Scam Alert: Fake Gold Bars, Phony Investments, and Shrinking Portfolios–Oh My!

Scams are everywhere. From late-night commercials selling you products that don’t live up to the hype, telemarketers toting the next best thing and then disappearing, to criminals hawking fake jewelry and knock-offs, who can say what’s true and what’s a scam? The most recent wave of scams involve imitation gold bars. They look real and the promise of money is alluring, but buyer beware—this may not be a genuine purchase. Here is background information you need to make sure you aren’t a victim of such a scam.

How it Works

Gold Bars

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Counterfeit gold bars are being created. They look legit, even weighing the proper amount. They can pass through all the necessary tests, including X-ray and weight assessments. They are created from real gold bars—from the outside, they appear in perfect condition. But they are filled with tungsten—a compound that costs merely $1 an ounce and feels just like gold.

Even serial numbers and the paper from the original gold bar come with it, fooling even the most discerning eyes. They are polished and sealed to perfection. Such gold bars have appeared in America and the U.K., which means buyers need to take notice.

Look for These Warning Signs

Authentic Gold

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Buyers should heed this advice prior to making any gold bar purchases:

  • Companies that promise large returns on your gold bar investment are not to be trusted. No investments are guarantees.
  • If you deal with a high-pressure salesperson that wants cash immediately, say no. They may take your money and run.
  • Telemarketers from offshore companies are a red flag. It’s best to garner as much information about the company and contact the Better Business Bureau. If you are still unsure, it is always a sound idea to stick with companies that have already earned a good reputation.
  • You must ask about fees and commissions—know where your money is going. If you don’t, you may be charged an excessive amount of dollars off the original quote.

Look for an Alternative

Gold Alternative

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Rather than buy physical gold and risk purchasing a fake–exposing you to a loss of potentially thousands of dollars–you can invest in gold funds instead. Such funds include Market Vectors TR Gold Miners (NYSE Arca: GDX), RBS Gold Trendpilot ETN (NYSE Arca: TBAR) and PowerShares DB Gold Fund (NYSE Arca:DGL).

Buyers should always be armed with as much knowledge as possible when making major purchases. You are putting your own financial future at risk if you don’t know the warning signs. It is always good advice to follow your instincts when it comes to decisions like these—if you feel any doubt, it’s best not to invest. Following this mantra may save you from losing thousands of dollars, which would take years to re-coop.

What to Check Before Paying Cash for Gold

There are two good reasons for buying gold. One reason is to accumulate assets that retain (and gain) value no matter what happens to the global economy. The other reason is to turn a profit by buying gold at low prices and selling it for at or near market value. Some buyers do both. Whichever you choose to do, know what you’re buying before taking that plunge.

Know the Current Market Value of Gold

Gold Market Value

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Gold prices are constantly in flux. Prices today aren’t the same as last week or last month. If you’re serious about getting the best price for the gold you buy, check the current price before every transaction. There’s no need to fret about a few dollars change during the day, but you’ll need to be aware of the quarterly and monthly trends to get the best value in the gold you buy. The New York Stock Exchange (NYSE) reports the current price of gold throughout the trading day.

Determine the Exact Weight of the Gold

Weight of Gold

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It’s absolutely crucial that you keep accurate scales. Never assume that a coin, bullion or piece of jewelry weighs what the seller says or what is printed on it. Weigh every piece of gold every time you buy. Keep your scales calibrated properly. Having a backup set of scales isn’t a bad idea either.

You’ll need scales that can accurately measure extremely small weights, down to a fraction of an ounce. Note that gold is traded in Troy ounces, which are not the same thing as standard ounces. There are 12 Troy ounces in a pound, whereas there are 16 standard ounces in a pound.

Test the Purity of the Gold

Test Gold Purity

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Again, pay no attention to the markings. Test each piece of gold you buy with a gold test kit, also called an acid testing kit. These aren’t expensive, and can save you a lot of money because you won’t be buying 10 karat gold and paying for 24 karat gold. Test kits also keep you from mistakenly buying gold-plated items that can look and feel real, even to an experienced eye.

What Not to Consider Before Buying Gold

Gold Deal

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Frankly, a person may seem honest but isn’t. Con artists thrive on having good personalities to woo their victims and charm is no indication of honesty. Even if the person is completely honest they may be misinformed. Perhaps the jewelry was a gift and the giver led the person to believe it was real gold when it was fake. Maybe the person bought the piece at a second-hand store and the proprietor assured them it was gold yet it was just heavily plated. Whatever the case, a seemingly honest person is no indication that you’re getting what you pay for. Buyer beware.

Gold buying is lucrative when done properly, but can cost the unaware buyer greatly. Take some time to practice weighing, testing and pricing gold before you begin meeting customers and laying down cash. A little prep work ahead of time can save you hundreds of dollars in the long run.

The History of Gold: Ancient to Modern Times [IG]

Learn about the history of gold from the ancient days of golden masks and temples to the current practices of gold stents being used in heart surgeries. Gold has been popular around the globe for more than 4,000 years because of its pliable, attractive nature. While people once considered metals like silver and lead appealing, gold became the symbol of the height of fashion and wealth because it is rare and safe.

 

From the ancient royals to today’s rap stars with gold grills and giant chains, the value of gold has gone up considerably. Find out in this infographic how gold has become an appealing investment opportunity, and where today’s gold is being mined.

 

History of Gold

Protecting Yourself When Making a Gold Buy

Before you head off to meet someone to buy gold, it is critical to follow a few important steps. After all, you may be walking around with a few hundred dollars of cash in your pocket to buy gold, and if you have a successful buy, then your purchase will be on you afterwards. You need to be safe.

Tell People Where You Are Going

Going to Buy Gold

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Before you leave to meet your seller, tell someone you trust where you are going. Give this person specifics about where you plan to go, what time you plan to meet someone and what time you’ll be home. This way, if you don’t come home on time, they know exactly where you were last. Never leave home to meet with a stranger if you haven’t shared the destination location with someone. Let them know what you are doing, too.

Meet in a Public Place

Public Place

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Your transaction is legal. There’s no reason to meet in an alley someplace. Choose a coffee shop or a diner. Be sure it is busy enough that there is someone else there when you plan to meet someone. Choose a busy time of the day, if possible, to ensure there are enough people there to notice you. Keep in mind, someone may ask you what you are doing. Be honest. Tell them you buy gold. They may want to sell to you, too.

Be Discreet When Handling Cash

Discreet Cash

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Instead of pulling out a stack of $100 bills, it is a better idea to keep them in separate pockets. Take out just what you need. For example, if you plan to pay $500 for the purchase, count out five, $100 bills in your pocket before pulling it out. As long as you have the same denomination in bills, you don’t have to remove them from your pocket to know how much you are taking out. Though you may trust the person sitting across from you, the chance someone else will see you with a stack of cash is high.

Avoid Confrontations

Confrontation

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When you test the gold for authenticity, the person selling to you may question your methods. Instead of allowing a confrontation to occur, tell the individual what you are doing and how the system works. Keep the dialogue during the conversation positive and upbeat. You do not want the other person to think you are taking advantage of the situation. If they ask what you do with the gold, tell them you hand it over to your boss or try to find a buyer. Don’t brag about the money you are making.

At the end of the day, you just want to make the transaction a smooth one. Be quick about it. Get in and get out without making too much of a scene about the process. Both parties will appreciate this.

Surprising Gold Laws Around the Nation: An Investor’s Guide

There are surprising, some might even say nonsensical, laws in every part of the United States. In Owensboro, Kentucky, a wife must get her husband’s permission before buying a hat, according to city law. Surprising gold laws around the nation aren’t always as funny.

Weird Federal Gold Laws

Federal Gold Laws

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The federal government has been regulating gold and trading in gold for a long, long time. The U.S. Treasury Department has been making coins and bills to serve as currency since the 1700s. The United States has been minting gold coins for just as long. Today, gold coins have a changing value that depends on weight and certain global economic factors.

The worth of gold coins is also determined by certain federal gold laws, some of them rather surprising. American Eagle gold coins were first minted in 1986 and approved through Congress the year before. These gold coins are traded around the world, but they’re strictly USA-made. That’s the law.

The American Eagle gold coin is bound by federal law. It may only be minted in 22-karat gold, and only from newly-mined sources within the boundaries of the United States. Because American Eagle coins can only be made from American gold, the Treasury Department is limited in how many coins they can create. Also by law, silver and copper are added to American Eagle gold coins to prevent scratching and improve overall durability. This means that the coins themselves aren’t comprised solely of pure gold, and some find all these laws and regulations surrounding American gold coins to be very surprising.

Surprising State Laws Regarding Gold

State Gold Laws

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Thanks to the U.S. Constitution, every state has the right to govern itself…but that doesn’t mean they always come up with the most reasonable laws. There are surprising laws regarding gold in several states around the nation. If you don’t know the laws, you’re in danger of violating them!

  • California: Selling a gold piece that doesn’t contain tooth marks is an illegal forgery.
  • New Jersey: Purchasing gold is regulated in New Jersey, where pawnbrokers and jewelers commonly deal in the metal. Many different laws are in place to protect the seller against buyers to make sure that they receive their money’s worth for gold items. One law states that gold buyers must publicly post the prices they pay for precious metals.
  • Utah: Gold and silver coins are legal tender statewide. Thanks to a new law signed in October 2012, it’s legal to pay state taxes in gold and silver coins. Because of the law, no capital gains or state taxes will be levied during coin exchanges. Federal taxes, however, do still apply.
  • Washington: It’s legal to prospect for gold in Washington State. Get the Gold and Fish booklet from the state Department of Fish and Wildlife to get all the rules and regulations of gold mining in Washington.

Gold investors have to know all the laws regarding their commodity, because breaking a law could result in having gold confiscated by the government. If you’re dealing in gold, know what you’re dealing with backwards and forwards – in every state where you plan to buy, sell or trade.