As the rising price of precious metals outpaces most other investments it’s inevitable that scammers will take advantage of unsuspecting and uninformed investors.
We’ve previously highlighted the dangers in purchasing physical gold and silver from auction web sites, fly-by-night internet dealers and even local coin shops, as well as provided some advice for how to spot counterfeit metals. We’ve also discussed the threat faced by investors who purchase ‘paper’ gold assets exclusively, especially ETFs that purport to be backed by physical metals and companies that claim to store your allocated precious metals in their vaults.
We’ve maintained for quite a while that precious metals will rise for a variety of reasons, a couple of which include inflationary pressure caused by monetary easing and as a hedge against government instability. For many, gold is a safe haven asset of last resort. Gold and silver investors are putting away precious metals to use in a worst case scenario – if and when a paper currency collapse wipes out the purchasing power of traditional units of monetary exchange. In this respect, we can’t stress enough that before you buy you must do your research, especially if you are investing large portions of your retirement savings, lest you lose everything.
Last year, Brian Gurl spent some time reading about the state of the U.S. economy.
He kept hearing about the gargantuan size of the federal debt and the threat of inflation on TV. Gurl is approaching retirement age, so he and his wife needed safe investments. The couple decided on gold.
“We approached several companies. But it was American Precious Metals who were the most aggressive,” said Gurl, who invested about $100,000 with the company last Fall. “They just sounded very expert.”
In the span of a few months, the couple lost about $60,000, Gurl said.
American Precious Metals, allegedly a boiler room telemarketing firm, purportedly purchased more than $23 million of precious metals for customers of their leveraged precious metals purchase program, but allegedly never purchased any metal for customers.
Specifically, the complaint alleges that the defendants “engaged in a massive fraudulent scheme” and, from at least July 1, 2007, APM, through its agents and employees, acting at the direction of Tanner and Goldman, purportedly purchased more than $23 million of precious metals for customers in their “leverage program.” The program allegedly requires customers to make a down payment of as little as $5,000 to APM for certain quantities of physical precious metals. APM also allegedly claims to finance up to 80 percent of customers’ purchases and store customers’ physical metals in a secure depository.
According to the complaint, these statements are false. In reality, APM allegedly does not purchase or sell any precious metals for customers, does not arrange loans for customers to purchase physical metals and does not arrange for storage in any depository. Instead, after charging customers commissions of approximately 40 percent of their initial investment, APM allegedly pools the remaining funds and sends a portion of that money to a third party. The third party does not purchase any physical precious metals, provide loans or arrange for metals storage on behalf of any APM customer, according to the complaint. The complaint also charges APM with making misrepresentations and omissions of material fact related to the profitability of and risks associated with the leverage program.
This is the problem with many gold ‘paper’ investments. American Precious Metals LLC, not to be confused with the reputable online physical metals dealer American Precious Metals Exchange (APMEX), was contacting potential customers via direct marketing calls (though Mr. Gurl initiated contact in this case), applying pressure through the use of fear based marketing, and selling a product that confused investors and didn’t disclose risks. They were likely utilizing APMEX’s well known reputation in the business to help promote their own products. The difference, of course, is that APMEX (www.apmex.com) is a physical metals dealer, while the APM, LLC. firm dealt strictly with paper investments.
In our view, there are very few paper related precious metals assets worth the parchment they’re printed on, but depending on your specific investment needs it may not be practical or possible for you to hold your entire PM portfolio in physical form.
Here are some steps you can take to help ensure you’re not being scammed or deceived:
- Check out the firm. Rule #1: Trust but verify. Just because it says something on a dealer’s web site or they tell you something on the phone doesn’t make it true. In this day and age it is quite simple to do your research on any company in the world. Utilizing simple search queries you can find forums, consumer reports, personal experiences, business organizations, fraud alerts, and licensing information with relative ease. Consumers will often spend hours reading reviews for products like cell phones, or televisions, or cars. It should be no different when buying gold/silver related assets, especially if you’re spending thousands of dollars.
- Don’t Bow to Pressure. A legitimate firm may make discount offers if you’re a regular customer or purchasing in bulk, but if you get the feeling you’re being persistently pressured by a dealer through the use of fear or guilt, hang up the phone or close your browser window. A reputable dealer will never pressure you. They may provide investment information and make recommendations based on market conditions, but they’ll never make you feel guilty about not purchasing enough.
- Fuzzy Math. Buying physical metals is easy. You determine a price, make the purchase, transfer funds and get a package in the mail (or buy direct from a dealer). When you deal with brokers who have specialized products, however, things can get confusing really quickly. If you feel like you don’t understand exactly what it is you are investing in or how the calculations are being done, then don’t do it. It’s really is that simple. When you hear words like ‘leverage,’ or ‘buying on margin,’ or ‘down payment,’ then it’s probably time to find a different dealer unless you are well versed in the specific precious metals instrument that you’re dealing with.
- Compare Prices and Premiums. Look at the open market price and compare that to the retail sales price being charged by the dealer. The spot price is the open market price. The ‘premium’ is the amount the dealer charges above the spot price. Most reputable dealers will charge anywhere from a few percentage points up to 10% to complete your transaction. Generally, the higher end premiums occur when there are perceived shortages, extreme volatility in the markets, or when you’re dealing with specialty coins (American Eagles, etc.). It’s always a good idea to compare premiums across several reputable online dealers to make sure that the premium you’re being charged is on par with other firms. Goldline, an online firm that came under fire last year, was charging exorbitant premiums of over 60% for many of their products and was being touted on various conservative media outlets. Just because it’s on the radio, on television or being recommended by your favorite talk show host doesn’t mean it’s fair. Do your research.
- Know Your Costs. If you’re dead set on allocated or unallocated storage always get information about storage fees, insurance costs, delivery fees and interest information BEFORE you buy. And get it in writing.
- Record Conversations. If legal in your state, record all conversations with the dealer/broker. The fact is, you’re likely investing tens of thousands of dollars – it doesn’t hurt to spend $50 or so on a tele-recording device (or simply use your computer’s built in recording application and speak with dealers on speaker phone). In states where recording of phone calls requires all parties to consent, advise your broker the call is being recorded. If they are a legitimate dealer, they won’t care because it is likely they are recording the call to make sure everything is on the up-and-up. A scammer, however, will be hesitant and may even hang up. That should tell you exactly what kind of firm they are.
- Ask the firm if they can deliver physical metals. If so, purchase a limited quantity of metals to start (and don’t reveal how much you plan on investing). Once received, take those metals to a local coin shop and have them inspected. Most local dealers will do that for free. If the metals are legitimate, you can contact the firm again and buy a larger amount.
- Convert Paper Metals to Physical Metals. If the firm claims they store the metals, and that’s your preferred method of investment, we’d recommend purchasing a limited amount of stored metals. Wait 30 days and request delivery. If the firm meets up to the expectations they set, then you can use them again. If they give you problems…
- Take Immediate Action At the First Sign of a Scam. Better safe than sorry. Most scammers ‘get away with it’ because victims are embarrassed or afraid to say something. Don’t be afraid – put the fear into the scammers. If the firm gives you excuses at the time you’ve requested delivery, don’t beat around the bush. Take immediate action by letting the firm know if they do not deliver your metals or return your purchase price you will contact your State’s Attorney General, the Federal Trade Commission, the CFTC, the police and online consumer reporting agencies. Also, rather than making these threats on the phone, send a certified letter with return receipt – this will let them know you’re serious. Most consumer protection laws allow a firm 30 days to deliver products that they have sold – you can give them 7 days to make good or you’ll start taking action. Don’t give a potential scammer any time to get away or steal from others.
Disclosure: We found it necessary in this article to point out the difference between American Precious Metals, LLC (the company charged with fraud) and American Precious Metals Exchange (APMEX) due to the similarity in names. We have utilized the services of the American Precious Metals Exchange (APMEX) over the past several years, have recommended them to family, friends and readers, and have only positive things to say about our experiences. In the interest of full disclosure, please note that SHTFplan.com is an authorized affiliate of the American Precious Metals Exchange (APMEX) through limited text and/or banner advertisements. We’ll also note that the majority of advertisements on our web site network, except for those automatically delivered by Google.com, are hand selected for quality and relevance.
Comments…..HOLD Physical, buy on the dips. Tha’t ALL the sheep neeed to know. Store it at home in a safe. A quality PROFESSIONAL one. And don’t tell me, “Someone will steal it!”. The biggest theives are the Federal and State Governments and #1 is THE BANK. Always. Take personal responsibility.
I own some silver, and my mom has a lot too that I will be getting at some point. But too much is made of gold and silver. All it can do is, hopefully, purchase you the necessities of life when you need them.
Instead of putting a lot into gold and silver, put your cash into things you will need to buy later no matter what happens (unless you die, then all bets are off). You don’t just need food. You need ziploc bags, garbage bags, laundry detergent, dish soap, containers of various sizes and shapes, etc.
Many people get preoccupied with food and gold. The best way to avoid the need for “money” is to buy whatever you can right now for your future use. The best way to survive a collapse in commerce is to have all of the little things you buy now and may not consider to be preps in the usual sense.
I don;t care if the stores close down for a few weeks. I have my own convenience store in the back yard. When I run out of something and have to go to the store to get it, I get at least 5 depending on what it is. I almost never have to go to the store to get the same thing twice in the same year.
Everybody has their own way of doing things I suppose.
God’s Creation is 100% correct. Immediately after a SHTF situation the banks will be closed. Soon after they close the ATMs will run out of cash. If it is a grid down situation, the ATMs will gone right away. No one will be accepting checks or credit/debit cards. Those firms that are still open for business will be accepting cash only. Be sure to have some on hand.
When things really go to hell, nobody will be giving up food, fuel, weapons or ammo for anything, not cash and probably not even for gold/silver until things have had a chance to shake out and calm down a bit.
Git it done and get prepared before things have a chance to go south on you. The last place that you want to be is out and about trying to stock up on food, pampers, infant formula, etc. once the sheeple finally figure out that we are all well and truely ‘hosed’. That’s when you want to be ‘hunkered’ down at home with your family gathered around you and your supplies in hand.
Better to have food, weapons, water purification ability, etc than to have gold or silver at this time. The gold and silver won’t be worth much until some sort of a barter type economy has a chance to develop.
God Bless & good luck to all.
What if it is a verrrrry slow noose MM. Metals will purchase more before the end to ride out the storm and save a few for later but the rules will change then.
“Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium.”
Murray N. Rothbard
“Even during the period when Rome lost much of her ancient prestige, an Indian traveler observed that trade all over the world was operated with the aid of Roman gold coins which were accepted and admired everywhere.”
“The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register.”
Hans F. Sennholz
“As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise.”
Jerome F. Smith
“Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort.”
Antony C. Sutton
“For more than two thousand years gold’s natural qualities made it man’s universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper.”
Hans F. Sennholz
“When paper money systems begin to crack at the seams, the run to gold could be explosive.”
“In a country whose currency is not convertible into gold, inflation leads to its continuous devaluation in terms of foreign currencies.”
Michael A. Heilperin
“Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible – forms which only the precious metals provide.”
“Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state.”
William F. Rickenbacker
“America today has insufficient savings to finance both crucial investment and its consumption of imports.”
James Dale Davidson
“We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades.”
“Do the American voters know that the unprecedented improvement in their standard of living that the last hundred years brought was the result of the steady rise in the per-head quota of capital invested? Do they realize that every measure leading to capital decumulation jeopardizes their prosperity?”
Ludwig von Mises
“The dollar will be wiped out.”
Dr. Franz Pick
“The way I see it, gold is headed over $1000 an ounce, probably much higher. At anywhere near current prices, it’s the lowest risk, highest potential investment I can think of.”
“In the long run, the gold price has to go up in relation to paper money. There is no other way. To what price, that depends on the scale of the inflation – and we know that inflation will continue.”
Nicholas L. Deak
“Gold bears the confidence of the world’s millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future.”
Oakley R. Bramble
“In the end, more than they wanted freedom, they wanted security.”
“The paper standard is self-destructive.”
Hans F. Sennholz
“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.”
F.A. von Hayak
“The fate of the nation and the fate of the currency are one and the same.”
Dr. Franz Pick
“The history of paper money is an account of abuse, mismanagement, and financial disaster.”
Richard M. Ebeling
@ McLovin –
Just my opinion, but I don’t see it as a sloooow down hill slide. We’re doing that slow down hill slide to Perdition right now. When the stock market tanks and the bonds become worth less than TP; then the crash won’t be far behind. Once an astute person sees the situation for what it really is; he/she may have 72 hours to a week, perhaps even two weeks to bust a few final moves in preparation. After that, I really don’t think that you will want to leave the house for a while.
I honestly don’t see how the elites can keep the system going for very much longer either. They don’t have that many rabbits left to pull out of the hat. One slight push from any number of directions can set the whole thing in motion. Getting it started will be easy …. getting it stopped will be a whole other thing. A preceeding article about increased activity in and around the DUMBs (deep underground military bunkers) says quite a bit as to where we are presently on the time line to hell.
A few months ago I started receiving calls from a company that offered to purchase and store gold for me. I asked them for more information and they sent me a long e-mail with lots of pictures of the very professional offices. They bragged about how honest they were and included a list of satisfied customers that had the first name and last name initial but no addresses or cities to comfirm them. I was immediately suspecious. I went to Google earth view and the address of their office turned out to be a building that was under construction and not occupied. I sent them an e-mail thanking them for sending the e-mail to me but that I had decided not to invest with their company. I then told them that my decision was final and didn’t expect to hear any more from them. About three days later I got a phone call from the president of the company. You could hear the desperation in his voice while he was trying to convince me that my gold was safe with them. i didn’t tell them about what I had learned on google about them only that I had reservations about dealing with the company. About two weeks went by and another individual from the same company then called and started again about how honest and safe the gold was there. By then I had had enough and told him that I was not interested in investing with them and THAT WAS FINAL.
Always do due diligence on any investment over say $20. The 10 minutes that I spend learning that they were crooks saved me tens of thousands of dollars in the long run.
I agree with you on everything MM but understand Calculus. Decreasing decreasing slopes or 180, increasing increasing slopes and bell curves. Where are we on the quadratic equation? The rabbits are rabid. Marilyn Chambers was in the movie. No problemo, shine on…..
Comments…..check dealers’ reviews on the NIA homepage.
buy junk silver. it’s recognizable. the place i buy from just has a big 5 gallon bucket of dimes and quarters behind the counter. kinda funny actually…
Buy PMs AFTER you have a large supply of necessities. I don’t have a lot of FRNs so I concentrate on food, etc. and in a bad situation try to aquire hard money theough my labors.
I love to see commercials stating “Or we can arrange storage for you”.
These commercials are made by a Mr. Ben Dover.
Glad to see the article did tell the difference in this scam outfit and APMEX, who never telemarkets and ONLY sells real metals.
Another BIG warning sign to look out for is dealers who push numismatic coins, like pre-33 US gold, using the fear of confiscation on plain Jane bullion coins to hawk over priced graded coins, or with exaggerated claims of how much these coins increase in value over time ( Goldline is well known for these tactics ) I guess you can make money in numismatic coins, but like musical chairs, if the music ever stops, you may well get caught standing…..and find out nobody gives a crap you paid twice as much for your coin as a plain bullion coin…..an ounce of gold being an ounce of gold.
Like God’s Creation, I totally believe in stocking up on a whole range of real goods, BUT I do think there IS a place for holding some real money as well. I also think the long, slow slide is a very real possibility, as that is EXACTLY what has happened in my experience for the last 50 years. WHO knows how long they can continue to juggle the balls in the air ?
And while you can stock up on many things like ziplock baggies, it’s not possible to pre-pay property taxes ( where I live ) or doctor bills or any one of a thousand other things that make life a whole lot more livable, and are either a service or a product with a short shelf life. For that type of thing, guess what ? You need MONEY.
And since the FED and the feds are clearly on a mission to destroy the value of that paper crap they call money, your objective ought to be making sure you save some REAL money that will hopefully keep up with the rate of destruction they have in mind.
So, by all means, get the “beans/bullets/bandaids” taken care of FIRST….since, as other point out, IF the SHTF today, gold/silver likely won’t buy you much of them. BUT if you DO find yourself with extra FED notes at the end of your shopping, convert those to real metals, in case the S_doesn’t_HTF.
About the referenced article against fakes… two bits:
A hellishly strong magnet is as close as a broken standard-sized computer hard drive. take one apart sometime, and yank the magnets out – they’re strong enough to hold up the weight of a pre-teen kid if you had one slap a magnet on an I-beam and hang on.
With a magnet that powerful, I doubt there’s an iron-cored fake on the planet that wouldn’t suck itself right up to one.
That said, an odd question (heh): what’s to keep the scammers from filling the silver coin/bullion centers with aluminum and nickel instead of iron?
Odd idea: For those who lean towards the essentials over precious-metals side of things, why not stock up on a metric shedload of nails and screws to stash at your permanent BOL (if you have one)? You could just as easily use them for petty cash, since coming across any that aren’t bent, snapped, or rusted come 12-18 months post-SHTF would be incredibly rare. Same with a general supply of bolts and matching nuts, come to think of it.
I agree completely that having real money on hand is a great idea. If you or a family member NEEDS a doctor (especially) during the early days of a SHTF event, a debit card or fistful of FRNs will probably not impress said doctor.