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Precious metal investment scams are ever present these days and were particularly prevalent at the height of the coronavirus pandemic. During this time, there was a surge in people looking for investment opportunities. Hopefully, we can see the light at the end of the tunnel of the covid era. In this article, we delve into the scammer’s (fraudsters) world, looking at how they operate and what we can do to protect against them. Gold will be mentioned a lot because it is the most popular precious metal. Investors also should apply what we learn to all precious metals.

What and Who are Scammers?

Scammers are unscrupulous people (male or female) acting as investment providers, normally with little or no empathy toward their victims. Scammers are sometimes tech savvy and can seem legit, preying on vulnerable and not-so-vulnerable people. We would all like to think there is no way we would succumb to a scam, but they can be convincing and catch you when you’re not expecting it.

Common Scams

• Phishing Emails

Phishing Emails attempt to steal sensitive information: phone numbers, credit card numbers, bank account details, usernames, passwords, and any information that would help them steal your identity. Warning signs to look out for are: the email does not mention your full name, bad grammar, incorrect spelling, and a sense of urgency to complete the investment.

• Not Sending Goods or Services Paid For

Usually, the scammers will use stolen identities gained through phishing emails as above.

• Vastly Overcharging for Rare Coins

Convincing customers to pay double the value of the rare coins is common; it is difficult to prove liability in these cases: the seller will try to justify the price.

• Boiler Room Schemes

Boiler room scams got their name from the 1960s when unscrupulous people operated from boiler rooms in the United States. Although they still operate today, they don’t work out of boiler rooms. They function from anywhere in the world, sometimes with high-tech equipment and the added benefit of inexpensive communication methods, making it easy to operate in other countries. Scammers reach out to investors through cold calls, with promises of high returns and no risk, and might also use pressure tactics to get people to invest.

• Gold Coin Scams

Faking gold coins is common, so you should buy from a trusted friend or acquaintance or reputable bullion companies, such as JM Bullion, SD Bullion, and APMEX (Harshman, 2022).

Five Ways to Avoid Precious Metal Scams

Various types of scams have been going on in the gold market for years – a testament to the fact that many still yield to these fraudulent practices.

1.   Know What You’re Buying 

The most important thing is to understand what you’re buying; you should know how jewellers weigh the gold, for example. On the international market, it is in troy ounces. A single troy ounce equals 1.0971 standard ounces or 31.1035 grams.

Each coin or bar has its unique design with minute details that make it extremely difficult to fake. So, make sure that all these details appear on every gold coin or bar you want to buy. An expert jeweller will use the ping test to check the authenticity of a gold coin or bar, paying attention to the sound created when gold is struck. In contrast to base metals, which make a duller and shorter sound when hit, precious metals generate a long, high-pitched, ringing sound.

Performing a magnetic test is another approach to spot counterfeit gold. Real gold (.999% pure gold) is not magnetic; counterfeit gold is. You can determine whether or not gold is genuine by testing it with a powerful magnet. What you assume to be a gold coin is not gold if a magnet is drawn to it.

2. Price

Any buyer who invests in precious metals must be aware of the current spot price of gold. When investors talk about spot gold prices, it’s the price of gold now for immediate delivery.

3. Use Only Reputable Dealers

You ought to select a provider with a solid reputation in the market. Start checking for repeat clients; if clients receive poor service or have a bad experience with them, they won’t likely return.

An online discussion group on social media is a good place to study possible investments and businesses. Many forums discuss buying gold and other precious metals for investment. Many members provide posts about investment companies that scam investors so that you can avoid these dealers.

4. Too Good to be True

The likelihood is that if you see an advertisement for an investment product or program that seems too good to be true, it usually is. Be cautious of such offers – or one that comes with extravagant high returns or exaggerated claims. In this case, it’s okay to be suspicious.

5. Forms of Payment

Modern businesses accept different payment methods, and your dealer should be no different, which means that you can pay with traditional cash (like in your local shop), checks, and money orders. Likewise, there should not be any problem if you’re going to pay via bank transfers and credit cards because they are more convenient despite the extra fees. Some dealers also accept cryptocurrencies.

Reporting Suspected Scams

Useful information to help you report suspected scammers:

• The United States

The Federal Trade Commission (FTC)

The FTC accepts complaints about most scams.

• The United Kingdom

Send by email to [email protected]. The National Cyber Security Centre (NCSC) will consider the alleged scam.

Financial Conduct Authority (FCA) Consumer Helplines: 0800 111 6768 (freephone), 0300 500 8082 (from the UK), +44 207 066 1000 (from abroad).

The FCA also publishes a Warning List for companies to avoid. https://www.fca.org.uk/

• Australia

When you receive a scam text message or telephone call, you should disregard it and notify Scamwatch at the Australian Competition and Consumer Commission (ACCC).