Gold is solid and dependable.
It has a well-earned reputation for predictability. Unfortunately, the same can not be said for some of the people trying to sell it.
You have worked hard to earn that money. You should be equipped with the ability to spot scammers who want to take it from you.
Here are a few warning signs to look for before handing over your money.
Urge to Liquidate. Gold should be one part of a well-rounded portfolio that includes stocks, bonds, and cash as well. Anyone who is exhorting you to roll over your entire nest egg or cash out all of your life insurance to invest in gold does not have your best interests at heart.
New On The Scene. Companies that have no track record are best avoided. There are plenty of established firms with decades of experience. At the end of this article, you will find links that allow you to research firms. If they are brand new, avoid them. If they are only a year or two old, avoid them. Let others test them out.
Printed Material. Most companies these days have free gold or other metal kits with information that they can send you. This can help evaluate the quality of the company. You should find licenses and government registrations that you can call on to verify.
Sense of Urgency. Insisting you have to invest quickly is a red flag. Gold is a good investment precisely because it retains its value over time. It is not an asset that requires good timing. You should never be in a hurry or feel pressured to buy quickly.
Any phrases like these are signs you are being pressured:
- “This deal won’t last”
- “The supplier is running low.”
- “The stock market is about to crash.”
- “Gold will be going up X amount in the next few months.”
If someone is telling you they know the value will rise severely, they are lying. Gold holds its value over long time periods. But like all assets, it has its hills and valleys.
A true expert in precious metals will be cautiously optimistic about the returns. A scammer will tell you the “price is bound to double this year.”
Multiple Cold Calls. If you are being badgered, run. A professional firm will act as an advisor if you have questions. But they will never pester you with repeated calls.
Vague Titles. Do they call themselves “metal dealers” or “merchants”? Not good. Firms that help you should be registered with a government agency and are licensed. Ask for proof. If they stall, run for the hills.
Wealth Creation. No firm should promise to “make you wealthy.” Investing in gold is a way to preserve wealth, not create it. You can expect modest, dependable returns that outpace the stock market. You can expect to hold onto what you have earned. But you should not expect to double or triple your investment. Anyone who is treating precious metals as a way to earn a fast return is lying to you.
Peer Pressure. No one should make you feel like you are “missing out” on an investment opportunity. One of the oldest tricks in the book is to tell people that their friends and neighbors are getting in on the action. Ignore these people and assume the worst.
“Free” Is Never Free. “Free” or “No Fee” Self-Directed Retirement Accounts just don’t exist – a company may be putting on a promotion and paying the fees for you temporarily or they could be overcharging and using that to pay your fees. Either way, if you hear the word “free,” assume they are getting the money from you some other way.
Go With Your Gut. If it feels too complex, that is no accident. Scammers will often flood you with so many details that you feel overwhelmed. And when you feel that way, you ignore crucial details. If it is all coming at you too fast, walk away.
Other Warning Signs. These should also make you very wary.
- They advertise on the radio or television.
- They offer a financing option. “Pay for 15% now and we’ll loan you the rest.”
- They promise to store the gold overseas
- If they claim to be selling it at below-market rates.
Be Proactive, learn to do your own basic research and ask questions…
Regardless of how positive or negative you feel about an investment firm you should always do your due diligence. Just because a company is on the front page of Google or on a top 10 list doesn’t mean they are to be trusted.
When you invest in gold or other precious metals, you’re investing in your future so don’t let anyone talk you into anything – you make the decision, for you, not for their commission.
You should contact all of the following agencies before handing over a dime.
- U.S. Commodity Futures Trading Commission (CFTC), a regulatory agency, can provide a sales company’s registration status and disciplinary history.
- National Futures Association (NFA) is a self-regulatory agency that keeps tabs on the bad apples in the industry.
- Every state has its own regulatory agency. Contact them. It’s free.
- The Better Business Bureau is always a good place to start.
