today, to hedge their U.S. dollar based portfolio risk consisting of U.S. stocks, U.S. corporate bonds, U.S. government bonds, U.S. treasuries and CD's at the bank. They need to possess some real wealth so they can still go buy food, medicine and make ends meet in the future.
I may buy a few coins because they are aesthetically beautiful, but not as an investment. Gold and silver bullion are all you need.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Long Physical Gold and Silver