Gold Coin Scams
The price of gold and the closely related price of gold coins of all kinds has reached staggering highs in recent years. The seemingly inexorable rise has happened as a result of the chaos and uncertainty in financial markets. With huge falls in the value of stocks and shares, bonds and property, gold has been treated as a safe haven by investors. Gold coins in particular have proved to be one of the most popular forms of investment, not just as bullion but also as collectibles in themselves. Older coins in good condition are worth literally more than their weight in gold, as they command a premium due to their rarity and desirability.
Unfortunately, where there is money to be made, scammers, con artists and criminals are not far behind. Many unwary investors, seeking a hedge against falling markets and rapid inflation, have become victim to fraudsters seeking to capitalise on their desire for a safe home for their money.
Gold coins can be a very good investment, offering both security and the opportunity to make impressive profits in the long term. However, anyone seeking to buy these coins needs to be aware of the pitfalls. A little research into the most common gold coin scams can help to prevent you falling prey to the criminals operating them.
Mint Condition Scams
Gold coins are graded by dealers according to an agreed index relating to their condition, so that obviously the better the condition the higher the price they will fetch. Uncirculated coins (those that have never been in general circulation) are given grades between MS60 and MS70. A coin that is judged to be at MS70 is regarded as flawless, whilst lower down the scale coins can have scratches or other imperfections that will lower their value. The system also grades circulated coins with scores below MS60.
It is well worth becoming familiar with this system of scoring, because if you buy an incorrectly graded coin you can lose a lot of money. The difference in value between an MS60 gold coin and an MS70 one can run into thousands of pounds.
One trick used by unscrupulous dealers is to disguise the real condition of a coin by placing it into packaging that covers its flaws. Another ploy is to sell it with a false certificate that does not reflect its true condition.
Unless you are an expert in rare gold coins, the best way to avoid this particular scam is to use an independent appraiser before buying. There is obviously an extra cost involved in this but it will be much less than the expense of buying a coin that has had its condition seriously misrepresented. No reputable dealer will object to you bringing someone to assess a coin before you buy it.
Safe Storage Scam
Many investors in gold coins are reluctant to keep them at home, given their value and the obvious danger of theft involved. To get around this problem, many dealers offer a service whereby the coins are kept in safe storage for any buyer until the time comes when they want to sell them. Most of these schemes are completely legitimate and offer a very useful service to buyers. A few, however, are an outright scam. The dealer takes the buyer's money, with the assurance that the gold is being kept in a safe place, but never actually buys any coins at all.
To avoid falling for this trick, the best thing to do is to thoroughly research dealers before doing business with them. Make sure that they have a proper address and phone number and find out how long they have been established. Word of mouth can be helpful in finding trustworthy dealers, as can online searches. Given the amount of money at stake, taking a bit of time to properly investigate dealers before buying from them is very important.
The Salomon Index Scam
The Salomon Index is often used to trap unwary investors into buying gold coins. The Index tracks the value of a number of particularly rare and valuable coins over a number of years. These coins have shown consistent year-on-year increases in price, which looks very attractive compared to other assets and commodities. The deception involved here is that these coins are not representative of the general market in gold coins, having risen so much in price because of their rarity and condition.
Although it is true that gold coins have risen in value, the increases in price are not as rapid or as consistent as those shown by the Salomon Index. Do not rely on this misleading comparison when making the decision on whether or not to buy gold coins.
Conclusion
As with any investment, when buying gold coins remember the phrase, 'caveat emptor!' or 'let the buyer beware!' If you perform some due diligence and research you will not be deceived by any of these scams and can rest assured that you are buying genuine coins at a fair price.
