Buyer Beware: 4 Gold Coin Scams to Avoid
Posted on December 28 2018
Collecting gold coins is not just a fulfilling hobby; it’s also a good way to diversify your portfolio. That’s why more people are investing in them, hoping that it will result to substantial gains should they decide to sell these pieces in the future.
However, scammers are also capitalizing on this industry and robbing substantial amounts of money from unsuspecting coin collectors. Most of these con artists have a very subtle way of tricking consumers, and most of their schemes go undetected, especially among novice buyers.
If you want to get your money’s worth and the most out of coin collecting, here are four common scams involving gold coins that you need to watch out for.
1. False Grading
Grade influences the value of a gold coin, and some con artists will use a false grade just to sell a piece for a higher price.
For instance a Gold Eagle coin that has a MS-70 grading, which indicates a mint or perfect condition, can be sold at $2,850. However, the same gold coin that’s only graded at MS-60, a clean but not perfect state, may only cost $1,650. The difference between the two grades can go unnoticed to an untrained eye, and this is where scammers can operate their scheme. They can claim that the Gold Eagle coin they’re offering you is in mint condition even if it’s not.
Always make sure that the grade of a gold coin is accurate before you purchase it. You can consult a third-party appraiser who works independently from the dealer.
2. Fancy Packaging
Packaging and storage is essential to preserving the quality of a gold coin, but you need to be wary of coins that are wrapped rather too fancily.
Before you buy a gold coin, you need to examine it thoroughly. You can’t do that if the packaging is obstructing you from closely looking at the coin and its details. Decorative packaging, ornamental wrapping, or too much plastic around the coin can be a warning sign that a dealer is trying to scam you. Typically, con artists do this trick in order to sell you a coin that’s not made entirely of gold or a low-quality piece.
Don’t buy a gold coin if the seller doesn’t allow you to see the coin properly. A pretty casing doesn’t matter, because what’s important is the true value of the coin.
3. Misquoting from the Salomon Brothers Index
If you’re looking at gold coins as investments, it’s normal to inquire about the chances that their value will appreciate in the coming years. However, you need to be careful when you do so, because some scammers use the Salomon Brothers Index as reference and claim that the worth of the coin they’re selling goes up annually.
Salomon Brothers Index monitored the appreciation of rare and gold coins each year. During the time period that they tracked the values of rare coins, the bank found that they appreciated at around 12 to 25 percent annually. However, their findings didn’t speak universally for all gold coins, because only a handful of 20 valuable coins were monitored on their index
“In present times, coin values do not appreciate as drastically as the ones did on the Salomon index; yet, some shady gold dealers still quote rates for rare coins from the Salomon Brothers Index hoping to make a sale to a novice coin investor. Beware of the dealers that are using the Salomon index still, as they are skewing the facts and values associated with rare coins.” The Voss Law Firm warns.
4. Offering to Store Coins for Convenience
Some scammers will sell you a collection of gold coins and offer to store them for you. Part of their usual marketing pitch is citing the danger of keeping valuable coins in your household, so for your safety and convenience, they will offer to oversee the safekeeping of the coins you will buy from them.
However, most of the coins that these scammers sell are non-existent. They may even show you a coin collection and claim that it’s what you’re investing in, but how do you know that it’s going to really be yours after the purchase?
Part of investing in coins is being responsible for their safekeeping. Each time you add a piece to your coin collection, see to it that you’re taking their possession physically. You’d rather worry about how to store them securely than be anxious about the possibility that you lost money over coins that didn’t exist in the first place.
If you plan on investing in coins, the only way to get your money’s worth and grow value in your collection is due diligence. Do your research and be abreast in the coin industry. When you’re equipped with the right information, scammers will not be able to prey on you and your money.