It’s a sad fact, but there are a lot of rip-off merchants and counterfeit coins in the precious metal markets. And with the price of gold and silver about to fall to very attractive prices, 2014 promises to be the ideal time to invest in gold bullion.
And Investdirect.com want to ensure you do not get ripped off!
Thankfully, there are more reputable dealers of precious metals than there are bad eggs, but it is understandable that you want to shop around for the best deals – and this is where some consumers can be on the losing side of an unfair deal.
Counterfeit coins surface annually, and precious metals are also smuggled and sold on the black market – which is particularly the case in India at the moment ever since the authorities slapped heavy levies on imported bullion. So be very cautious if you are dipping into Indian markets.
Finding a reputable dealer
Your first consideration is who to buy your gold and silver coins from. The majority of online dealers are a safe bet, whereas unauthorised sellers through eCommerce sites like eBay and Craigslist is more of a gamble. Although reputable online dealers do use these forums and are safe to buy, these types of sites are also where the fraudsters hang-out!
So how can you detect when gold bullion is not the real deal when buying online?
Gold prices trade on a spot price which changes constantly due to daily trading. Because gold is such a vital commodity for investment bankers prices fluctuate daily, but usually only by around $10 or less. The price you pay for gold bullion from a reputable dealer will typically be around three or four percent to cover the premium.
If you find gold offered at a price that is less than the spot price, you can almost guarantee it is counterfeit and a desperate seller is trying to get rid of it at the earliest opportunity. Before buying gold always check the spot price and add the four per cent premium on to your total cost. Some dealers can charge up to 15% so it is also worthwhile checking out how much the premiums are before you even start searching for bullion buys.
Bullion coins v collectibles
The term bullion is used to describe any type of gold, thus nuggets, bars and coins. The most profitable and easiest to sell on at a later date are coins so where possible opt for coins. However, be cautious about the type of coin your purchase, particularly if you have your eye on rare or collectible coins.
Online dealers buy their precious metal merchandise directly from Mints who each have their own security measures, typically a laser mark. The standard test for authenticity will depend on the year the coin was made and technology has improved security standards. If you are a first time buyer of gold coins, invest in bullion from recent times.
Think twice about buying older coins online as damaged bullion will not fetch as much when you come to sell. Always ask the buyer what condition the coin is in if they do not mention it their advert. Also avoid buying “rare” coins that are being flaunted by the seller as “exempt from confiscation.” This is a trick many dodgy dealers use to convince you to buy pre-1933 coins rather than modern bullion coins.
Also check the numismatic value of the coin. Many of the premium coins minted today have a .999 fineness which means it is 99% pure gold. Some older coins will have a 92-94% purity.